The Government of Sri Lanka borrowed over Rs. 700 billion from the domestic market, such as treasury bills, to sustain itself in January 2025 alone, said Talal Rafi, a regular columnist for the International Monetary Fund (IMF).

Explaining Sri Lanka’s debt situation during a televised interview, Talal Rafi said Rs. 700 billion equals eight expressways from Colombo to Katunayake. 

“This is the amount we are borrowing on a monthly level for the government to sustain. This is not the fault of the present government or the previous government. This is the way Sri Lanka has been functioning,” the Director at Ernst & Young said. 

Touching on Gross Financing Needs, he explained that this was the amount of financing Sri Lanka needs in a year to sustain itself and that this includes interest, maturity, and the Fiscal Deficit. 

He elaborated that at the peak of the 2022 economic crisis, Gross Financing Needs were 32% and per the latest IMF report have now dropped to 25%, a drop of 24.9%.

“This indicates that one-quarter of Sri Lanka’s economy has to be paid/ financed each year for Sri Lanka to sustain,” Talal Rafi said. 

Stating that he was also of the opinion that the government should not borrow, he added that, however, the current and previous governments did not have a choice but to borrow.

“If you stop borrowing, then 25% of the GDP has to be paid per year. That is not sustainable. Even if you double VAT to 36%, Income Tax to 72%, or Corporate Tax to 60%, we still cannot finance it without borrowing. The truth is that is the way forward, as our rollover debt is too high as a quarter,” he said. 

Talal Rafi pointed out that Sri Lanka can only solve this by addressing its Fiscal Deficit, adding that the country cannot continue with its expenditure being more than its revenue.

“The solution is something that will be extremely unpopular, to bring the deficit down or to zero. But this will lead to either an increase in revenue, such as people paying taxes, which is unfair to them. Or reducing expenditure which is not going to be popular with people who are receiving it,” he said. 

Talal Rafi noted that Sri Lanka, including the current or any future government, is caught in this situation, but the solution would be to increase revenue and downsize wasteful expenditure of the government, including getting rid of some unproductive sectors. (Newswire)

Sri Lanka's debt situation explained in 3 minutes. Every Sri Lankan needs to know how deep in debt Sri Lanka is. Can Sri Lanka afford to stop borrowing? I explained this at Ada Derana Hyde Park TV show last month (February 2025)#srilanka #economics #economy pic.twitter.com/bqo06IXY9f

— Talal Rafi (@talalrafi7) March 16, 2025

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Opposition Leader Sajith Premadasa has appointed Talal Rafi, an economist and economic policy consultant to a multilateral development bank, as his policy advisor. 

Talal Rafi is a regular contributor to the International Monetary Fund’s expert forum on public finance and is also a member of the expert network of the World Economic Forum. 

He was a member of the Deloitte Global Economist Network and is a Visiting Lecturer at the Centre for Banking Studies, Central Bank of Sri Lanka. 

Having worked on projects by the World Bank, Asian Development Bank and USAID, his work has been published by the World Bank, International Monetary Fund, Asian Development Bank, World Economic Forum, Chatham House London, London School of Economics and Forbes. (Newswire)

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