India Pledges USD 450 Million to Aid Sri Lanka | 25 Dec 2025

Source:TH 

India announced a USD 450 million reconstruction package to support Sri Lanka’s recovery after Cyclone Ditwah, reinforcing India’s role as a first responder and trusted partner in the Indian Ocean region. 

• Earlier, under Operation Sagar Bandhu, India delivered humanitarian aid, relief supplies, and medical assistance to Sri Lanka, including an Indian Army field hospital near Kandy that treated over 8,000 people, reaffirming India’s strong support. 
• Sri Lanka’s Fragile Recovery: Sri Lanka was showing tentative fiscal stability under International Monetary Fund (IMF) support when the cyclone struck.  
  • The IMF-led programme, imposed after Sri Lanka’s 2022 debt default, introduced austerity measures such as tax hikes, subsidy cuts, and high interest rates to restore some macroeconomic stability; but it disproportionately hurt the poor. 
  • The IMF recently approved about USD 206 million in emergency financial assistance under its Rapid Financing Instrument (RFI). 
    • The RFI provides prompt financial assistance to any IMF member country facing an urgent balance of payments need. 
  • The World Bank estimates USD 4.1 billion in losses (~4% of Sri Lanka’s GDP) from direct physical damage. The recovery is seen as more challenging than the 2004 tsunami. 
• Strategic Significance for India: The reconstruction package builds on India’s USD 4 billion assistance in 2022 (lines of credit, currency swaps, petroleum support) to Sri Lanka. 
  • India has consistently acted as a first responder in the Indian Ocean region, especially for Sri Lanka, extending support during the MV XPress Pearl ship-fire disaster in 2021 and providing assistance during Cyclone Roanu (2016). 
  • This strengthens Neighbourhood First and SAGAR approaches, enhancing India’s regional leadership amid climate shocks.