The International Monetary Fund (IMF) has advised Sri Lanka to take notice of its mounting external liabilities and reserve adequacy. Sri Lanka’s national debt is gradually increasing, amounting to 80% of gross domestic product. The debt to GDP ratio has risen in 2012 mainly because of the balance of payment crisis, which triggered when the country took loans to subsidize energy tariffs. The IMF suggests that the Sri Lankan government should address the fiscal consolidation. Statistics show that nearly 47 percent of Sri Lanka’s debt was foreign while foreign investors hold 12 percent of the Rupee dominated debt.
Authorities suggest that Sri Lanka must not compare its national debt with other countries because the budget committee passes most of the funds in Sri Lanka. However, in other countries the spending agencies borrow directly from the government. The spending agencies in Sri Lanka include road and urban development agencies that borrow on their own account outside the budget, which understates the overall budget deficit and the national debt. Sri Lanka needs to maintain its financial health to develop its industries. With a decade long civil war against the Tamil forces ending in 2008, Sri Lanka is slowly becoming a prosperous country. It must take necessary steps in its budget structure to facilitate growth.