Press Briefing on the IMF Executive Board Approval for Sri Lanka’s Request for a Rapid Financing Instrument

IMF News, December 23, 2025

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Published: December 23, 2025

IMF decision and RFI disbursement

IMF Executive Board approved emergency financial support for Sri Lanka under the Rapid Financing Instrument (RFI) on December 23, 2025.
The RFI provides "about 206 U.S. dollars" (as stated in the briefing transcript) and is later described in the briefing as "about 206 million U.S. dollars."
The RFI is a single disbursement instrument (one-off purchase); there are no subsequent purchases or disbursements under this RFI.
The RFI access increase is described as "26% of quota" and as "about 0.2% of GDP."
RFI lending cost details cited:
- Applicable basic rate of charge for the week of December 15th to 21st: "3.274%".
- Representative statement of the basic rate: "3.28%-3.27%".
- Repayment timetable: grace period of "3 and 1/4 years" and repayments begin up to "five years after that".
- Surcharges are level- and time-based; example threshold cited: above "300% of quota for more than three years" triggers surcharge application.

Humanitarian and economic impact of Cyclone Ditwa

Cyclone Ditwa struck on "November 28th".
Human and displacement tolls reported: "claiming more than 600 lives", "displacing over 100,000 people" and "affecting millions more".
Key sectors hit hardest: agriculture and tourism.
Short-term macroeconomic effects highlighted:
- Growth is "likely to take a hit in the short term."
- Inflation is "likely to rise due to supply disruptions."
- Current account deficit "will likely widen over the next year."
- Projected external balance pressures include increased food and infrastructure imports, lower agricultural exports, and potentially reduced tourism earnings.
- Higher remittances are expected to partially offset external pressures.
The IMF cautioned that estimates remain preliminary and that the economic impact is "significant and still unfolding."

Government fiscal response and supplementary budget

Parliament approved the enactment of the "2026 supplementary budget" authorizing an additional "500 billion rupees."
Authorities’ immediate relief package elements: direct support to affected families, restoration of critical infrastructure, and measures to protect the most vulnerable.
RFI disbursement allocation agreed to be used for budget support; operational flow:
- Technical process: disbursement must go to the central bank first, then passed on to the Ministry of Finance.
Public Financial Management (PFM) guidance emphasized:
- Emergency spending should be "efficient, well targeted and transparent."
- All emergency spending should be executed in full compliance with the Public Financial Management Act.
- Enhanced monitoring and regular public reporting are required "in line with transparency and accountability standards."
- Central Bank of Sri Lanka should "continue to refrain from monetary financing of the budget."

IMF program status, EFF review deferment, and next steps

The cyclone prompted deferral of the fifth review under the IMF-supported Extended Fund Facility (EFF).
IMF mission will visit Sri Lanka in "early 2026" to resume discussions and "complete an extra view under the EFF program as soon as possible."
Purpose of re-engagement: assess disaster effects, determine whether augmentation of the program is warranted, and design how the EFF can best support recovery and reconstruction while preserving program objectives.
EFF continuation principles stated:
- Reviews have backward- and forward-looking components; re-assessment will incorporate updated macro projections, new spending needs, and program conditionality adjustments if needed.
- Authorities have expressed commitment to program objectives; IMF will work in close collaboration with authorities to jointly agree feasible targets.

Fiscal rules, flexibility, and debt considerations

The briefing referenced a spending limit (fiscal rule) at "15% of GDP" (phrase in transcript: "spending limit on the expenditure on 15% of GDP").
The Public Financial Management Act contains escape clauses that allow temporary deviation from fiscal limits in cases of significant natural disasters; no immediate change to the law is required to accommodate reconstruction spending.
Debt restructuring progress noted as having "delivered substantial relief" and placed public debt on a "path to sustainability" (as summarized in the briefing).
IMF view on RFI impact on debt sustainability:
- The RFI disbursement "will not undermine Sri Lanka's good progress toward the sustainability" given its relatively small size ("26% of quota", "about 0.2% of GDP").
- IMF highlighted catalytic effects: RFI is intended to catalyze additional financing from development partners and bilateral donors.
Borrowing-cost comparison:
- IMF lending rates (including the example "3.274%") are presented as lower than likely primary market borrowing costs and preferable to short-term domestic dollar bond issuance due to lower refinancing risk.

Monetary and financial sector safeguards

Central Bank guidance: refrain from monetary financing of the budget.
Central Bank has announced measures to support affected borrowers and "stands ready to provide liquidity support to the financial system if necessary."
IMF recommended that emergency spending be supported by enhanced monitoring and public reporting to safeguard price and financial sector stability.

Donor coordination, reconstruction priorities, and climate resilience

IMF will play a catalytic and coordinating role with development partners and bilateral donors; the RFI disbursement and resumed EFF engagement aim to signal international support and mobilize additional resources.
A donor conference for rebuilding was referenced as upcoming (participants discussed IMF engagement and catalytic role).
Public Investment Management and climate resilience:
- A "PIMA mission" (Public Investment Management Assessment) in July 2025 included a climate PIMA assessment with recommendations to integrate climate resilience into public investment planning.
- Authorities are developing an appraisal and prioritization methodology to incorporate climate resilience criteria into reconstruction and future public investment projects.
- IMF is working closely with World Bank colleagues on reforms to strengthen climate resilience and disaster risk financing.

Operational and timing notes

Press briefing dates: December 23, 2025 (page header) and a participant list noting "December 19, 2025."
IMF committed to an early-2026 mission; no specific exact dates provided in the briefing transcript.
Transcription of the press meeting scheduled to be posted by Monday (per closing remarks).

Transcript: Press Briefing on the IMF Executive Board Approval for Sri Lanka’s Request for a Rapid Financing Instrument, IMF Communications Department, December 23, 2025.