**Economic News** ### Reasoning The news text focuses on the **macroeconomic impact** of a major natural disaster (Cyclone Ditwah) on Sri Lanka’s national economy and its sovereign debt sustainability. * **Subject:** It centers on the **Debt Sustainability Analysis (DSA)**, GDP growth projections, and the International Monetary Fund (IMF) bailout program. * **Key Elements:** The article discusses fiscal policy, central bank positioning, and a debate among world-renowned economists (including Joseph Stiglitz) regarding **sovereign debt restructuring** and **solvency vs. liquidity** in a macroeconomic context. * **Impact:** The core theme is how an exogenous shock affects national economic indicators and government debt-repayment capacity, which falls squarely under **Category 3: Economic News**. While it mentions government decisions, it is not primarily about political stability (Politics) or specific laws (Regulatory). Similarly, while it discusses debt, it does so from a national macroeconomic perspective rather than a private investment or retail banking one.

### Cyclone Ditwah Shocks Economy: Debt Restructuring Under Fire 📈

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The Central Bank of Sri Lanka (CBSL) maintains that 2026 GDP growth and debt sustainability remain on track despite the catastrophic impact of Cyclone Ditwah. However, a global coalition of 121 economists, led by Nobel laureate Joseph Stiglitz, warns that the current debt deal is inadequate to absorb this US$ 4.10 Bn exogenous shock. Economic & Sectoral Impact • Agriculture: US$ 814 Mn in direct damage to paddy, vegetables, and livestock; posing severe risks to food security. • Apparel & Manufacturing: Production and shipments delayed due to flooding and power outages affecting 30% of the grid. • Infrastructure: Total damage estimated at US$ 1.74 Bn (42% of total losses), disrupting vital ICT/BPM and logistics hubs. • Macro Outlook: GDP growth expected to trim by 0.5%–0.7% as 2.2 Mn people face displacement and livelihood losses. Debt & Fiscal Position • Sustainability: CBSL Governor indicates IMF targets may need "inevitable" revision, but rejects calls for debt suspension. • Relief Demands: Economists call for an immediate debt service pause and genuine "solvency relief" (principal haircuts) over simple cash-flow reprofiling. • Emergency Funding: IMF has approved US$ 206 Mn via the Rapid Financing Instrument (RFI) to bridge urgent balance-of-payment gaps. Key Figures • Total Damage: US$ 4.10 Bn (approx. 4% of GDP). • Inflation: CCPI accelerated to 2.3% in Jan 2026; annual average 2026 forecast adjusted to 3.3%. • Remittances: Projected to rise 10%–15% (US$ 8.80 Bn total) as the diaspora supports reconstruction.

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