Public debt edges higher in rupee terms in 1Q despite lower external stock

Sri Lanka’s gross public debt increased marginally during the first quarter of 2026 in rupee terms, despite a decline in the dollar value of Government debt, according to the latest Quarterly Statistical Debt Bulletin issued by the Public Debt Management Office (PDMO).

Total public debt stood at Rs. 32.23 trillion at end-March 2026, up from Rs. 32.2 trillion three months earlier. In dollar terms, the stock declined by 2% to $ 102.27 billion from $ 103.86 billion. Public debt comprises Central Government debt, Local Government debt, and Government-guaranteed debt of State-owned enterprises (SOEs).

Central Government debt, which accounts for the bulk of public liabilities, increased to Rs. 31.19 trillion from Rs. 31.11 trillion during the quarter. However, its dollar value declined to $ 98.97 billion from $ 100.36 billion. 

The movement reflected contrasting trends between domestic and external debt. Domestic debt declined by Rs. 51 billion to Rs. 19.38 trillion from Rs. 19.43 trillion, while external debt increased by Rs. 135 billion to Rs. 11.81 trillion from Rs. 11.68 trillion. In dollar terms, domestic debt fell to $ 61.5 billion from $ 62.69 billion, while external debt declined to $ 37.47 billion from $ 37.66 billion. 

Treasury Bonds remained the largest component of domestic debt at Rs. 15.82 trillion, followed by Treasury Bills at Rs. 2.85 trillion. Outstanding Domestic Dollar Bonds amounted to Rs. 16 billion. 

The PDMO said Government external debt stood at $ 37.47 billion at end-March, representing a nominal decline of $ 195 million from end-2025. Multilateral creditors accounted for 38% of external debt, commercial borrowings 34%, and bilateral creditors 28%. Approximately 81% of commercial debt consisted of International Sovereign Bonds (ISBs), with the balance comprising foreign currency term financing facilities. 

Among bilateral creditors, China remained Sri Lanka’s largest lender with outstanding debt of $ 4.99 billion, followed by Japan at $ 2.31 billion and India at $ 856 million. The Asian Development Bank (ADB) remained the largest multilateral creditor with exposure of $ 6.95 billion, followed by the World Bank at $ 4.67 billion and the International Monetary Fund (IMF) at $ 1.93 billion. 

The Treasury said significant progress had been made in external debt restructuring since the debt service suspension announced in April 2022. It noted that debt treatment agreements had been completed with the Official Creditor Committee, China Exim Bank, China Development Bank, and holders of ISBs. The exchange of defaulted ISBs into new instruments was completed in December 2024 with participation of nearly 98%, allowing “the conversion of almost all defaulted ISBs into new ISBs.” 

The bulletin also highlighted progress in bilateral debt restructuring. The Treasury said agreements had been concluded with Japan, the Exim Bank of India, France, Hungary, Saudi Arabia, the UK, Australia and Denmark, while agreements with Belgium and Germany were signed during 1Q 2026. “As a result of these agreements, Sri Lanka has resumed regular debt servicing to the respective creditor partners,” the PDMO said. 

During 1Q, the Government raised the equivalent of $ 6.24 billion through domestic securities issuances and external disbursements. Domestic borrowing accounted for $ 6.14 billion, comprising $ 3.84 billion in Treasury Bills and $ 2.3 billion in Treasury Bonds. External disbursements totalled $ 98 million, including $ 75 million from multilateral lenders and $ 23 million from bilateral creditors. 

Debt service payments during the quarter amounted to $ 8.09 billion, consisting of $ 5.98 billion in principal repayments and $ 1.59 billion in domestic interest payments, together with $ 530 million in external debt service. Of the external payments, $ 207 million was paid to bilateral creditors, $ 234 million to multilateral lenders, and $ 89 million on commercial debt. 

Outside the Central Government balance sheet, Local Government debt increased from Rs. 6 billion to Rs. 7 billion, while Government-guaranteed SOE debt declined to Rs. 1.03 trillion from Rs. 1.08 trillion. In dollar terms, guaranteed SOE debt fell to $ 3.28 billion from $ 3.48 billion. 

The PDMO said the quarterly bulletin was published under the Public Debt Management Act, No. 33 of 2024 as part of efforts to strengthen fiscal transparency and accountability by providing timely and comprehensive information on Sri Lanka’s debt position.