Overview When disasters strike, they do more than damage homes and infrastructure—they test how quickly countries can mobilize finance, coordinate institutions, and turn “build back better” from aspiration into action. When Tropical Cyclone Ditwah struck Sri Lanka in late 2025, it stress-tested how fast these systems could function in practice. A series of floods and cyclones, culminating in Ditwah, showed how recovery speed and quality depend not only on emergency response capacity, but on recovery readiness—particularly the availability and timely access to financing. Sri Lanka’s experience demonstrated a critical reality for South Asia climate-vulnerable countries: recovery outcomes are largely determined before a disaster occurs—financing arrangements, systems, and institutional coordination should already be in place. In response, Sri Lanka is strengthening its financing recovery readiness through pre-arranged instruments, layered financing, and institutional coordination to enable faster and more predictable recovery. Context Across South Asia, extreme climate events—including cyclones, floods, droughts, heatwaves, and rising sea levels—are becoming more frequent and intense. Their impacts are worsening as these hazards increasingly intersect with growing exposure and vulnerability. Recurrent shocks strain infrastructure and public finances, delay recovery, and widen disparities between communities that can rebound quickly and those that cannot. Disaster preparedness and recovery are often treated separately, but they are intrinsically linked. While preparedness reduces immediate losses, recovery outcomes depend heavily on pre-disaster financing arrangements, planning, and institutional readiness. Challenges Sri Lanka’s experience with Ditwah revealed three interrelated constraints: Finance for recovery was not pre-arranged. While existing instruments supported immediate response, recovery relied heavily on ad hoc budget reallocations and external financing, which constrained its scale, speed, and predictability. Disasters have placed significant social and economic strain on the country. Approximately 2.3 million people in Sri Lanka were affected by Tropical Cyclone Ditwah, which struck in late November 2025. Cyclone Ditwah is estimated to have caused LKR 618.1 billion ($2 billion) in damages and LKR 416 billion ($1.4 billion) in economic losses. Institutional and implementation capacity gaps limited execution. Constraints in coordination, planning, and technical capacity slowed the transition from damage assessment to recovery implementation. Reconstruction depended on the depth of provincial and district institutions. Solutions After Ditwah, the Asian Development Bank (ADB) supported Sri Lanka with a $3.15 million rapid disaster relief grant from the Asia Pacific Disaster Response Fund for lifesaving response and Post-Disaster Needs Assessment support. It also provided a $40 million emergency trade finance facility to keep essential imports flowing. These actions were closely coordinated with the government’s emergency and recovery framework. Additionally, ADB is processing an emergency assistance loan of $200 million to address immediate rehabilitation and support affected livelihoods. Sri Lanka is also addressing constraints by strengthening financing recovery readiness through the following measures: Establishing layered financing to address timing and liquidity gapsTo reduce reliance on ad hoc financing, Sri Lanka can adopt ADB’s layered approach to disaster risk financing to ensure that funds are available when needed, reducing delays between response and recovery. Different ADB instruments are aligned to different phases of the recovery timeline: The Asia Pacific Disaster Response Fund offers quick-disbursing grants for immediate needs. Emergency Assistance Loans provide fast-track processing and approval to restore essential services and initiate reconstruction in line with improved standards. Policy-Based Loans support structural reforms, including climate-informed fiscal frameworks and disaster risk financing strategies. Introducing contingent financing to improve predictability under fiscal constraintsTo manage fiscal shocks and ensure rapid access to funds, Sri Lanka is exploring Contingent Disaster Financing to lock in reforms, reinforce national systems, and ensure predictable and resilient recovery. Efforts are aligned with its National Disaster Risk Management Plan, Nationally Determined Contributions, and National Climate Finance Strategy. Strengthening institutional systems and implementation capacityFinancial instruments alone are insufficient. Technical assistance is critical to support reforms, strengthen institutions, and build local implementation capacity, particularly at the provincial and district levels. These efforts enable faster transition from assessment to execution and ensure that financing translates into effective recovery outcomes. Outcomes Strengthening financing recovery readiness is helping Sri Lanka reduce reliance on ad hoc financing, accelerate restoration of essential services, and maintain critical programs despite fiscal constraints. Layered and contingent financing improve the timing and predictability of resources, enabling a smoother transition from response to recovery. Strengthened institutional systems are improving coordination and execution, ensuring that available financing translates into timely and effective recovery on the ground. Lessons Learned Sri Lanka’s recovery highlights the costs of facing a disaster without established recovery systems. Experience from countries such as Indonesia and the Philippines shows that when risk is embedded in Post-Disaster Needs Assessments, sector plans, and public financial management—and backed by contingent policy-based financing—governments can mobilize rapid liquidity while protecting fiscal stability and enforcing “build back better” standards. Recovery readiness is a strategic investment that strengthens disaster recovery, advances climate adaptation, and enhances long-term fiscal resilience. Financing works best when linked to institutional and policy systems that are in place before disaster happens. Layered financing provides resources for immediate disaster response and long-term recovery—ensuring support through all recovery stages. Recovery readiness must be a standing national capacity, not an emergency function. It should integrate disaster risk information, institutions, and finance before a disaster—an approach that shifts recovery from an emergency reaction to a strategic system. It rests on five key elements: risk-informed planning that incorporates future hazards into Post-Disaster Needs Assessments and sector plans; disaster-ready public financial management, including budget tagging, expenditure tracking, rapid but safeguarded reallocations, and treasury systems aligned to recovery phases; pre-agreed institutional arrangements enabling rapid transition from assessment to execution across disaster, loss, and damage financing systems; layered disaster risk financing spanning immediate response, recovery, and resilience building; and clear “build back better” criteria guiding investment prioritization, standards, and safeguards under time pressure Ask the Experts Unnikrishnan D. Nair Senior Climate Change Specialist, Climate Change and Sustainable Development Department, Asian Development Bank Unnikrishnan Nair is a climate finance and sustainability leader with over 22 years of experience across Asia-Pacific, Africa, and the Caribbean. His expertise covers agriculture, forestry, coastal management, and rural and peri-urban development, with a strong focus on building resilience in vulnerable communities. At ADB, he leads South Asia climate efforts. He has held senior roles at the Commonwealth Secretariat, UNFCCC, GIZ India, and ITC Ltd, advancing climate policy, finance, and land use initiatives. Maria Anna C. Orquiza Senior Disaster Risk Management Officer, Climate Change and Sustainable Development Department, Asian Development Bank Anne Orquiza collaborates with ADB’s member countries in Asia and the Pacific to strengthen climate resilience, disaster risk management, and post-disaster recovery. She has 20 years of experience with DFAT, AusAID, UNEP, JICA, GIZ, and the Philippine government. Her expertise spans climate adaptation, environment, public sector management and governance. She holds an MSc in Environmental Science, post-graduate degrees in urban planning, government, and humanitarian leadership, and a BSc in Agriculture from the University of the Philippines and Deakin University. Asian Development Bank (ADB) The Asian Development Bank is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—49 from the region. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.