Sri Lanka’s RFI Comes With Long Grace, Low Rates

COLOMBO (News 1st); The repayment terms of Sri Lanka’s latest IMF lifeline are clear: a grace period of 3¼ years and repayment over five years, at a lending rate of just 3.274%, among the lowest globally.

IMF Mission Chief Evan Papageorgiou says this structure makes the Rapid Financing Instrument (RFI) far superior to short-term market borrowing, which carries higher costs and refinancing risks.

The $206 million disbursement under the RFI, equivalent to 26% of Sri Lanka’s IMF quota or 0.2% of GDP, comes on top of the existing Extended Fund Facility (EFF) program. 

“This is new support we are providing,” Papageorgiou explained. “It will not undermine Sri Lanka’s progress toward debt sustainability.”

Why RFI Now?

The cyclone struck as the EFF was nearing completion, forcing a pause to reassess program parameters. 

“The RFI is a faster instrument to deploy,” Papageorgiou said. “It ensures quick liquidity and signals confidence, unlocking additional financing from development partners and bilateral donors.”

While modest in size, the RFI’s catalytic effect is significant. “This access strengthens the authorities’ response and reassures markets,” he noted.

Papageorgiou reiterated that Sri Lanka’s debt sustainability is expected to be restored on a forward-looking basis after restructuring, provided reforms continue. 

“Progress has been good, and the authorities remain strongly committed,” he said, adding that discussions on adapting the EFF to accommodate cyclone recovery will be held soon.

The IMF emphasized that the program’s pillars—fiscal discipline, institutional strengthening, and social protection—remain unchanged, even as flexibility is applied to address disaster-related needs.