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Sri Lanka in the top 10 countries with the highest interest to revenue ratio, since 1990!

According to data from the World Bank Database, looking at the ratio of interest to revenue, Sri Lanka is the only country to have always ranked among the top 10 countries with the highest ratio globally every year from 1990 onwards, while being number 1 in the past 3 years. This ratio measures the percentage of a country's revenue that goes toward paying interest on its debt, indicating how well the country can manage these payments with its collected revenue. While high interest payments alone are not necessarily problematic, the real issue arises when a country struggles to generate enough revenue to cover these payments.

A significant increase in this ratio was observed between 2019 and 2020 in Sri Lanka. During this period, the government implemented tax cuts, including a reduction in Value-Added Tax (VAT), an increase in income tax thresholds, and the complete elimination of certain taxes like PAYE (Pay As You Earn) and NBT (Nation Building Tax). These fiscal measures led to a drastic decline in government revenue, dropping from 1,891 billion Sri Lankan Rupees in 2019 to 1,368 billion in 2020, a decrease of 28 percent.

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Sonali Wijeratne
29 Sep 2023
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