• Fin. Min. projects the nation can manage MLB payments, even under upside scenarios
• Public debt-to-GDP targets are expected to be met two years early, with robust economic growth projected

Sri Lanka will have the capacity to repay the macro-linked bonds (MLBs) by 2028, even if the upside scenarios are triggered with a lesser haircut based on current macroeconomic projections, the Finance Ministry said.

Responding to a question raised by dollar bond investors at the end of the July investor presentation, the Finance Ministry said, while debt payments are higher under the upside scenarios of the MLBs, they have been structured to ensure they remain consistent with Sri  Lanka’s long-term public debt sustainability and capacity to repay its external debt.

Authorities said that the adjustments to the MLBs have been designed to align with Sri Lanka’s macroeconomic performance and that current projections suggest a higher likelihood of triggering the upside scenarios, reflecting the strength of Sri Lanka’s economic recovery.

According to the MLB’s repayment structure, a cumulative real GDP growth between 2024-27 is greater than 11.5% or nominal GDP stays between $ 94-107 billion, the principal haircut on the dollar bonds will only be between 16-19%, while the baseline scenario offers a haircut of 27%.

The Finance Ministry presentation shows that it expects the public debt stock to reduce to 95% of the GDP by 2030 from the earlier expectation of 2032.

It expects real GDP growth to remain robust at 3.5% in 2025 and have a close to global average growth of 3.1% from 2026-29.

The average tenor of the outstanding central government debt of Sri Lanka is 10 years, while the average annual interest rate is 3.2% where 72% of the debt has a fixed interest rate.