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IMF Rapid Financing Instrument: Critical support at fragile juncture
View(s):By Bandula Sirimanna
The International Monetary Fund on Friday approved Sri Lanka SDR 150.5 million, or about US$206 million, through the Rapid Financing Instrument (RFI), to meet urgent financing for post-Cyclone Ditwah reconstruction.
The devastating cyclone, which shook the country on November 28, caused over 600 fatalities and leaving scores of people displaced. There was destruction of dwelling houses, agricultural land, as well as small-scale businesses, while infrastructure such as roads, bridges, electricity, and irrigation channels was also damaged.
More than 17,600 houses are either damaged or have become unsuitable for living anymore due to possible risks of landslides, President Anura Kumara Dissanayake told Parliament on Friday.
“The IMF concedes the severity of the crisis, and the cyclone has resulted in urgent humanitarian and reconstruction needs which exerted a large strain on the government’s finances and the outside current account,” IMF’s Deputy Managing Director and Acting Chairman Kenji Okamura said in a statement on Friday adding that the financial assistance would ensure that the country deals with the emergency created by the cyclone.
The approval comes as Sri Lanka is still implementing reforms as part of its Extended Fund Facility (EFF) with the IMF, which has helped to secure price stability, increase tax revenues, and accumulate foreign reserves, Finance Ministry officials said.
However, the cyclone hit when the Fifth Review of this programme was close to completion. Due to the uncertainty over the full damage to the economy as well as costs of rebuilding, it was decided to defer this review to early 2026. The IMF is expected to send a mission to Sri Lanka in coming months, an IMF spokesman revealed.
RFI ensures quick access to foreign currency with fewer terms, enabling the government to provide relief as well as satisfy relevant imports.
This, especially in an uncertain scenario, indicates that the international community still supports the recovery of Sri Lanka. However, the support also points out the challenges that exist.
The economy still has not recovered to what it was before the crisis, the level of public debt is still high, and natural disasters are becoming more common.
Although IMF officials praised the country’s fiscal performance in 2025, they also emphasised that expenditure on recovery needs to be closely watched as not to endanger debt sustainability.
The officials have, however, clarified that the provision of emergency funds does not in any way affect the commitments on reforms.
Deputy Minister of Finance and Planning, Dr. Anil Jayantha Fernando, said that “the RFI is appropriate for the disaster that the country has encountered, without having any implications for the IMF programme”.
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