### 📉 Ravi K. Warns: Economic Recovery on "Fiscal Knife-Edge"

Former Finance Minister Ravi Karunanayake cautions that while surface-level indicators have improved, Sri Lanka’s 2026 recovery remains fragile due to debt obligations and recent climate shocks. • Debt & Fiscal Benchmarks Sri Lanka is already servicing restructured debt; relief of US$ 17 Bn (2023-2027) is deemed "significant but temporary." IMF targets require foreign debt servicing to stay below 4.5% of GDP. Total public debt is mandated to drop to 95% of GDP by 2032. • Budgetary Impact of Cyclone Ditwah Recent disaster damages (est. US$ 4.1 Bn) forced a major 2026 Budget revision. The budget deficit projection has risen to 6.5% of GDP (up from 5.1%) following a Rs. 500 Bn allocation for reconstruction. • Revenue & Sector Outlook Taxation remains the primary tool for consolidation; however, aggressive expansion without growth may stifle SMEs. Tourism and worker remittances are key pillars for rebuilding reserves. Gross official reserves are projected to reach US$ 6.8 Bn by end-2025. • Strategic Warning The recovery is "stabilised but not secured." Sustaining momentum requires high export growth and disciplined spending to avoid "fiscal populism."