Monday Dec 22, 2025
Monday Dec 22, 2025
Monday, 22 December 2025 05:56 - - {{hitsCtrl.values.hits}}
By Charumini de Silva
|
Mission Chief for Sri Lanka Evan Papageorgiou
|
The International Monetary Fund (IMF) on Friday underscored both support and caution as the country seeks emergency assistance under its Rapid Financing Instrument (RFI) in the aftermath of Cyclone Ditwah, warning that the country’s hard-won economic recovery remains vulnerable to fresh shocks.
Speaking at a virtual press conference, IMF Mission Chief for Sri Lanka Evan Papageorgiou said the supplementary allocation of around $ 206 million is intended to go beyond immediate disaster relief and help sustain recovery efforts.
“The supplementary budget will help bridge the gap between immediate humanitarian needs and the longer term reconstruction efforts,” Papageorgiou said.
He noted that the cyclone struck at a particularly sensitive moment, just as Sri Lanka was emerging from one of the deepest economic crises in its history. According to Papageorgiou, the IMF-supported reform program under the Extended Fund Facility (EFF) has already begun to deliver tangible outcomes.
“These include a robust economic recovery, price stability, and progress in rebuilding foreign exchange reserves,” he said, adding that revenue-based fiscal consolidation and public financial management reforms have strengthened fiscal discipline and reduced risks.
On debt sustainability, Papageorgiou said Sri Lanka’s restructuring efforts have provided critical breathing space. “Debt restructuring has moved public debt towards a more sustainable track,” he said.
However, he issued a blunt warning that the recovery remains incomplete. “The economy remains fragile and GDP has not yet returned to its pre-crisis level,” Papageorgiou cautioned.
Given the scale of devastation caused by Cyclone Ditwah and the time required to establish credible estimates of its economic impact, the IMF has deferred the Fifth Review under the EFF. Papageorgiou said a fresh IMF mission will visit Sri Lanka in early 2026.
“The IMF will field a mission to Sri Lanka in early 2026 to resume discussions on how the program can best support recovery and reconstruction efforts while preserving the objectives and policy priorities that have underpinned the recent progress,” he said.
Papageorgiou described the economic fallout from the cyclone as “significant and still unfolding,” noting that while it is too early for a high-confidence assessment, short-term economic activity is likely to be affected.
He identified agriculture and tourism as the sectors most exposed to the shock.
He also warned of broader macroeconomic spillovers. Inflation is likely to rise due to supply disruptions, while the current account deficit is expected to widen over the coming year. Even so, he said Government relief measures, backed by the IMF and other development partners, should help cushion the impact.
“The Government’s relief measures supported by the IMF and other development partners should go some way to addressing these challenges and should lay the groundwork for recovery,” Papageorgiou said.
In the immediate term, he stressed the need to prioritise people over numbers. “In the short term, the authorities need to accommodate the significant natural disaster and act to help those affected the most and protect lives and livelihoods,” he said.
At the same time, Papageorgiou stressed that emergency spending must adhere to strict governance standards.
“The authorities need to ensure that emergency spending is efficient, well-targeted, and transparent,” he said, adding that all such expenditure should comply fully with the Public Financial Management Act and be supported by strong monitoring and routine disclosure.
On monetary policy, he reiterated the need for discipline, urging the Central Bank of Sri Lanka (CBSL) to continue avoiding money creation to finance the Budget.
Papageorgiou said sustained reforms will be essential to restoring stability and supporting reconstruction, including improvements in public investment management.
“The steadfast implementation of reforms will be crucial to restoring macroeconomic stability and supporting Sri Lanka’s recovery. Public investment management reforms will help prioritise reconstruction projects and ensure value for money,” he said.
He also noted that the CBSL has already announced measures to support borrowers affected by the disaster and stands ready to provide liquidity support to the financial system if needed.
Papageorgiou said the IMF is working closely with Sri Lankan authorities to determine how best to support the country and complete the next EFF review as quickly as possible.
“We are working closely with the authorities to understand how we can help and how to complete the next review under the EFF program as soon as possible,” he said.
He reiterated that the core objectives of the IMF-supported program remain unchanged: restoring fiscal and debt sustainability while protecting the vulnerable, safeguarding price and financial sector stability, rebuilding external buffers, strengthening governance, and advancing growth-oriented structural reforms.
“Our shared objectives remain restoring fiscal and debt sustainability while protecting the vulnerable, safeguarding price and financial sector stability, rebuilding external buffers, strengthening governance, and advancing growth-oriented structural reforms,” Papageorgiou said.
Papageorgiou also praised the Sri Lankan authorities for their response to the disaster and reaffirmed the IMF’s commitment to the country.
“Let me conclude by commending the Sri Lankan Government and the CBSL for their swift and decisive response to the disaster. The IMF remains dedicated to supporting Sri Lanka and safeguarding its hard-won gains and navigating the road ahead,” he added.
