Thursday Jul 30, 2026
Thursday Jul 30, 2026
Thursday, 30 July 2026 05:44 - - {{hitsCtrl.values.hits}}
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando
The Government yesterday said several key policy measures implemented by the Government, including policy consistency, stronger fiscal management, and improvements in debt management, had contributed to the latest assessment by S&P Global Ratings, while cautioning that Sri Lanka continues to face structural vulnerabilities stemming from its debt burden, energy dependence, and exposure to external shocks.
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando said maintaining macroeconomic stability required continued fiscal discipline despite the country’s improving economic indicators, noting that interest costs remained one of the largest pressures on public finances.
He said the Treasury had allocated more than Rs. 2,500 billion for interest payments alone in 2025, limiting fiscal space available for development expenditure.
“The substantial debt burden created by imprudent and unnecessary borrowing decisions made by successive governments in the past continues to place considerable pressure on public finances,” Dr. Fernando said.
He said the Government was addressing these challenges through a medium-term debt management framework that had received recognition from international institutions, enabling Sri Lanka to rely increasingly on Treasury Bonds while extending borrowing maturities and securing financing at more stable and lower interest rates.
According to Dr. Fernando, the latest assessment indicates that Sri Lanka is strengthening debt sustainability and improving long-term financial stability (https://www.ft.lk/front-page/S-P-affirms-Sri-Lanka-s-CCC-C-rating-outlook-remains-stable/44-795222).
He said part of the country’s existing debt had been obtained for projects that were unsuccessful or generated limited economic returns, with managing the consequences of such borrowing remaining a challenge.
Beyond domestic governance and political issues, which he said could be addressed through effective policy measures, Dr. Fernando said Sri Lanka remained exposed to external shocks, including natural disasters and geopolitical conflicts such as the situation in the Middle East. He said these challenges required a strong and resilient economy capable of absorbing external pressures.
Energy security also remains a structural concern, with Sri Lanka’s transport sector continuing to rely heavily on imported fuel.
Dr. Fernando said reducing this vulnerability would require structural changes in the future to reduce dependence on imported fuel, while limitations in fuel storage capacity also remained a challenge. He said the Government was taking necessary measures to address these issues and strengthen energy security.
He said these achievements had been made possible through sound decision-making, policy consistency, political stability, and effective governance. Dr. Fernando added that continued support and contribution from all stakeholders would be essential to sustain the progress achieved and ensure the benefits of economic stability reached the people of Sri Lanka.
Commenting on the recent S&P rating review, Dr. Fernando said the Government’s policy measures had enabled Sri Lanka to achieve strong economic progress despite a range of domestic and external challenges.
He noted that the economy expanded by 5.1% in the first quarter of 2026, describing the performance as evidence of the resilience of the economy and the effectiveness of the policy measures adopted.
On fiscal performance, Dr. Fernando said generating sufficient revenue to finance public services and capital investment remained central to sound fiscal management.
He said the Government had monitored revenue collection on a daily basis since assuming office to ensure collections remained aligned with its fiscal objectives and had consistently met its targets.
As of July 2026, Government revenue had reached 63.5% of the projected annual target. Based on current performance, Dr. Fernando said the Government expected to achieve and exceed its revenue target for 2026.
He said the stronger revenue performance provided assurance that expenditure commitments outlined in the Budget would be fully implemented, including allocations to maintain public administration and deliver essential public services.
The Deputy Minister said the Government also had the necessary fiscal space to finance capital expenditure allocated under the Budget.
According to Dr. Fernando, where delays occurred in utilising those funds, they generally reflected implementation mechanisms, administrative efficiency, or procedural constraints rather than a lack of financial resources.
He said stronger fiscal discipline and improved revenue performance had placed the Government in a sound position to finance both recurrent and capital expenditure commitments.
Dr. Fernando also said Sri Lanka had continued to build foreign exchange reserves without restricting economic activity or slowing economic growth.
He said earlier concerns that the US dollar could rise to between Rs. 400 and Rs. 500 had not materialised, with the latest assessment demonstrating that foreign reserves had strengthened while normal economic activity continued.
“The key achievement is that Sri Lanka has strengthened its foreign reserves while allowing normal economic activities to continue,” he said, adding that this had become an important factor in improving investor confidence and reflected greater stability in the economy.
Referring to S&P Global Ratings’ latest assessment, the Deputy Minister said the agency had maintained Sri Lanka’s sovereign credit rating despite external shocks, including Cyclone Ditwah and the conflict in the Middle East.
He said maintaining the Government’s economic policy direction without deviation had enabled Sri Lanka to preserve economic stability despite those challenges.
Dr. Fernando highlighted the improvement in Sri Lanka’s Transfer and Convertibility (T&C) Assessment, which measures a country’s ability to facilitate the transfer of investment returns abroad and the conversion of domestic currency into foreign currency for the repayment of loans, interest, and other financial obligations.
He said Sri Lanka’s credit assessment had improved from the highly vulnerable ‘CCC’ level in 2022 to ‘CCC+’ in 2025 before advancing to ‘B-’ in 2026.
According to Dr. Fernando, the improvement reflected the implementation of sound macroeconomic policies, improved political stability, stronger foreign exchange liquidity, and continued reserve accumulation.
He said achieving the ‘B-’ level should be recognised as a significant milestone and an important reflection of the country’s improving economic fundamentals.
He said reserves had been accumulated while allowing normal economic activity to continue, supported by the Central Bank of Sri Lanka’s (CBSL) strategic interventions to maintain monetary and financial stability, rather than through import restrictions or by suppressing economic activity.
Dr. Fernando said the Assessment reflected the views of internationally recognised institutions with the expertise, experience, and technical knowledge to evaluate such matters, rather than commentary circulated on social media.
He also attributed the improved T&C Assessment to progress in strengthening debt transparency and improving engagement with creditors.
The Deputy Minister said past experience had demonstrated the consequences of inadequate debt transparency, noting that certain audit reports had highlighted shortcomings in the recording and reporting of public debt.
He said improving transparency and maintaining credible engagement with creditors were essential to strengthening investor confidence and confidence among the international financial community.
According to Dr. Fernando, the latest assessment showed significant progress in strengthening both debt transparency and investor engagement compared with 2025. Sri Lanka recorded a score of 43.67 out of 50 in the latest assessment, up 6.34 points from 37.33 in 2025, placing the country fourth among those assessed in 2026.
Dr. Fernando said the improvement in investor confidence and debt transparency had been a key factor contributing to Sri Lanka’s upgraded ‘B-’ T&C Assessment.
