Former Deputy Leader of the United National Party and Member of Parliament Ravi Karunanayake has warned that Sri Lanka’s economic recovery in 2026, while showing surface-level improvements, remains severely constrained by debt obligations, fragile foreign exchange inflows, and rising fiscal pressures, particularly following recent natural disasters.
Citing official financial data from the Ministry of Finance, the MP said that despite the relief provided under the International Monetary Fund–supported Extended Fund Facility, the country is still far from being out of danger.
He noted that the government’s ability to manage external debt servicing next year will depend heavily on strict adherence to revenue targets, effective expenditure management, and the continuation of foreign exchange inflows.
According to the Ministry of Finance, Sri Lanka has committed under the IMF loan programme to keep external debt servicing below 4.5 percent of GDP by 2032 and to reduce total public debt to around 95 percent of GDP.
The MP pointed out that these benchmarks leave very little room for fiscal error. He also emphasized that debt sustainability will now be reviewed annually, rather than being deferred until the end of the decade.
Contrary to popular belief, he said Sri Lanka has already begun servicing its restructured debt and will not wait until 2028 to do so.
He explained that the debt restructuring agreements have eased immediate repayment pressures by approximately USD 17 billion between 2023 and 2027, describing this as significant but temporary relief.
He warned that once the grace periods expire, the country could face renewed debt pressures if economic growth and income levels do not improve.
The MP further stated that taxation remains the government’s primary tool for achieving the fiscal consolidation required under the IMF programme.
However, he cautioned that aggressive tax increases not aligned with economic growth could reduce compliance and undermine the development of small and medium-sized enterprises.
