By: Staff Writer
December 09, Colombo (LNW): The economic turmoil that struck Sri Lanka after Cyclone Ditwah calls for swift, focused relief, something the IMF’s Rapid Financing Instrument (RFI) is designed precisely for. Under recent announcements,
Sri Lanka has requested roughly US$ 200 million under the RFI: SDR 150.5 million (about 26 % of its IMF quota), with the intention of mobilizing immediate support for reconstruction, humanitarian aid, and balance-of-payments stabilization.
The RFI stands in sharp contrast to the island’s ongoing Extended Fund Facility (EFF) arrangement a long-term, structural reform programme approved in March 2023 that aims to restore macroeconomic stability, rebuild reserves, manage public debt, stabilize inflation, and implement fiscal and governance reforms.
Under the EFF, Sri Lanka has already drawn multiple tranches by early 2025, it had received over SDR 1.0 billion; by mid‑2025, support reached SDR 1.27 billion (about US$1.74 billion) after the fourth review.
The EFF’s objective is structural: it is meant for countries facing serious, medium-term balance-of-payments issues caused by deep-rooted fiscal, monetary, and institutional weaknesses.
Because these structural problems require time often several years the EFF features long repayment periods, periodic reviews, and strict conditionalities (such as fiscal consolidation, governance reforms, debt restructuring, energy pricing, social safety nets).
By contrast, the RFI is a rapid, low-access instrument intended for urgent, often short-lived crises such as natural disasters, sharp external shocks, or sudden liquidity shortfalls.
It offers single‑disbursement loans, with no program‑based conditionality or periodic reviews, and repayment typically within 3¼ to 5 years.
This makes it well-suited for a country like Sri Lanka now hit by a cyclone whose consequences are immediate and severe, but (hopefully) not structural in nature.
Given the circumstances, most analysts argue that tapping the RFI alone preserves the credibility and momentum of the existing EFF programme. Using the RFI does not interfere with structural reform commitments, debt‑sustainability efforts or external buffer rebuilding. In fact, IMF sources confirm that the RFI request is being processed separately, and that the next scheduled EFF review will resume only after the RFI decision.
In practical terms, this ensures that Sri Lanka receives immediate liquidity for reconstruction and relief while maintaining its longer-term reform trajectory. For an economy still emerging from years of crisis with progress on inflation, revenue‑collection, debt restructuring and more under the EFF the RFI represents a surgical, well‑timed intervention.
In conclusion: at this moment, what Sri Lanka needs is emergency support, not another bailout programme. The RFI is the right tool; issuing calls for a new multi‑year IMF programme would be counterproductive. If implemented and communicated clearly, this dual approach RFI for disaster relief + EFF for structural reform might just preserve both short-term stability and long-term recovery.
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