Verité Research Warns of Fiscal Risk Despite Rs. 1.2 Trillion Cash Surplus 📈

A report by Verité Research cautions that Sri Lanka’s improved Treasury liquidity masks a weaker fiscal position. While the cash balance swung from a deficit of Rs. 832 Bn in 2022 to a surplus exceeding Rs. 1.2 trillion by August 2025, the growth is attributed to "overborrowing" rather than revenue strength. • Overall Figures & Borrowing: The Government borrowed Rs. 1.78 trillion in excess of its actual financing needs between 2022 and August 2025. In 2023 alone, it borrowed Rs. 8,137 Bn despite a total financing requirement of only Rs. 7,495 Bn, creating a Rs. 642 Bn unnecessary buffer. • Liquidity vs. Fiscal Health: While the surplus provides short-term liquidity and allows the Treasury to push back on high-yield bids at Government Bond auctions, it increases the national debt and interest burden. The state is effectively paying high interest on borrowed funds that remain idle. • Recent Fiscal Performance: Provisional data for January 2026 shows a stronger primary surplus of Rs. 222.82 Bn (up 86.7% YoY). Revenue grew 35.3% due to higher tax collections, narrowing the overall budget deficit by 96.8% to just Rs. 3.81 Bn. • Economic Context: The excess borrowing strategy impacts the banking & finance sector by increasing the sovereign debt stock. Despite the current surplus, Verité warns the government is "worse off" due to the net loss incurred by holding high-cost debt as low-earning cash.