Domestic Borrowing Rises as ISB Restructuring Eases External Pressure
Sri Lanka’s public debt reached $107.5 billion by the end of March 2025, according to the Finance Ministry’s first quarter debt bulletin, signaling a continued reliance on domestic borrowing and careful management of external obligations.
The central government debt stood at $102.6 billion, with the domestic component rising by 1.3% from December 2024 to $65.4 billion. The increase was driven by the issuance of $8.9 billion in Treasury bills and bonds during the first quarter, while $9.06 billion in domestic debt was repaid during the same period.
On the external front, Sri Lanka’s debt stood at $37.2 billion, aided by a successful restructuring process completed in 2024. In the first quarter of 2025, the country borrowed $428.1 million, primarily from multilateral agencies, and repaid $406.6 million in external debt. Of this, $80.4 million was in bilateral repayments and $88.5 million in market repayments.
The Finance Ministry also highlighted that 65% of external debt consists of fixed interest instruments, while 24% is tied to floating interest rates—a factor that could influence future risk exposure as global rates shift.
A notable impact of the international sovereign bond (ISB) restructuring was the reduction of 2025 maturities from $2.15 billion to $330 million, offering the government critical breathing space for fiscal planning.
Looking ahead, Sri Lanka is expected to meet the International Monetary Fund’s (IMF) Debt Sustainability Analysis (DSA) target of reducing public debt-to-GDP to 95% by 2032. However, Deputy Minister of Economic Development, Prof. Anil Jayantha Fernando, addressing Parliament on June 30, noted that the government aims to lower the ratio even further—to around 90% by 2032, within the current DSA framework.
The report reflects a cautiously optimistic outlook as the government balances fiscal consolidation with economic recovery under the guidance of the IMF program.