Option 3 of 8
Grow the economy
Make the whole economy bigger, so the same debt is smaller next to what the country earns.
In the house
Train for a better job, or expand the family shop, so income rises while the loan stays the same.
The idea
Debt is usually measured against the size of the economy (GDP). If the economy grows faster than the debt, the ratio falls even with no repayment. Growth also raises tax income without raising tax rates.
How it works
- Encourage exports, tourism, investment and new industries.
- Remove obstacles for business such as slow permits, unreliable power or high costs.
- Invest in skills and infrastructure that raise what each worker can produce.
How long
Slow. Growth cannot be ordered, and it takes years of steady results to change the debt ratio.
Who has to agree
Mostly private businesses and investors, plus stable government policy.
Who feels it first
Workers and firms in growing sectors. Others may feel change as industries shift.
What makes it hard
- Growth depends on many things the government does not control, including world demand.
- High debt itself can discourage investment, because investors expect higher taxes later.
- Growth alone rarely brings the ratio down fast enough in practice.
How people and the world may react
Households
Rising incomes and jobs are the most welcome result, but the benefits may arrive unevenly across regions.
Businesses
Investors respond to stable rules, reliable energy and a predictable exchange rate.
Lenders and other countries
Lenders see growth as the healthiest route, but they rarely rely on it alone when lending.
Pros and cons
Pros
- Raises incomes as well as lowering the debt ratio.
- Does not require tax rises or cuts.
- Adds to tax income over time.
Cons
- Slow and uncertain.
- Cannot be guaranteed by any policy.
- Benefits may be uneven.
A real example
United Kingdom after World War II
The Office for Budget Responsibility reports UK debt at about 270% of GDP shortly after the war, falling to about 50% over the next three decades. It attributes the fall mainly to growth in the economy outrunning the interest rate on the debt, helped by inflation. Sri Lanka's IMF figures on this site show real growth of -7.3% in 2022 and 5.0% in 2025.
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.
The economy grows 5.5% a year in real terms.
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.