Local Law Local Currency Debt is held by the banks, pension funds, individuals and the central bank.

Sri Lanka has to re-structure debt to meet a ceiling on debt-rollovers and new deficits called the gross financing need from 2027, which has been set at 13 percent of GDP (from 30-pct in 2022).

Foreign debt service has to be 4.5 percent of GDP or below.

“The authorities and their financial advisors are weighing different options and their associated legal procedures to optimize the design of an LLLC debt treatment while preserving financial stability,” the IMF said in a statement.

“The maturity shortening and interest rate increase of LLLC debt in the recent periods contributed to a sharp increase in the government’s GFNs.

“The authorities and their financial advisors are weighing different options and their associated legal procedures to optimize the design of an LLLC debt treatment while preserving financial stability.

T-bills held by the Central Bank are exchanged into longer term debt instruments; a select pool of the remaining domestic debt is assumed to be reprofiled to reduce gross financing need, while limiting the impact on the financial sector,” the report said.