By Vox Civis
Sri Lanka’s post-Cyclone Ditwah response is fast becoming a case study in how not to manage a national emergency in a country already living on borrowed time. The government’s instinctive rush to announce a sweeping compensation and relief package may have been politically understandable, even emotionally resonant, but it has now exposed a deeper and far more troubling flaw: policy has once again been made in reverse order.
The cart has once again been put before the horse; the promise before the plan, the politics before the arithmetic. What remains is a widening gap between what was announced by the President and Finance Minister from the well of Parliament and what can realistically be financed without detonating the fragile stabilisation achieved since bankruptcy.
When the President unveiled his grand relief package on the final day of the budget debate on December 5th, the symbolism seemed deliberate. It conveyed decisiveness, compassion and a sense of control. Yet even then, some of us asked the uncomfortable but unavoidable question: where is the money supposed to come from? That question was never answered.
Weeks later, that question largely remains unanswered while signs of an ad hoc plan appear to be surfacing, that too in bits and pieces and difficult to piece together. What has followed the Presidential pronouncement instead is a frantic scramble for funds, even as affected families on the ground are demanding the payments they were promised. Relief, in other words, was announced as certainty, while funding was treated as a detail to be figured out later. This, from a government that is supposedly strictly bound by IMF imposed conditions connected to the yet ongoing bailout package, also referred to as the ‘stabilisation programme.’
The importance of sequencing
Under normal circumstances proper sequencing matters. Given Sri Lanka’s exceptional circumstances it should matter more, given that the country is yet under an IMF programme and eagerly awaiting the next tranche along with an emergency funding facility, but the government does not appear to think so, letting politics do the talking while the accounting is left to others. Ad hoc funding mechanisms devised after the fact, without prior consultation, are unlikely to be met with enthusiasm in Washington. Sri Lanka’s next IMF review is due as early as next month, and it will not take much imagination to see the tension coming.
Emergency spending on this scale, however morally justified, cannot simply be waved through without offsetting measures or a recalibration of fiscal targets. The government may find that it has no choice but to return to the negotiating table, at which point the NPP’s much-derided promise to renegotiate the Debt Sustainability Analysis (DSA) could paradoxically become the only way to preserve the status quo without collapsing the programme.
Ironically, amending the DSA was one of the governing National People’s Power (NPP) party’s main election slogans, citing the “raw deal” that the people were being made to undergo in order to sustain the programme. However, since assuming office, that promise was effectively consigned to the dustbin of history – another inconvenient promise – but it now appears that karma has other plans lined up.
It is against this backdrop that Deputy Finance Minister Sunil Jayantha’s recent declaration that Inland Revenue has already exceeded its target by Rs. 50 billion, must be read. This seems less like a triumphal announcement and more like a pre-emptive defence, a signal aimed squarely at the anticipated IMF pushback.
Bridging the gap
But even taken at face value, that surplus barely scratches the surface of the problem. The largely private-sector-managed ‘Rebuilding Sri Lanka Fund’ has so far raised only about Rs. 7 billion. Meanwhile, the estimated cost of compensation and infrastructure repair ranges between $6 and $7 billion. In rupee terms, that is roughly Rs. 1.8 trillion.
To put that figure in perspective, the entire spending budget for next year is around Rs. 8 trillion. The projected budget deficit is Rs. 1.8 trillion. The disaster funding requirement, therefore, is equivalent to an entire year’s planned deficit. Meeting it without structural adjustments would effectively mean doubling the deficit at a time when fiscal consolidation is the cornerstone of Sri Lanka’s economic survival. Whether the President was aware of the complications of the compensation package at the time of announcement is unclear, but what is clear is that what was promised will have to be delivered to the already badly battered victims of the disaster.
Warnings of an impending crunch are no longer confined to anonymous analysts. At a recent press conference, UNP’s newly appointed Deputy Secretary General, Harin Fernando, openly urged journalists to mark their diaries, predicting that the funding crisis would come to a head by April next year, exactly four years after Sri Lanka first declared bankruptcy in April 2022.Whether one takes the timing seriously or not, the symbolism is chilling. It suggests that the country may be drifting, almost unconsciously, back toward the same cliff edge it narrowly stepped away from. While help came through the IMF the last time around, whether that same entity will step in a second time in such a short period after flouting its agreed upon conditions, is left to be seen.
The tourism gamble
For now, the government appears to be placing its faith in tourism, hoping that the sector will once again play the role of saviour. But that hope is increasingly detached from reality. One of the reasons the destruction caused by Cyclone Ditwah was initially downplayed was to reassure tourists that access routes were open and business was as usual.
