Option 8 of 8
Change nothing
Keep the current path: no new measures, and see where debt goes. Used here as a point of comparison.
In the house
Keep spending as usual and make only the minimum payment, and see what the loan looks like in ten years.
The idea
This is the baseline against which the other options are measured. With no primary surplus and slow growth, interest keeps being added to the debt faster than the economy grows.
How it works
- No new taxes, no new spending limits, no new loan terms.
- New borrowing covers the part of the bill that income does not.
- Interest on the growing debt adds to next year's bill.
How long
Not a plan, but a path. The effect compounds year after year.
Who has to agree
Nobody has to agree, which is part of why it can happen by default.
Who feels it first
At first nobody. Later, whoever bears the cost when lenders stop lending.
What makes it hard
- Interest grows on itself, so the problem gets larger with time.
- Lenders may stop lending, or lend only at high rates.
- A sudden stop forces sharp measures all at once.
How people and the world may react
Households
Nothing changes at first. If lending stops suddenly, shortages and price rises can follow.
Businesses
Uncertainty about taxes, the exchange rate and access to loans weighs on investment.
Lenders and other countries
Lenders and rating agencies tend to react to a growing debt ratio with higher interest rates or less lending.
Pros and cons
Pros
- No immediate tax rise, cut or negotiation.
- Avoids short-term political cost.
Cons
- Interest keeps compounding.
- Risk of a sudden crisis.
- The later fix is usually bigger.
A real example
Sri Lanka, 2022
On 12 April 2022 the Ministry of Finance announced an interim policy on servicing external public debt. IMF figures on this site show real growth of -7.3% and average inflation of 45.2% in 2022. These figures show what happened that year, not what would happen again.
Sources:
Try it with numbers
The starting settings show this option as a simple example. Change any slider to explore. Open the full calculator, or build a mix of options in Try your strategy.
No primary surplus and growth of 2% a year.
Each year, debt as a share of GDP = last year's share × (1 + interest rate) ÷ (1 + growth of GDP in rupees) − primary surplus. Growth in rupees combines real growth and inflation. Debt starts at 96.8% of GDP in 2025 (IMF, general government gross debt). The interest rate is the Central Bank's actual interest paid in 2025 divided by central government debt at the end of 2025. This is a simple illustration with the settings you choose, not a forecast, and it cannot show shocks such as exchange rate moves or new borrowing for other reasons.
These pages describe options and what happened when countries tried them. Budgets LK does not recommend any option, and nothing here is a forecast or financial advice.