The repayment terms of Sri Lanka’s latest International Monetary Fund (IMF) assistance are clearly defined, featuring a grace period of three and a quarter years, a five-year repayment period, and a lending rate of just 3.274 percent, among the lowest globally.
IMF Mission Chief Evan Papageorgiou said the structure makes the Rapid Financing Instrument (RFI) significantly more attractive than short-term market borrowing, which typically involves higher interest costs and considerable refinancing risks.
The US$206 million disbursement under the RFI—equivalent to 26 percent of Sri Lanka’s IMF quota or about 0.2 percent of GDP—is in addition to the country’s ongoing Extended Fund Facility (EFF) programme.
“This is new support we are providing,” Papageorgiou said. “It will not undermine Sri Lanka’s progress toward restoring debt sustainability.”
Why the RFI now?
The financing was approved after Cyclone Ditwah struck Sri Lanka just as the EFF programme was nearing completion, prompting a temporary pause to reassess programme parameters.
“The RFI is a faster instrument to deploy,” Papageorgiou explained. “It provides immediate liquidity and sends a strong signal of confidence, helping to unlock additional financing from development partners and bilateral donors.”
Although relatively modest in size, the RFI is expected to have a strong catalytic effect. “This access strengthens the authorities’ response to the crisis and reassures markets,” he added.
Papageorgiou reiterated that Sri Lanka’s debt sustainability is expected to be restored on a forward-looking basis following the completion of debt restructuring, provided reform momentum is maintained.
“Progress so far has been encouraging, and the authorities remain strongly committed,” he said, noting that discussions will soon take place on adapting the EFF programme to accommodate cyclone-related recovery needs.
The IMF stressed that the core pillars of the programme—fiscal discipline, institutional strengthening and social protection—remain unchanged, even as flexibility is applied to address disaster-related challenges.
