Govt to breach 2026 primary spending limit, but keep IMF debt targets: Minister

ECONOMYNEXT - Sri Lanka will breach the primary spending limit of 13 percent of gross domestic product on 2026 cyclone relief but will maintain the targets in an International Monetary Fund debt sustainability plan, Deputy Minister of Finance and Planning Anil Jayantha Fernando said.

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Approval is being sought from the parliament to spend 500 billion rupees extra in 2026.

The supplementary estimate involves around 1.4 percent of GDP in extra spending breaching the 13 percent of GDP primary spending limit, with the total spending likely to reach 7,657 billion rupees, Minister Fernando said.

“We are exceeding the target because it is an emergency,” Minister Fernando said.

“Sri Lanka will maintain the 95 percent debt target by 2032.”

Sri Lanka will continue to service foreign debt, he said. There was no truth in the narrative that foreign debt is only being repaid from 2028, he said.

“We are servicing foreign debt even now,” he said. “There are some payments on restructured sovereign bonds due in 2018. But we are servicing debt every year.”

The 95 percent debt to GDP to target is one of the limits set in a debt sustainability analysis.

With the central bank generating less inflation than its controversial 5 percent floor to raise cost of living of the people and maintaining a stronger rupee, despite recent concerns over depreciation to 310 rupees to the US dollar, Sri Lanka has so far exceeded IMF debt targets.

Since depreciation became a problem only in the 1930s, budget deficits do not take into account the explosion of foreign debt from monetary debasement.