By: Staff Writer
December 12, Colombo (LNW): Sri Lanka may be heading toward another debt-pressure cycle as external repayment obligations are set to accelerate sharply from 2028 onward, despite significant progress in restructuring arrangements with its major creditors.
The latest Quarterly Debt Bulletin issued by the Public Debt Management Office highlights the scale of the challenge: Sri Lanka’s external debt stock rose to USD 37.24 billion by end-September 2025, an increase of USD 100 million.
Although the country remains shut out of international capital markets, it continues to access and service loans from multilateral partners, which now dominate the portfolio alongside restructured commercial and bilateral exposures.
Multilateral lenders account for 37% of the debt stock, commercial creditors 34%, and bilateral partners 29%. Notably, ISBs account for roughly 81% of commercial liabilities, reflecting the weight of past borrowing choices.
Sri Lanka has already repaid USD 1.36 billion in the first half of 2025 over half of the USD 2.45 billion due for the year. But Central Bank Governor Dr. Nandalal Weerasinghe warned that the real stress point lies beyond 2027.
Under current commitments, annual servicing will average USD 2.75 billion until then. From 2028 onward, however, repayments will surge to between USD 3.2–3.5 billion, peaking at nearly USD 4 billion in certain years.
This shift reflects the maturity structure of pre-crisis borrowings, the phased-in repayments from restructuring agreements, and debt taken after the 2022 collapse to stabilise the economy. Analysts argue that without robust export-led growth, stronger fiscal consolidation, and improved governance, Sri Lanka will struggle to meet post-2028 obligations without courting new financial stress.
Restructuring progress has been substantial. Agreements concluded in June 2024 with the Official Creditor Committee and China’s EXIM Bank, alongside amendment arrangements, paved the way for debt treatment implementation. The China Development Bank restructuring was finalised in December 2024.
Commercial debt restructuring has also advanced, with an agreement in principle reached with ISB holders in September 2024 and a bond exchange completed in December with 98% participation. Bilateral restructuring continued through 2025, with Sri Lanka signing agreements with Japan, India, France, Hungary, and the UK, pushing total completion to 94%.
Even SriLankan Airlines, long considered a fiscal risk, has reached an agreement in principle with external bondholders holding USD 175 million in instruments.
Despite these achievements, the reality remains sobering. Restructuring may have eased debt service pressures temporarily, but the medium-term outlook suggests rising risk. Without stronger revenue mobilisation, disciplined spending, and export expansion, Sri Lanka may once again face a sustainability crisis precisely when repayments begin to spike after 2028.
