Sri Lanka's fund facility to continue despite Cyclone Ditwah impact: IMF

The IMF's current Sri Lanka bail out would continue with no changes despite the economic impact due to widespread devastation after Cyclone Ditwah, a delegation of the global lender told President Anura Kumara Dissanayake on Wednesday.

The representatives of the International Monetary Fund (IMF), who are in Sri Lanka to assess the damage caused by Cyclone Ditwah that left over 600 dead in late November, met with Dissanayake at the Presidential Secretariat, the President's Media Division (PMD) said here.

The IMF conveyed that Sri Lanka is currently moving in the right economic direction despite facing a severe disaster situation, Dissanayake's office said, adding, "the IMF representatives stated that there would be no changes to the agreement relating to the Extended Fund Facility (EFF) programme being implemented with Sri Lanka."  The discussions relating to the release of the sixth tranche under the programme would resume in March, it added.

Sri Lanka is to receive around $330 million as the sixth tranche of the $2.9 billion bail out for four years entered by the government in March 2023.

Despite the completion of its fifth review in December, the tranche was delayed until February in view of Sri Lanka seeking 200 million dollars outside the EFF. It was part of the island nation's international appeal for aid in wake of the trail of destruction left by Cyclone Ditwah.

In the country's deadliest disaster since the 2004 tsunami, more than 600 people died in rains, floods and landslides as Cyclone Ditwah struck Sri Lanka on November 26.

An initial assessment had estimated that floodwaters inundated nearly 20 per cent of the country's land area, exposing approximately 2.3 million people.

In the immediate aftermath of the disaster, the government had said $6-7 billion would be required to fund the recovery effort.

Sri Lanka's parliament was on December 18 told that LKR 500 billion would be additionally needed to restore livelihoods of those affected due to the devastating Cyclone Ditwah.

The IMF delegation that arrived here on January 22 travelled to observe first-hand the damage caused by Cyclone Ditwah and met with communities affected by its impact.

The IMF representatives also pointed out that the strong fiscal discipline maintained by the Dissanayake government over the past year had been a key factor. "They noted that the Government's ability to present a supplementary estimate of LKR 500 billion was made possible by a surplus in the Treasury, describing this as a highly commendable development."  Dissanayake noted that the disaster had most severely affected poor rural communities, with rural infrastructure and livelihoods suffering extensive damage. He stated that, accordingly, LKR 500 billion had been allocated to protect rural livelihoods and restore income-generating activities.

Both parties agreed to continue implementing the Extended Fund Facility programme without making any changes to the existing agreement.

In December, the IMF had approved an emergency funding of $206 million under its rapid finance instrument to help Sri Lanka "address the urgent needs arising from the catastrophic Cyclone Ditwah and preserve macroeconomic stability."  The 48-month EFF deal with the IMF signed in March 2023 prompted Sri Lanka to carry out hard reforms in welfare-based governance. It was signed after Sri Lanka plunged into an unprecedented economic meltdown with its first-ever sovereign default in April 2022.