Sri Lanka faces a risk if its foreign debt rises further, but the Medium Term Debt Management Strategy is sufficient to steer the country towards lower reliance on foreign borrowing, Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando told Parliament on Tuesday, Hiru News reported.
He was speaking on the Public Debt Management Office’s MTDS for 2026-2030, formulated under the Public Debt Management Act No. 33 of 2024 and released in 2025. A crisis could arise if foreign debt continues to climb, Fernando said — which is why the strategy explicitly contains a framework for lowering the foreign share of the debt stock.
The targets
The strategy sets out repayment schedules and specific plans for foreign obligations through 2030. Its headline composition targets:
- 90% domestic, 10% external financing as the near-term aim
- 85% domestic, 15% external to be maintained between 2027 and 2030
- The PDMO’s Annual Borrowing Plan for 2026 covers 88% of the gross borrowing requirement through rupee-denominated bonds, with 12% from FX-denominated bonds
On the structure of domestic debt, the office aims to lengthen the average maturity of Treasury bonds from 6.8 years to 8 years by 2030, shifting issuance towards longer-dated instruments and away from short-term Treasury bills. Treasury bills are targeted to fall from 10.7% of total debt to 5% over the period.
The strategy’s key performance indicators project the interest payment-to-revenue ratio falling from 52.2% at end-2025 to 35% by 2030. Fernando said discussions are under way on further measures to reduce interest repayments.
Why it matters now
More than half of government revenue currently goes to servicing interest. Bringing that to roughly a third by 2030 is the single clearest measure of whether the strategy works.
Shifting borrowing from foreign to domestic markets reduces exposure to exchange-rate shocks — the mechanism that turned Sri Lanka’s debt burden unpayable in 2022 — but it is not costless: heavier domestic issuance competes with private borrowers for the same pool of savings.
Fernando’s remarks come amid continuing debate over fiscal and debt sustainability, with the IMF’s Extended Fund Facility programme due to conclude by March 2027 and the Fund advising the government to set clear medium-term fiscal parameters.
Not reported
Hiru does not give the current foreign-to-domestic split of the debt stock, so there is no baseline against which the 90:10 and 85:15 targets can be read. It does not say what the average Treasury bond maturity or the Treasury bill share stood at when the strategy was written versus today, or whether the 2026 borrowing plan is running to target.
The report does not name the MP whose question or motion prompted the statement, does not carry any opposition response, and does not say what the additional measures on interest repayments under discussion would involve. It gives no projection for the debt-to-GDP ratio over the strategy period.
Readers should note that the themes here — reducing foreign reliance, lengthening maturities — have been stated by the same Deputy Minister in earlier settings during 2026. What is specific to this filing is the parliamentary statement on the 2026-2030 strategy document and the KPI figures above.
Sources: Hiru News.
