According to recent data from the Public Debt Management Office, Sri Lanka’s central government experienced a significant decline in its overall debt during the first quarter of 2026.
The total debt decreased from USD 100,356 million at the close of December 2025 to USD 98,965 million by March 31, 2026, marking a reduction of approximately USD 1,391 million within this three-month span.
This decrease was attributed to reductions in both domestic and external debt obligations. The domestic debt, which constitutes the majority of the government’s liabilities, decreased from USD 62,693 million to USD 61,497 million, encompassing both LKR-denominated and a smaller amount of foreign currency-denominated domestic debt. Meanwhile, external debt figures fell by USD 195 million, dropping from USD 37,663 million at the end of 2025 to USD 37,468 million by the end of March 2026.
Notably, while there was a decline in debt measured in US dollars, the value of the government’s debt in Rupees increased slightly, rising from LKR 31,109 billion to LKR 31,193 billion. This difference can be attributed to changes in the indicative exchange rate, which shifted from LKR 309.99 per USD in December 2025 to LKR 315.19 per USD at the end of March 2026.
This reduction in debt coincides with the government’s ongoing efforts to stabilize its financial operations. In the first quarter of 2026, Sri Lanka made debt service payments totaling USD 8,094 million, with USD 530 million allocated to external creditors and USD 7,565 million to domestic obligations.
The report also notes significant advancements in the completion of external debt treatments. Following a successful exchange of International Sovereign Bonds (ISBs) in late 2024, which saw a participation rate of 98 percent, the Sri Lankan government entered into additional bilateral amendatory agreements with Belgium and Germany during the first quarter of 2026.
As a result of these agreements, Sri Lanka has resumed regular debt servicing to its creditor partners. The information provided in this report aims to facilitate evidence-based policymaking and underscores the government’s dedication to fiscal transparency.
