Domestic refinancing risk dominates debt outlook

THE Government’s Medium Term Debt Management Strategy 2026-2030 report warns that refinancing pressure is heavily concentrated in the domestic debt portfolio, even as external debt obligations appear more spread-out following restructuring.

- 

The report compiled by the Public Debt Management Office said the composition and maturity structure of domestic liabilities present the most immediate risks to liquidity and rollover management, despite improving market conditions.

Sri Lanka’s total Government debt stood at Rs. 30.8 trillion at end June 2025. Domestic debt accounts for 64% of the total, while external debt makes up the remaining 36%.

The debt to GDP ratio has fallen to 99.1% in 2024 from 114.2% in 2022 due to restructuring and revenue driven fiscal consolidation under the IMF program.

The PDMO highlighted the size of short-term domestic instruments as a key vulnerability Treasury Bill stocks are estimated at Rs. 3.6 trillion at end 2025 and will come due in 2026.

"This concentration of short-term maturities underscores the need for effective revenue and cash flow management," the PDMO said.

Treasury Bill stocks were Rs. 4.09 trillion and Rs. 4.07 trillion at the beginning of 2024 and 2025 respectively and were refinanced.

Treasury Bonds dominate the broader domestic redemption profile, with maturities peaking at Rs. 2.15 trillion in 2028. Issuance shifted to short term maturities following the 2022 crisis, leading to a cluster of redemptions between 2027 and 2033.

The PDMO said investor appetite has begun to move back toward medium- and long-term maturities in the second quarter of 2025, reflecting improved market stability.