- Liquidity management crucial as 21% of debt exposed to interest rate changes
- Govt. aims for domestic-focused financing strategy with reduced reliance on T-bills
Sri Lanka will have Rs. 3.8 trillion worth of short-term securities maturing in 2025, which requires the government to manage short-term liquidity pressure while over 21% of the total debt will have interest rate changes within the year, the Finance Ministry said.
In its Medium Term Debt Management Strategy, the Finance Ministry said that Treasury bills (T-bills) worth Rs. 3,827.16 billion are maturing in 2025, significantly increasing the forecasted debt service obligations for this year.
“This indicates the requirement of taking precautionary measures to manage the short-term liquidity pressure, if any, for the government in 2025, as a large portion of the debt will be due for repayment or refinancing,” the Finance Ministry said.
The report stated that the Sri Lanka government debt to GDP ratio reduced to 98% by the end of 2024 after the completion of debt restructuring, from 104% a year earlier, the total outstanding debt stock stood at $ 100.3 billion by the end of last year.
Moreover, the report said 21.4% of the total debt will have its interest rates refixed within 2025, suggesting some exposure to short-term interest rate changes.
“This could be a bit concerning if interest rates increase, it will adversely affect the debt portfolio,” the Finance Ministry said.
However, it said that a large portion of 97.3% of the debt is in fixed-rate instruments, which provides stability and reduces the risk of interest rate fluctuations.
The total debt to be matured in 2025 amounts to $ 18 billion including $ 13 billion of Treasury bills and $ 3 billion of Treasury bonds (T-bonds).
The Debt Management Strategy for the period 2025-2029 focuses on a more domestic-oriented financing strategy maintaining an 80:20 domestic-to-external financing ratio while increasing the issuance of medium-term to long-term treasury bonds to address refinancing and borrowing costs and gradually reducing the reliance on treasury bills.
It also focuses on managing the external borrowing to bilateral and multilateral concessional loans with fixed interest rates.