This was particularly evident in the insistence that connectivity had been restored, even as the scenic upcountry railway, one of the country’s signature attractions, remained out of commission due to extensive damage. The strategy was transparent to the extent that it showed the level of desperation: keep the tap open at all costs. Yet as tourists already in the country shared their firsthand experiences of disruption, that narrative quickly unravelled.
The latest tourism data confirms what many suspected. While arrival numbers look impressive, revenue tells a far less comforting story. In November 2025, Sri Lanka welcomed a record 212,906 tourists, the highest ever for that month and a 16 percent year-on-year increase. Yet tourism earnings fell 8.5 percent year-on-year to $251.6 million. That figure is still a whopping $115.5 million below what the country earned in November 2018, underscoring just how wide the gap remains between volume and value. Besides, today’s prices are nowhere near what they were in 2018 when tourism products and services were much cheaper. Yet the revenue earned was greater indicating a dramatic slide on the revenue side.
Cumulatively, tourism generated $2.9 billion in the first eleven months of 2025, a modest 3.7 percent increase year-on-year, but still 34.2 percent lower than the same period in 2018, the year Sri Lanka achieved its highest-ever tourism revenue. Monthly earnings this year have averaged around $264.6 million, with worrying volatility. After a strong January, revenues declined in July and August, barely recovered in September, and have failed to regain momentum since.
Optimistic assumptions
Part of the problem lies in over-optimistic assumptions. The Sri Lanka Tourism Development Authority recently revised its per-day tourist spending estimate downward from $171 to $148, following a comprehensive airport exit survey conducted over 12 months. This is the same Authority which a year ago announced it would target increasing the per-day tourist spend to USD 200. This recalibration has seemingly forced the authorities to quietly abandon the once-vaunted $5 billion revenue target for 2025, revising it down to $3 billion; $1.4 billion short of what the country earned in 2018.
Even longer-term ambitions appear to have been trimmed, with the 2030 target reduced from $10 billion to $8 billion under the 2026 Budget. The message is clear: tourism is recovering in headcount, not in cash. Therefore, betting the fiscal future on it will probably be an exercise in denial.
With tourism earnings unpredictable, the government will be compelled to look elsewhere. In his December 5 address to Parliament, President Anura Kumara Dissanayake outlined a multi-layered funding strategy that blends domestic measures, special funds, and international assistance. A Rs. 500 billion supplementary estimate was presented to Parliament last Friday which was speedily approved. It was reported that the Treasury has already released Rs. 10.5 billion for immediate relief while the President’s Fund is being used for death compensation and student grants.
A new Rebuilding Sri Lanka Fund has been established to attract private and diaspora contributions. Internationally, the government has requested $200 million in emergency IMF funding, and secured $120 million through World Bank project repurposing, and received modest bilateral pledges, with a donor conference planned for January 2026.
Critical importance of external buy-in
To his credit, it was the Opposition Leader who first proposed the donor conference, a suggestion he reiterated during the special parliamentary session approving the supplementary allocation. Yet even taken together, these measures fall far short of the scale required. This is why the opposition has questioned the Rs. 500 billion supplementary estimate as woefully inadequate. It is also why the IMF’s reaction will be pivotal. Without external buy-in, the arithmetic simply will not work.
Meanwhile, Minister of Public Security Ananda Wijepala told Parliament on Friday that 257,000 out of 493,000 eligible flood-affected families have received the initial Rs. 25,000 grant to clean their homes. He said a total of Rs. 6.4 billion has been disbursed so far from the allocated Rs. 17.6 billion and steps are being taken to complete all payments soon.
Compounding the fiscal dilemma is a looming food crisis that has yet to receive the urgency it deserves. Thousands of hectares of vegetable cultivation have been destroyed, with Nuwara Eliya, Badulla, Anuradhapura, Kurunegala, Trincomalee, Batticaloa, and Puttalam among the worst affected. Pulses, maize, chillies, and other crops have been wiped out across large swathes of the country.
Satellite data shows severe inundation in northern and eastern districts, with flood extents reaching up to 16 percent. These are not abstract statistics. They translate into farming families crushed by debt, stripped of income, and facing months without productive land or functioning equipment. Without an emergency agricultural recovery plan, today’s disaster relief could easily become tomorrow’s food shortage.
Sri Lanka has been here before. The lesson of 2022 was not merely that the country ran out of dollars, but that credibility evaporates faster than reserves when promises are made without plans. In hindsight, Cyclone Ditwah did not create Sri Lanka’s current fiscal fragility; it merely exposed it.
The tragedy now would be to respond with compassion untethered from competence. Relief must be delivered, but it must also be financed honestly, transparently, and in a way that does not undo the painful gains of the past three years. Otherwise, April may once again arrive not as a month of renewal, but as a reminder that we failed to learn when it mattered most.
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