The Hon. (Dr.) Harshana Suriyapperuma - Deputy Minister of Finance and Planning

¶ 01 Mr. Speaker, this is the response to the question raised by the Hon. Leader of the Opposition under Standing Order 27(2) on 23.05.2025.

¶ 02 1. As at 31 March 2025, the total payable under debt restructuring agreements with bilateral creditors and international private creditors amounts to USD 20,853.70 million.

¶ 03 2. The annual payment profiles (USD million) under the debt restructuring agreements for bilateral creditors and international private bondholders are as per the annex. Note: Schedules shown cover only those bilaterals that have concluded agreements—Export-Import Bank of China, China Development Bank, India, and Japan. Schedules for other bilaterals will be available after agreements are signed. (Outstanding balances of debt subject to restructuring as at 31.03.2025: USD 2,831 million.)

¶ 04 3. Following two years of severe crisis, in 2024 Sri Lanka’s economy strengthened sufficiently to face various challenges. Broad reforms under the IMF’s four-year Extended Fund Facility (EFF) approved since March 2023 have enabled gradual reduction of debt burden and progress toward growth targets.

¶ 05 These reforms aim to: strengthen public governance; address structural weaknesses; restore macroeconomic stability; and ensure long-term public debt sustainability, with transparency and anti-corruption measures embedded.

¶ 06 The fiscal framework to determine macro targets necessary for successful debt servicing has been identified, emphasizing revenue-based fiscal consolidation. Quantitative targets under the IMF-EFF and fiscal rules under the Public Financial Management Act provide the foundation for macro targets to ensure debt sustainability.

¶ 07 Key fiscal targets: - Raise government revenue to at least 15% of GDP in 2025 and beyond via tax policy reforms and stronger administration. - Maintain a primary surplus of 2.3% of GDP in 2025 and beyond through sustained revenue efforts and rationalized expenditure. - Manage primary expenditure below a ceiling of 13% of GDP under the medium-term fiscal framework of the PFM Act. - Maintain public investment above 4% of GDP in 2025 and beyond.

¶ 08 Related macro targets: - Accelerate economic growth. - Maintain inflation around 5% beyond 2025. - Increase gross official reserves from USD 7.2 billion in 2025 to USD 15.3 billion by 2029. - Raise FDI to at least 2% of GDP.

¶ 09 - As in 2024, achieve a positive foreign currency current account balance as a share of GDP.

¶ 10 By achieving these, the government aims to reduce public debt below 100% of GDP by 2029.

¶ 11 In line with our policy declaration “A Prosperous Country – A Beautiful Life,” the government is engaging not only with the IMF but also with other creditors to ensure debt sustainability. These programs are already being implemented successfully under the people’s mandate.

¶ 12 The IMF-EFF’s core understandings are based on seven pillars (not “conditions”): i. Revenue-based fiscal consolidation with SOE reforms and cost-reflective energy pricing. ii. Stronger social safety nets for the most vulnerable. iii. Establishing frameworks for debt restructuring to rebuild sustainability. iv. Restoring price stability and rebuilding external buffers under a credible, flexible regime. v. Policies to safeguard financial sector stability. vi. Governance and anti-corruption reforms. vii. Structural reforms to broaden growth potential.

¶ 13 There are nine disbursements in total. Each tranche is SDR 254 million, totaling SDR 2,286 million.

¶ 14 Disbursement schedule (SDR mn / USD mn): - 1st: 22 Mar 2023 – 254 / 333 - 2nd: 14 Dec 2023 – 254 / 337 - 3rd: 14 Jun 2024 – 254 / 336 - 4th: 04 Mar 2025 – 254 / 334 Total received: 1,016 / 1,340 - 5th (2025): 254 - 6th (2025): 254 - 7th (2026): 254 - 8th (2026): 254 - 9th (2027): 254 Grand total: 2,286 (SDR)

¶ 15 6. Our pledge is to minimize burdens on the people and ensure every rupee of public spending yields social and economic returns. Accordingly, in the first Budget of the new government we granted several reliefs, while coordinating with the IMF to ease tax burdens and enhance reliefs under Budget 2025:

¶ 16 - From 01 April 2025, the annual personal income tax-free threshold was raised from Rs. 1.2 million to Rs. 1.8 million. - The minimum monthly salary in the public service was increased from Rs. 24,250 to Rs. 40,000 (an increase of Rs. 15,750; about 65%) effective 01 April 2025. - VAT exemption on liquid milk and yogurt. - Increased social benefit payments for those on the social registry, raising net social protection outlays to Rs. 232.5 billion in 2025; with ADB and World Bank support, 25,000 vulnerable families have been identified for empowerment, with domestic funding to extend coverage. - Additional 3% interest above market rates for senior citizens’ deposits. - Rs. 6,000 for school equipment for children who receive, or currently do not receive, school attendance benefits.

¶ 17 Thus, while meeting IMF understandings, we have rolled out measures to maximize relief to the public.