The Government has fully implemented over 94% of its public external debt restructuring and reached agreement on terms with just under 99% of external creditors, according to the latest investor presentation by the Finance Ministry and Central Bank, with a small number of creditor agreements still to be completed.
The presentation delivered by Treasury Secretary Dr. Harshana Suriyapperuma at the investor call with Bondholders earlier this month, provided an update on debt restructuring alongside the country’s fiscal, external and economic position. The Finance Ministry has also published the presentation following the call. However, it did not include the usual questions and answers as before.
As of August, implementation had been concluded for debt owed to China Exim Bank, the Saudi Fund for Arab Economic Development and the Kuwait Fund, while agreements had also been implemented with International Sovereign Bondholders and China Development Bank. Implementation involving SriLankan Airlines Bondholders remained ongoing.
Within the Official Creditor Committee (OCC), Sri Lanka had finalised 11 bilateral agreements covering $ 4.3 billion and signed 10 as of August.
Agreements have been signed with Japan for $ 2.19 billion, India for $ 800 million, France for $ 446 million, the UK for $ 200 million, Germany for $ 215 million, Korea for $ 259 million, Spain for $ 84 million, Australia and Denmark for $ 39 million each and Belgium for $ 11 million. Two of three agreements with Hungary, covering $ 35 million, have also been finalised.
Discussions with Austria, Canada, the Netherlands, Russia, Sweden and the US remained ongoing, while a component of the Spanish restructuring involving CESCE was pending signature.
The restructuring is being completed against a still-high public debt stock. Total public debt stood at $ 103.86 billion at end-2025, equivalent to 95% of GDP. Government debt accounted for $ 100.36 billion, comprising $ 62.69 billion in domestic debt and $ 37.66 billion in external debt. State-owned enterprise debt amounted to $ 3.48 billion.
Of Central Government external debt at end-2025, 75% was at fixed interest rates, 23% at floating rates and 2% interest-free. The US dollar accounted for 68% of the currency composition, followed by Special Drawing Rights at 17%, yen at 6%, yuan at 4%, renminbi at 3% and euro and other currencies at 2%.
On the economy, the presentation cited the IMF’s projection of 3% real GDP growth in 2026, down from about 5% in 2025. The IMF had revised its 2026 projection from 3.1% to 3% to reflect uncertainty surrounding the Middle East conflict, while raising its 2027 forecast from 3.1% to 3.2%.
The economy expanded by 5.1% year-on-year in the first quarter of 2026, marking the 11th consecutive quarter of positive growth.
Gross official reserves stood at $ 6.5 billion at end-June 2026, compared with $ 7.3 billion in February. The presentation attributed the decline to pressures from higher fuel costs and lower tourism following the Middle East conflict. The end-June reserve stock was around 60% of the IMF’s reserve adequacy metric.
Headline inflation was recorded at 6.8%, while the presentation cited a revised projection of around 6% by end-2026, reflecting the pass-through from higher fuel and energy prices. It expects inflation to move gradually towards the 5% target in 2027.
On the fiscal front, the primary surplus reached 5.4% of GDP in 2025, against a 2.3% program target. The presentation attributed the outperformance partly to motor vehicle import-related revenue, equivalent to 2.8% of GDP, and improved domestic VAT collection.
For the medium term, the fiscal projections envisage a primary surplus of 2.1% of GDP in 2026 and 2.6% from 2027 onwards. The presentation said a temporary relief package responding to the Middle East conflict was capped at Rs.100 billion, or around $ 323 million.
The investor presentation also identified completion of the remaining debt restructuring agreements, development of a Medium-Term Revenue Strategy and continued rebuilding of fiscal and external buffers among the authorities’ priorities.
Sri Lanka’s IMF Extended Fund Facility has meanwhile disbursed SDR 1.78 billion, or about $ 2.4 billion, following completion of the combined fifth and sixth reviews in May. The latest reviews provided access to an additional SDR 508 million, equivalent to about $ 695 million, bondholders were told.