- COPF Chair calls for a permanent State climate resilience fund
- Sri Lanka’s fiscal framework remains vulnerable to shocks
In the wake of the Cyclone Ditwah disaster, Sri Lanka’s ability to weather its impact has become a point of discourse as the national economy is still recovering from a major economic crisis.
According to Department of National Budget Director General Jude Nilukshan, the 2026 Budget does not contain specific disaster management allocations.
He said: “The 2026 Budget does not include separate provisions for disaster management. Disaster response and reconstruction will be financed through reallocation within pre-approved budgetary frameworks rather than through new, earmarked resources dedicated to disaster risk reduction and resilience.”
Nilukshan added: “While the Budget includes a modest allocation of Rs. 5–6 billion for mitigation activities, there is no structural provision to institutionalise disaster preparedness, climate adaptation, or resilience planning. Additionally, a supplementary estimate under the 2025 Budget provided Rs. 50 billion for immediate relief following the recent cyclone, which underscores the absence of a forward-looking mechanism built into the 2026 fiscal framework.
“This reliance on internal reallocations reflects a broader structural issue: Sri Lanka’s budgeting approach still treats disaster response as contingent and reactive rather than as a planned, institutional obligation.”
Repeated attempts to contact Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando on the matter proved to be futile.
Structural considerations
The 2026 Budget, passed by Parliament recently, presents a fiscal picture oriented towards meeting International Monetary Fund (IMF) benchmarks for deficit reduction and debt sustainability.
Projected figures include a total revenue of Rs. 5,300 billion, with Rs. 4,910 billion expected from taxes; a total expenditure of Rs. 7,057 billion; and a budget deficit of Rs. 1,757 billion, equivalent to 5.1% of Gross Domestic Product (GDP). The Government also projects a primary surplus of Rs. 860 billion, or 2.3% of GDP, with a declining debt-to-GDP ratio of 96.8% by 2026.
Economists such as University of Peradeniya Department of Economics and Statistics Professor Ananda Jayawickreme have underscored that these figures reflected structural vulnerabilities.
He stated: “The deficit projection of 5.1% of GDP in the 2026 Budget represents an increase from the revised 2025 estimate of 4.5% of GDP. This indicates that the country is not progressing towards the fiscal consolidation targets set for 2028 and 2030.
“Furthermore, the Budget’s heavy reliance on indirect taxation, particularly the expanded Value-Added Tax (VAT) base, disproportionately burdens salaried employees and professionals while leaving loopholes that allow wealthier taxpayers and politically connected individuals to evade meaningful tax contributions. Without closing these loopholes and diversifying investment incentives, the revenue framework remains fragile and vulnerable to external shocks.”
Climate resilience and budgetary limitations
Member of Parliament and Committee on Public Finance (COPF) Chairman Dr. Harsha de Silva has provided detailed insight into the implications of the 2026 Budget for climate resilience and disaster preparedness.
He stated: “Climate resilience is a medium to long-term imperative. Going forward, all project approvals, whether public or private, should be contingent upon adherence to climate-resilient construction standards. This ensures that new investments are not exposed to predictable climate-related risks and that infrastructure and housing are better prepared to withstand future shocks.”
When asked about the necessity of a permanent climate resilience fund, Dr. de Silva said: “Yes, the country urgently requires proper insurance mechanisms and scientifically sound zoning regulations to reduce vulnerability to climate disasters. The absence of such a fund in the 2026 Budget severely limits the Government’s ability to address both immediate reconstruction needs and medium-term resilience investments.”
He added: “Reconstruction following Cyclone Ditwah will require approximately Rs. 500 billion annually for at least three years. Some of these funds can be mobilised through reallocation within the existing Rs. 1.4 trillion capital budget. Since the Government has exceeded primary surplus targets for three consecutive years, there is some fiscal space to accommodate these pressing needs, although careful prioritisation is essential.
“The 2026 Budget was formulated prior to the cyclone’s destruction and is therefore not fully aligned with current realities. The Budget requires fundamental adjustments, including shifting funds from recurrent expenditure to capital programmes and reallocating allocations between ministries. Very little unallocated contingency exists – perhaps only Rs. 30–40 billion – meaning that comprehensive restructuring of the capital budget will be necessary to meet the immediate recovery and medium-term resilience requirements.”
Dr. de Silva also addressed broader considerations beyond disaster response, noting: “The disruption to education caused by the cyclone, including lost schooling and the Government’s planned transition to a module-based system, is not reflected in the current Budget. The Government must reconsider its priorities in light of these constraints, focusing public resources on areas that only the Government can effectively deliver, such as teacher training, technology integration in schools, and English education.”
The COPF Chairman described the 2026 Budget as “largely a continuation of the IMF-aligned framework proposed under the previous administration of President Ranil Wickremesinghe”.
He added: “The lack of significant private sector involvement means that public funds are being spent on initiatives that could have been carried out privately, reducing the effectiveness of public investment and limiting expected economic growth."
