Auditor General flags Treasury debt reporting discrepancies

THE Auditor General has warned of a “high potential” for foreign loan disbursements received during 2025 to have remained unrecorded in both the Government's Financial Statements and the Debt Management System, while identifying a series of discrepancies, reconciliation gaps, and reporting inconsistencies relating to Sri Lanka’s foreign debt records.

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The observations, contained in the audit review of the Government’s 2025 Financial Statements, highlight weaknesses in the recording, reconciliation, and reporting of foreign borrowings at a time when Sri Lanka is seeking to strengthen debt governance following the completion of sovereign debt restructuring and the establishment of the Public Debt Management Office (PDMO).

The Auditor General noted that a previously identified difference of Rs. 1.07 billion relating to three foreign loans as at 31 December 2024 remained unresolved. In addition, a net difference of Rs. 2.672 billion was observed between the opening balances reported in Stock and Flow Report No. 01 of the Debt Management System as at 1 January 2025 and the corresponding balances disclosed in Note 26(ii) of the Government's audited Financial Statements as at 31 December 2024.

According to the audit, additional loan disbursements relating to the 2024 financial year had not been recorded in either the Debt Management System or the Financial Statements as at that date, raising questions regarding the correct accounting period in which those borrowings should have been recognised.

Although the Director General of the Treasury Operations Department informed auditors that no foreign loan proceeds received during 2025 had been omitted from the year's accounts, the Auditor General stated that there was a "high potential for unaccounted disbursements received during the year 2025" that had not been recorded in either the Debt Management System or the Financial Statements.

The audit also questioned the treatment of certain foreign borrowings and related expenses, noting uncertainty over whether expenditures associated with those loans had been recognised in the appropriate accounting periods and whether related interest costs had been calculated for the correct periods.