Sri Lanka’s Fitch rating upgrade does not guarantee a return to international capital markets, as interest payments could absorb 41% of government revenue this year, and external debt repayments could rise towards $ 4 billion annually by 2030, Committee on Public Finance (CoPF) Chairperson and MP Harsha de Silva said in Parliament yesterday (6).
De Silva said: “The Fitch rating upgrade from ‘CCC+’ to ‘B-’ does not guarantee market access. Only Fitch has upgraded us, not Moody’s nor S&P’s. We have to think about the future. Mixed signals are damaging confidence. A government without market access will become drastically dependent on the International Monetary Fund (IMF). Beyond this year, although Fitch pointed out its upgrade, Sri Lanka’s external debt, and debt in total is still very high. Interest on loans is expected to take about 41% of government revenue this year, where external repayments could rise towards about $ 4 billion annually by 2030, which leaves the country vulnerable to external shocks.”
According to Fitch Ratings, Sri Lanka’s sovereign rating went from ‘CCC+’ to ‘B-’ with a stable outlook on 22 September, citing improvements in fiscal and external balances. However, the ratings agency said the country’s government debt and debt-service ratios remained high compared with rating peers.
Meanwhile, the IMF has also identified strengthening the Public Debt Management Office and rebuilding the capacity for liability management as important steps towards Sri Lanka’s eventual return to international capital markets.
“Sri Lanka’s debt position has improved, which has to be acknowledged, with public debt falling from about 121% of GDP to 101% between 2022 and 2024, while the ratio was expected to decline further. The higher primary surplus achieved by the Government has helped bring the ratio down faster than what the IMF forecasted,” he said.
“However, part of the surplus had come from underspending more than what was budgeted, including capital spending,” he said.
“In 2025, only 76% of capex was spent. And so far, from January to August 2026, only 26% of capital expenditure had been spent. Underspending is not the same thing as fiscal reform. And it cost us growth,” he said.
Warning about the sustainability of the Government’s revenue increase in 2025, de Silva said: “The increase in revenue in 2025 was largely driven by pent-up demand for vehicle imports. 63% or Rs 900 billion of the Rs 1.4 trillion revenue increase in 2025 was vehicle import related. That is not sustainable.”
De Silva added: “Sri Lanka continued to face a financing gap, with repayments remaining high on both domestic and on the foreign side, while new external financing was limited. The trend is worrying.”
“In the first half of 2026, multilateral lenders other than the IMF disbursed only about $ 177 million, which is World Bank $ 94, Asian Development Bank (ADB) $ 52, Asian Infrastructure Investment Bank (AIIB) $ 23 and others $ 8, while bilateral lenders disbursed only $ 24 million. Japan about $ 14, India $ 8 and Saudi $ 3,” he said.
“By comparison, the IMF disbursed about $ 690 million. 6 months of near-zero bilateral inflows is not a financing strategy. Under today’s resolution about $ 200 million from the ADB is expected to be spent this year, and about $ 45 million has already been spent. This is inefficient,” he said, arguing that Sri Lanka needs to ensure its gross financing requirement is covered every year rather than relying on a single strong year.
De Silva further said: “The public debt management has been very slow in deciding how to get back into the international debt market. The IMF agreement basically is built on Sri Lanka’s ability to get back into the international debt market.”
Expressing concern over the management of Sri Lanka’s Macro-Linked Bonds (MLBs), he said: “The total payments of the MLBs will go up from $ 6.2 billion to $ 7.4 billion over the next 10 years, if the Public Debt Management Office (PDMO) does not act proactively. But if we can buy back some of those loans outstanding.”
“There is a possibility that we can save about $ 300-400 million in the next 10 years,” De Silva noted.