Sri Lanka has substantially reduced the immediate pressure from external debt repayments following its restructuring, but the Government’s latest debt data reveal a vulnerability that has moved closer to home: a heavy concentration of short-term domestic maturities.
The first Annual Report of the Public Debt Management Office (PDMO) shows that 24.3% of domestic debt was due within one year at end-2025. By comparison, only 1.5% of external debt was scheduled to mature within the same period. Across the entire Government debt portfolio, 15.8% was due within a year.
The figures expose a striking shift in Sri Lanka’s refinancing risk. External debt maturities have been pushed further into the future, while the domestic market continues to carry a substantially shorter repayment profile.
The average time to maturity of total Government debt improved to 6.8 years in 2025 from six years in 2024. But the gap between domestic and external debt remained pronounced. External debt had an average maturity of 9.6 years, compared with just 4.7 years for domestic debt.
The PDMO itself identified the concentration of short-term domestic maturities as a “key risk” requiring continued monitoring and active debt management.
There are signs that the Government has already begun addressing the problem. Treasury Bills accounted for 10.11% of total Government debt in 2025, down sharply from 14.06% a year earlier. Their share of domestic debt also declined from 22.04% to 16.15%.
Nevertheless the reduction in Treasury Bill dependence does not eliminate the refinancing challenge. A significant portion of domestic borrowing still has to be rolled over in a market where investor depth remains limited and financing conditions can change rapidly.
Interest-rate exposure appears more contained. Fixed-rate instruments represented 88% of the Government’s total debt portfolio at end-2025, while the average time to re-fixing for local-currency debt stood at 4.5 years. That provides some protection against an immediate surge in borrowing costs.
The external side presents a different risk. Although only 3.4% of external debt matured within one year, the return of debt servicing after restructuring pushed external debt service to 17.4% of exports in 2025, up from 13.1% in 2024.
External debt service also rose to 34.5% of gross official reserves, from 27.3%. Nevertheless, both indicators remained far below the severe stress levels recorded during the 2021-22 crisis.
The external debt-to-reserves ratio has also improved dramatically, falling to 5.51 times in 2025 from 18.96 times in 2022.
Sri Lanka’s post-restructuring challenge, therefore, is no longer simply about escaping an external repayment wall. It is about managing a domestic refinancing cycle without undermining market stability.
The PDMO’s warning makes the central issue clear: debt restructuring has bought Sri Lanka time, but managing that time will determine whether the country can convert temporary relief into lasting debt sustainability.
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