Sri Lanka Interim Debt Policy Overview

Sri Lanka's Public Debt has grown rapidly and now reaches unsustainable levels In the absence of an upfront comprehensive debt treatment, Sri Lanka's public debt is set to remain at unsustainable levels in the coming years Sri Lanka's public debt indicators in the absence of an upfront comprehensive debt treatment¹ In % of GDP² Barbados GFN target, 15.0% Ukraine GFN target, 10.0% Actuals 89.0% 21.7% Ecuador GFN target, 6.0% Argentina GFN target, 5.0% 2019A 2020A Estimates 136.6% 37.9% 2021E 2022P 2023P Central Government Gross Financing Needs Projections 2024P Public Sector Debt Stock 2025P 2026P 2027P Projections presented above assume that the macro-fiscal framework and underlying policy package agreed with the IMF are implemented, and that Sri Lanka benefits from financial support from development partners as contemplated under the IMF program It is therefore a << theoretical » exercise designed to illustrate the relief to be delivered by the expected comprehensive upfront debt treatment and should be seen as optimistic. Absent such debt treatment, none of the above assumptions should materialize, leading to a far worse macro-fiscal framework and therefore further deteriorated debt trajectory Sources: Ministry of Finance, Economic Stabilization and National Policies, Central Bank of Sri Lanka, IMF Notes: (1) The above DSA trajectory reflects a "pre-restructuring scenario" (i.e., a DSA scenario assuming the IMF program's adjustment path and foreseen multilateral financing and in which the remaining financing gap is financed with an illustrative 10% interest rate debt instrument), (2) CG Debt/GDP and CG GFN/GDP indicators are not presented on the same scale 14

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