IMF Warns Cyclone Ditwah Risks Derailing Sri Lanka’s Recovery

The International Monetary Fund (IMF) has warned that Cyclone Ditwah could significantly disrupt Sri Lanka’s economic recovery, cutting growth, raising inflation, and widening external financing gaps.

In a staff assessment released last week, the IMF estimated cyclone-related losses at 2.5% to 5% of GDP, with the balance of payments gap widening by about $700 million over the next year. Growth in 2026 is projected to slow to 2.9%, while average inflation could rise to 5.4%, breaching the Central Bank’s target.

Agriculture and tourism have been identified as the worst-hit sectors, while reconstruction spending is expected to raise import demand. To address urgent financing needs, the IMF assessed $205 million in Rapid Financing Instrument support as appropriate.

The Fund stressed that transparent emergency spending and strict public financial management will be critical to safeguard macroeconomic stability and preserve reform gains.

 

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