• Current account surplus likely at year-end
• Public sector external debt repayment close to $ 4 b
• Only disbursements of about $ 200 m actually received

The depreciation of the Sri Lankan Rupee in 2025 was likely driven by high public sector debt repayments and lower-than-expected disbursements from multilateral agencies, rather than the high level of vehicle imports recorded during the year, experts claim. 

Frontier Research Head of Macroeconomic Advisory Chayu Damsinghe pointed out that despite the popular narrative blaming vehicle imports for the depreciation of the Sri Lankan Rupee in 2025, this claim was not supported by economic indicators.

“Despite having a significant number of vehicle imports, with almost close to $ 2 billion worth of imports cleared by the end of the year, we are still likely to have a current account surplus this year,” he stated.

He stated that Sri Lanka recording a current account surplus of around $ 1.7 billion during the first 10 months of 2025 indicated that despite the high volume of vehicle imports, these were not the primary cause of the currency depreciation.

Damsinghe pointed out that Sri Lanka’s current account surplus during the first 10 months of 2025 was in fact wider than that recorded in the corresponding period of 2024, indicating that imports were not the primary cause of the currency depreciation.

He therefore opined that the primary cause of the depreciation of the rupee in 2025 was the high level of Government debt repayments.

“Government debt repayments in 2025 are very high. Considering only the Central Government’s debt repayments, it’s not that high, being around $ 2 billion or so. On top of that, the Central Bank of Sri Lanka (CBSL) also has debt repayments. 

“When all this is combined, the public sector’s external debt repayment comes close to around $ 4 billion, which is fairly high. This is likely higher than what we will have in 2028 and 2029.”

Damsinghe also pointed out that disbursements to Sri Lanka from multilateral agencies such as the International Monetary Fund, World Bank, and Asian Development Bank were significantly lower than previously anticipated. 

According to him, disbursements of around $ 800 million had been expected during the year, but only about $ 200 million was actually received.

He stated that as of November, net external debt repayments amounted to an outflow of over $ 1 billion. Considering this substantial outflow for debt repayments, the fact that the currency depreciated by only around 5–6% is a testament to the strength of the economy. 

Damsinghe noted that under normal circumstances, an outflow of this magnitude would typically result in a depreciation of around 10–20%, similar to what was experienced in 2018.