Rebuilding Sri Lanka beyond the catastrophe

A strategy for financing recovery and long-term resilience

- By Dr. Gishan Illangakoon

While banks and investors often favour climate mitigation projects, Sri Lanka's urgent need lies in adaptation, protecting communities, agriculture, and infrastructure from climate shocks

SRI Lanka entered 2024-2025 with cautious optimism. After navigating one of the most severe economic crises in its post-independence history, the nation has made meaningful progress toward macroeconomic stabilisation, debt restructuring, and fiscal consolidation under the IMF Extended Fund Facility. Inflation has eased, reserves are strengthening, investment sentiment is slowly improving, and structural reforms that have been long overdue are finally taking shape.

Against this backdrop of gradual progress, Cyclone Ditwah has inflicted catastrophic damage. The cyclone ravaged multiple districts, destroyed homes and livelihood assets, disrupted agriculture, wiped out infrastructure, and tragically caused significant loss of life. Early estimates place reconstruction needs at $ 4-5 billion (as per the Commissioner of Essential Services), posing a formidable challenge to a nation already grappling with limited fiscal space.

Yet, crises often create opportunities to rethink systems, build smarter, and adopt strategies that transform adversity into long-term resilience.

This article proposes a comprehensive, innovative, and fiscally responsible roadmap for Sri Lanka’s recovery. It draws on international best practices, regional experience, and disaster-financing instruments widely used in climate-vulnerable developing countries.