Sri Lanka will have pay around 3.275 percent plus and some surcharges for the 206 million dollar Rapid Finance Instrument loan, Evan Papageorgiou, IMF Mission Chief for Sri Lanka said.
There have been concerns raised in Sri Lanka that the RFI loan is too expensive compared to other commercial borrowings.
The Rapid Finance Instrument, which was approved on December 19 has a three and a quarter year grace period and is repayable up to five years after that, Papageorgiou said.
“The basic rate of charge right now, by the way, that’s determined weekly, but right now, for the week of December 15th to 21st, where we are now, is 3.274 percent, which is the SDR interest rate plus a fixed margin, which is a standard for every member,” he said.
“And then, so this number is already very low : 3.28 percent, 3.27 percent, is already very low. There are surcharges on top of that, but there are surcharges actually kicking in only after a period of time. They are level-based.”
The surcharges are based on the level of access based on quota and may rise to 200 basis points in some cases.
At the moment Sri Lanka is getting new disbursements from the Extended Fund Facility after the currency crisis and default triggered by 2020 rate cuts and is steadily repaying the loan taken after the currency crisis triggered by 2015 rate cuts.
Sri Lanka is now getting the RFI after a controversial rate cut in May, though inflationary open market operations (monetizing bank rupee assets) have not been deployed in 2025 to enforce it and rates are correcting upwards.
There was a public outcry over monetizing bank Treasuries in the last quarter of 2024, and the threat to move to a single policy rate (floor system), abandoning a scarce reserve regime which analysts warned will lead to a rapid default.
However a parliament panel has raised concerns over monetizing foreign currency deposits through inflationary buy-sell swaps in 2025.
In Sri Lanka a temporary shock to the credit system from natural disasters, such as during the tsunami has had to effect of improving the balance of payments and the exchange rate, analysts say.
Sri Lanka is getting the RFIs without any conditions per se.
There are usually prior actions but since the IMF already had a program and was familiar with the country, the RFI was disbursed without any, Papageorgiou said.
The cyclone hit Sri Lanka from November 26 and the RFI was approved in December 19.
The cyclone has left more than 800 people dead or missing, inundated vast areas.
Sri Lanka now has to re-negotiate the economic policies and targets in the IMF program for which a team will arrive in January.
In the meantime Sri Lanka will have access to IMF money.
“What I can tell you about this $206 million USD disbursement from the rapid financing instrument is that it will not undermine Sri Lanka’s good progress toward debt sustainability,” Papageorgiou said.
“It will increase Sri Lanka’s IMF credit commitment by a relatively small amount.
This is 26 percent of quota, so roughly 200 million dollars, which is about 0.2 percent of GDP. This is a very small amount.
“So, I would instead point to the catalytic effect that this access can have, because this ensures that the authorities’ response can be augmented and there is quick access to additional financing, not only from the IMF, but also from other development partners, as well as bilateral donors. That’s very important.”
The RFI funds will also go to the Treasury as in the EFF.
President Anura Kumara Dissanayake told parliament on Friday that he is expecting 500 million Us dollars from the IMF and other international partners including the World Bank and Asian Development Bank.
