The Executive Board of the International Monetary Fund (IMF) has approved emergency financing for Sri Lanka under the Rapid Financing Instrument (RFI), providing immediate access to approximately US$206 million. This support aims to help Sri Lanka address urgent needs resulting from the catastrophic Cyclone Ditwah and to preserve macroeconomic stability.
The emergency disbursement, equivalent to SDR150.5 million or 26 percent of Sri Lanka’s quota in the IMF, will assist the country in managing acute balance-of-payments and fiscal pressures following the cyclone, which struck on November 28. The disaster has claimed more than 600 lives, displaced over 100,000 people, and caused widespread destruction of infrastructure and livelihoods. Millions have been affected by flooding and landslides across the country, creating significant humanitarian and reconstruction needs.
The Sri Lankan authorities remain committed to their economic reform program supported by the IMF’s Extended Fund Facility (EFF). The cyclone occurred as the Fifth Review under the EFF was nearing completion. Given the need to assess the full impact of the cyclone and determine how the IMF program can best support Sri Lanka’s recovery efforts, the Fifth Review has been deferred. An IMF mission team is expected to visit Sri Lanka in early 2026 to resume discussions.
Kenji Okamura, Deputy Managing Director and Acting Chair of the IMF, commented on the decision, stating, “The emergency financial support provided under the RFI will help address the significant fiscal and balance-of-payments pressures created by the cyclone. The government responded swiftly with a package of relief measures, supported by strong fiscal overperformance in 2025. The Central Bank of Sri Lanka stands ready to provide liquidity support to the financial system if needed.”
He added that while recovery and reconstruction needs will be substantial, the authorities are committed to maintaining fiscal prudence to safeguard debt sustainability. All emergency spending will comply fully with the Public Financial Management Act, and will be subject to enhanced monitoring and regular public reporting to ensure transparency and accountability. The Central Bank will continue to refrain from financing the government budget through monetary expansion.
Okamura also noted that the cyclone’s impact comes as Sri Lanka is emerging from a severe economic crisis. The IMF-supported reform program has contributed to a robust economic recovery, price stability, substantial fiscal consolidation through increased revenues, and progress in rebuilding foreign exchange reserves. However, the economy remains vulnerable, and GDP has not yet returned to pre-crisis levels.
The IMF and Sri Lankan authorities remain in close contact and are committed to resuming discussions as soon as possible. The IMF has expressed its continued support for Sri Lanka’s recovery and reconstruction efforts during this challenging period.
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