Sri Lanka’s government expenditure patterns have changed significantly since the recent economic crisis. While overall government spending has remained relatively steady—rising slightly from 20% of GDP in 2021 to 20.5% in 2024—the breakdown of expenditure reveals a concerning trend: an increasing share is going towards interest payments on existing debt, with less investment in crucial development projects.

Recent figures from the Central Bank of Sri Lanka’s Annual Economic Review 2024 show that interest payments now account for an unprecedented 44% of total government spending. This marks a dramatic shift from pre-2021 levels, when less than 30% of expenditure was allocated to interest payments. This rise signals a troubling constraint, as a larger portion of government revenue is dedicated to servicing debt rather than supporting growth or providing essential public services.

Simultaneously, capital expenditure, which includes vital infrastructure and development initiatives, has fallen sharply from 22% to just 13% of total spending between 2021 and 2024. Such a reduction raises concerns, given the critical role these investments play in driving economic growth and improving the quality of life for citizens.

Expenditure on salaries and wages also saw a notable decline, dropping from 24% to 17% of total spending. Meanwhile, transfer payments—which include welfare and subsidies—remained broadly stable, increasing marginally from 19% to 20%.

Sources

Central Bank of Sri Lanka, Annual Economic Review 2024 (2024), at https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-economic-review/annual-economic-review-2024 [last accessed 23 June 2025].

Research by: Shalomi Liyanage and Anushan Kapilan

Visualization by: Muaadh Himaz