By: Staff Writer
June 25, LNW (Colombo): The Auditor General’s Department of Sri Lanka, has released the audit review of the Government’s 2025 Financial Statements, exposing a Rs. 2.67 billion reconciliation gap, unrecorded foreign loans, and major reporting inconsistencies within the Ministry of Finance and Treasury.
Concurrently, as of June 2026, Sri Lanka’s total central government debt sits at USD 98.96 billion, with a stabilizing post-restructuring external debt profile according to finance ministry reports. .
The Auditor General’s review highlighted significant systemic vulnerabilities, accounting mistakes, and data mismatches.
Auditors detected a net discrepancy of Rs 2.672 billion between the opening balances in the Debt Management System’s Stock and Flow.
Despite Treasury assurances, the Auditor General warned of a “high potential” that foreign loan proceeds received during 2025 completely bypassed both the Government Financial Statements and the core Debt Management System.
[Financial statements erroneously overstated loan disbursements by Rs 2.01 billion across four foreign loan agreements.
Missing” Assets against Loans
A staggering Rs 518.3 billion in foreign loan balances remains active on the books without any corresponding physical or capital assets identified in government accounting logs.
A previously flagged discrepancy of Rs 1.07 billion across three foreign loans dating back to December 31, 2024, remained unrectified by the Treasury.
Discrepancies were noted in the accounting treatment of IMF loans under the Rapid Financing Instrument (RFI) and the Extended Fund Facility (EFF).
The audit questioned whether loan expenses and interest costs were calculated or assigned to the correct accounting periods.Unregistered Program Accounts:
The National Audit Office discovered that the “Rebuilding Sri Lanka” program operates informally via an account under the Deputy Secretary to the Treasury without a legally established statutory fund.
Data released by the newly formed Public Debt Management Office (PDMO) outlines the country’s fiscal reality: Debt Volume etc
Sri Lanka’s central government debt component stands at USD 98,965 million.Total External Debt: Settled at US$ 37,468 million, down nominally by $195 million from the prior quarter.
Multilateral lenders hold the majority at 38 percent, followed by Commercial debt (mostly International Sovereign Bonds – ISBs) at 34 percent, and Bilateral creditors at 28 percent
Because of extensive maturity extensions secured during external debt restructuring, the immediate pressure on foreign reserves has been heavily mitigated
The Ministry of Finance sustained its repayment momentum by launching a cash tender offer to wrap up remaining 2022 ISBs. All outstanding settlements to accepting bondholders were cleanly finalised, boosting international market credibility.
In addition, in February 2026, Sri Lanka launched a cash tender offer for the remaining 2022 ISBs
In parallel, the Rs 500 Billion supplementary allocation approved by Parliament to address the fallout from Cyclone Ditwah has fundamentally adjusted Sri Lanka’s 2026 fiscal baseline.
To correct the data gaps and the Rs 518.3 billion in asset mismatches flagged by the Auditor General, the Ministry of Finance and Treasury is deploying a multi-step rectification framework, Integration of Debt Systems and Financial Statements.
The primary objective is connecting the Commonwealth Meridian debt management system (used for stock and flow tracking) directly with the Integrated Financial Management Information System (IFMIS).
This enforces dual-entry verification, ensuring that when a foreign loan disbursement occurs, a corresponding asset entry or capital expenditure record is created automatically to prevent unrecorded inflows.
To resolve the Auditor General’s findings on informal program management, the Treasury is transitioning accounts like the “Rebuilding Sri Lanka” ledger into legally recognised Statutory Funds.
This brings them under standard government accounting codes and cuts down period-cut recording errors.