PDMO Strategy Flags Domestic Debt as Key Refinancing Risk ⚠️

• Sri Lanka's total Government debt stood at Rs. 30.8 Tn (June 2025). Domestic debt accounts for 64%, with External debt at 36%. • The Debt-to-GDP ratio fell to 99.1% in 2024 (down from 114.2% in 2022) post-restructuring and fiscal consolidation. • Immediate Risk: Refinancing pressure is heavily concentrated in the domestic portfolio due to short-term maturities, presenting high rollover risk. • Key maturities: T-Bills (12% of total debt) face a Rs. 3.6 Tn redemption pressure in 2026. T-Bonds (48% of total debt) peak at Rs. 2.15 Tn in 2028. • External Debt Outlook: Near-term risk is lower due to restructuring, providing capital grace periods until 2028. Final repayments on restructured debt extend to 2043. • MTDMS 2026-2030 Goals: Shift toward deeper domestic financing, aiming for 90% of borrowing from domestic sources by 2030. • The strategy includes lengthening domestic maturities (5-15 years benchmarks) and exploring new external financing like Samurai, Panda, and Sukuk bonds, alongside efforts to build reserves and manage FX risk. • Scheduled External Debt Service for 2025 totals US$ 2.45 Bn (US$ 1.4 Bn Principal + US$ 1 Bn Interest). Obligations rise, reaching ~$3.1 Bn in 2028.