The critical gap
Among the most significant concerns raised by economists, environmental advocates, and policy analysts is the absence of a dedicated climate resilience and disaster recovery fund in the 2026 Budget.
Sri Lanka lies in a climate-vulnerable region. Despite this vulnerability, the Budget does not establish a statutory fund designed to accumulate resources in advance of disasters or to support systematic recovery and adaptation efforts.
Prof. Jayawickreme noted: “Tropical countries like Sri Lanka face frequent climate disasters and therefore require a statutory fund financed through a fixed percentage of annual tax revenue. Such a fund should be governed by stringent regulations to ensure transparency and prevent misuse, drawing lessons from past experiences where disaster assistance funds lacked robust oversight.
“By accumulating resources during periods of relative calm, a statutory fund ensures that financial capacity is available immediately upon the onset of a crisis, rather than relying on supplementary estimates or ad hoc reallocations."
Int’l climate finance and policy implementation
Adding to the domestic critique, Centre for Environmental Justice Co-Founder and Attorney-at-Law Ravindranath Dabare has called for a comprehensive strategy that integrates international climate finance into Sri Lanka’s resilience planning.
He pointed out that various global funding mechanisms, such as the Green Climate Fund, adaptation finance channels, and loss and damage compensation systems under the United Nations Framework Convention on Climate Change (UNFCCC), were designed specifically to support vulnerable nations facing climate shocks.
Dabare noted: “Sri Lanka’s contribution to global greenhouse gas emissions is negligible, yet the country faces disproportionate impacts from climate change. Securing international climate finance is both a moral and strategic imperative.
“Responsibility for pursuing these funds lies with administrative and foreign policy institutions, specifically the Ministry of Environment in coordination with the Ministry of Foreign Affairs. Under established UNFCCC mechanisms, funding is available to assist with climate adaptation and resilience efforts – resources that Sri Lanka has not yet sufficiently accessed.”
Domestically, the Disaster Management Act No.13 of 2005 already provides a legal basis for establishing a Disaster Management Fund, yet its initial and subsequent allocations have been minimal and insufficient to meet the scale of contemporary needs. Dabare said: “This statutory provision must be operationalised with effective governance structures that ensure accountability and strategic deployment of resources.”
President’s perspective
In an extensive interview with Newsweek, President Anura Kumara Dissanayake detailed the Government’s approach to disaster preparedness and response as well as systemic reform in the wake of Cyclone Ditwah, which inflicted extensive damage across Sri Lanka’s provinces.
The President noted: “The immediate response efforts mobilised national resources and benefited from international partner support, but they also highlighted the need for institutional upgrades and enhanced resilience architecture.
“The Government has initiated a comprehensive review of existing frameworks, with particular emphasis on pre-monitoring and early warning mechanisms, including real-time weather tracking and community alert systems. Plans are underway to establish emergency operations centres in every district affected by climate events, deploy military and Police resources for rescue and relief, and engage international partners for technical support.
“However, these measures are only a beginning, not a culmination, and systemic gaps must be addressed through institutional reform rather than temporary fixes.”
He added: “The creation of a national disaster management authority with real authority, dedicated resources, and accountability mechanisms is central to our strategy. Improvements in forecasting, enhanced radar coverage, pre-positioning of rescue equipment, and detailed mapping of landslide-prone terrain are critical for long-term resilience.
“Past approaches lacked sufficient anticipation of extreme weather events. Transparent governance and international cooperation are essential to ensure that resilience mechanisms are effective, efficient, and accountable.”
Fiscal discipline and resilience
The 2026 Budget’s fiscal orientation reflects a tension between achieving macroeconomic targets under IMF guidance and addressing the pressing need for resilience investments.
While the Government projects a primary surplus and declining debt ratios, critics argue that the Budget’s structure lacks the flexibility and forward-looking investments necessary for sustainable growth and risk mitigation.
Without a dedicated climate resilience fund, the Government will depend on reallocations and supplementary estimates whenever disasters occur, which can delay response and place undue pressure on other critical sectors such as health, education, and infrastructure development.
COPF Chairman Dr. de Silva noted: “Without proper institutional reforms and the establishment of a permanent climate resilience fund, Sri Lanka risks recurring setbacks where each disaster forces the reprioritisation of limited public resources, delaying structural growth initiatives and entrenching a reactive model of crisis management.”
Institutional resilience
The need for a statutory climate resilience fund is not merely a policy preference; it represents an institutional imperative grounded in the realities of climate science, economic exposure, and development stability.
A dedicated fund would enable Sri Lanka to build fiscal buffers, invest in risk reduction infrastructure, and ensure that resources are available immediately when disasters strike. It would also create a framework for accountability, transparency, and strategic planning, addressing past weaknesses in relief delivery and preparedness.
It could also be designed to integrate international climate finance pledges, enhancing Sri Lanka’s capacity to leverage global resources while maintaining domestic oversight.
Such an approach would align fiscal policy with climate resilience goals, embedding risk mitigation into the core of national budgeting rather than treating it as a contingent expense.