(Daily Mirror) – Sri Lanka’s Net International Investment Position (NIIP) remains one of the deepest in Asia nearly USD 68 billion in the red, or about –70% of GDP. This figure reflects decades of accumulated foreign borrowing, weak export earnings, and limited FDI inflows. It is the real balance-sheet story behind our external vulnerability. On paper, this reflects strong IMF-backed fiscal discipline. But beneath the surface, these same IMF preconditions are choking the economy’s external balance sheet and limiting recovery.
The 2026 Budget shows fiscal maturity and adherence to IMF targets but doesn’t help our external balance sheet debt situation, despite these glossy measures:
A primary surplus of 2.5% of GDP,
Revenue rising to 15.4% of GDP, and
Expenditure restrained under the new Public Financial Management Act.
But the key question is, does this fiscal discipline translate into external wealth?
Unfortunately, not yet.
Fiscal Balance (% of GDP)
2023 –8.3
2024 (est.) –6.8
2025 (proj.) –5.3
2026 (budget) –5.1
Current Account Balance (% of GDP)
2023 +1.7
2024 +1.2
2025 –1.0
2026 (budget) –2.5
Estimated NIIP (USD bn)
2023. –$65.0 (negative)
2024. –$64.0
2025 –$65.5
2026 –$67.5
NIIP (% of GDP)
2023 (– 75) = negative
2024 (–72)
2025 (– 70)
2026. (–70)
This projection indicates a continued but slower deterioration in NIIP, as the external deficit outweighs the limited reserve build-up.
While the budget narrows the fiscal deficit to 5.1% of GDP, the current account deficit is projected to widen to –2.5% of GDP (≈ USD 2.3 billion).
That means the economy will still require about Rs. 800 billion of additional financing to pay for imports and external obligations. If foreign inflows or FDI don’t fill this gap, the Central Bank must supply the rupee liquidity recreating inflation and exchange-rate pressure.
The result:
The NIIP stabilises, but does not improve.
External liabilities remain high, foreign assets too low.
Even with better budgeting, the country’s net external wealth remains negative.
To genuinely reverse this IMF dependency, Sri Lanka needs:
Sustained current-account surpluses of 2–3% of GDP for several years
Debt restructuring with face-value reductions, not just reprofiling, and
Strong, equity-based FDI inflows of USD 3–4 billion annually.
Fiscal consolidation stops the bleeding, but external rebalancing heals the wound.
Until these structural shifts occur, Sri Lanka remains fiscally subordinated and firmly IMF compliant, yet externally indebted. The 2026 Budget is therefore credit-stabilising, not yet credit-enhancing. The path to a positive NIIP lies not in tighter budgets alone, but in building foreign-currency earning capacity and real investment inflows.