Economic Outlook for Sri Lanka

Selected fiscal and public debt challenges in Sri Lanka ESCAP MOVING FORWARD TOGETHER Wide fiscal deficits • Low tax revenue (8.1% of GDP) • Below-potential tax collection (3.2% of GDP gap, ESCAP estimates) Rigid public spending (2/3 on wages, pensions and interest payments) • Large debt servicing and deficit financing burdens Large upcoming foreign debt service ($5.6 billion between Apr-Dec 2022) Small, shrinking foreign exchange reserves ($1.7 billion) Sizeable monetary financing is weakening macroeconomic stability • High financing cost Rapidly deteriorating sovereign credit rating (from CCC+ to 'selective default' in 9 months) Surging government bond yields (now 24.4% from 12.6% six months ago)

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