This paper examines the macroeconomic implications of debt stabilisation fiscal rules in Sri Lanka using a calibrated DSGE model with heterogeneous economic agents. It analyses the transmission mechanism of debt stabilisation fiscal policy configurations viz distortionary taxes, government spending and fiscal transfers. The impact of fiscal policy shocks on macro variables are polarised: the dynamic responses of macro variables are more sensitive to consumer tax shocks but trivial compared to monetary policy shocks. The paper finds that there is a leeway for fiscal authorities to raise tax rates, as prevailing rates are below the rates that generate maximum tax revenue.