Sri Lanka is expected to service a total debt of $2,454 million in 2025, comprising $1,369 million in principal repayments and $1,085 million in interest, according to Deputy Minister of Economic Development Anil Jayantha. In the following years, the country’s debt burden remains significant.
For 2026, Sri Lanka must repay $1,191 million in principal and $931 million in interest. In 2027, the figures are projected at $1,196 million in principal and $893 million in interest, while in 2028, repayments will surge to $2,133 million, with an additional $974 million in interest obligations.
As part of the International Monetary Fund (IMF) program, a June 2024 report estimated Sri Lanka’s overall debt service obligations at $7,184 million for 2025, with a projected increase to $15,105 million in the coming years.
These figures are subject to periodic revision based on evolving economic conditions. Addressing concerns in parliament,
Minister Jayantha assured that Sri Lanka has successfully met all quantitative performance criteria under the IMF program, including net international reserve (NIR) targets. NIR represents a country’s gross reserves minus liabilities related to reserves.
The central bank of Sri Lanka has historically relied on borrowing foreign exchange from institutions like the IMF, India, and local banks to maintain a targeted policy rate through inflation-driven open market operations.
However, over the past two years, the central bank has repaid debts owed to Bangladesh, the Reserve Bank of India, and the IMF. Calls have emerged in parliament to prohibit the central bank from using foreign exchange swaps to fund monetary policy, as such strategies have previously led to significant financial instability.
A crucial issue has been Sri Lanka’s reliance on a fixed policy rate, which has resulted in excessive reserve injections. This approach has created liquidity surpluses, preventing interest rates from rising naturally and contributing to forex shortages.
During the peak of the financial crisis in 2024, Sri Lanka’s net reserves plunged to a negative $4.6 billion. However, in recent months, they have returned to positive territory, partly due to deflationary open market operations.
Debt Servicing in 2025: A Major Challenge
Despite recent improvements, Sri Lanka faces significant debt servicing obligations in 2025. With over $2.4 billion in payments due, maintaining financial stability will require continued fiscal discipline and strategic economic policies.
The government is expected to rely on IMF support, foreign direct investments, and improved revenue collection to meet its obligations.
However, with rising debt repayment commitments in the following years, ensuring long-term economic resilience remains a formidable challenge.
