Policy Uncertainty Threatens Sri Lanka’s Debt Resilience 📉

• Macroeconomic Performance: GDP growth projected to drop to 3.1% by end-2026 (down from 5% in 2024). Inflation rose to 8% in August (up from 7.3% in July). Cumulative trade deficit widened significantly to US$ 6.5 Bn (Jan–Jul 2026) vs. US$ 3.9 Bn in the same period last year. • Trade & Sector Breakdown: Imports surged by nearly 26% (Jan–Jul 2026 YoY). Exports recorded a 5% increase over the same period. Tourism earnings declined by 11% from Jan–July 2026 compared to 2025. • Reserves & Debt Sustainability: Foreign exchange reserves stand at US$ 6.5 Bn, up by only US$ 500 Mn since 2024. Projected buffer of US$ 13 Bn by end-2027 appears unlikely to be met prior to resuming commercial and sovereign debt repayments in 2028. Servicing debt will require ~US$ 5 Bn annually by 2030.