The Sri Lanka Government would have to settle existing arrears of Rs. 126 billion by the end of 2026 under the International Monetary Fund (IMF) programme without future accumulations, the Finance Ministry said.

Accordingly, between September 2025 and June 2026, a structured timeline has been established to monitor and achieve specific financial targets, whereby the end of September 2025, the indicative target is set at Rs. 126 billion. 

This target is subsequently adjusted to Rs. 56 billion by December 2025. Moving into the first quarter of 2026, the focus is to shift to quantitative performance criteria (QPCs), with a target of Rs. 51 billion by March 2026. 

The target is further reduced to Rs. 37 billion by the end of June 2026, and by the end of 2026, total arrears recorded as of now will be fully settled. 

“This phased-out approach aims to ensure progressive fiscal discipline and effective monitoring of performance over the specified period,” the Finance Ministry said, adding that actions will be taken to avoid future accumulation of arrears through a proper implementation and monitoring mechanism.

To implement this mechanism, an Arrears Clearance Oversight Committee (ACOC) is to be established to provide strategic oversight, transparency, and accountability in the identification, verification, prioritisation, and clearance of arrears. 

The committee ensures that arrears are managed in line with fiscal responsibility principles, legal obligations, and stakeholder expectations, and shall report to the Secretary of the Treasury.

Between 2019-2022, total arrears decreased significantly from Rs. 242.7 billion in 2019 to Rs. 106.8 billion by 2022, marking a substantial 56% reduction over three years as the government lost access to capital markets and was going through a pandemic, followed by an economic crisis.