Budget Surplus Widens To Rs. 197.3 Billion Through May On Robust Revenue Growth

Sri Lanka’s fiscal position continued to improve during the first five months of 2026, with the Government recording an overall Budget surplus of Rs. 197.34 billion, compared to a deficit of Rs. 236.63 billion in the same period last year, as revenue growth continued to outpace expenditure.

The latest fiscal operations data released by the Central Bank of Sri Lanka (CBSL) showed that total revenue and grants increased by 30.6% year-on-year (YoY) to Rs. 2.54 trillion during the January-May period, up from Rs. 1.94 trillion recorded a year earlier.

Tax revenue, which remained the largest source of Government income, rose by 23.9% to Rs. 2.32 trillion from Rs. 1.8 trillion in the corresponding period of 2025. Non-tax revenue posted a stronger increase of 54.2%, reaching Rs. 211.84 billion compared to Rs. 137.38 billion a year earlier. Meanwhile, grants declined to Rs. 1.34 billion from Rs. 2.49 billion.

Total expenditure and lending minus repayments increased by 7.3% YoY to Rs. 2.34 trillion from Rs. 2.18 trillion, indicating that expenditure remained under control despite higher capital spending.

Recurrent expenditure increased by 5.5% to Rs. 2.11 trillion, while capital expenditure and lending minus repayments rose by 29.3% to Rs. 226.83 billion from Rs. 175.37 billion during the same period last year.

The primary balance, a key fiscal measure under Sri Lanka’s International Monetary Fund (IMF)-supported reform programme, improved to a surplus of Rs. 1.13 trillion during the first five months of the year, up from Rs. 742.92 billion in the corresponding period of 2025, marking a 52.3% increase.

The latest data highlights the continued strengthening of the country’s public finances, with improved revenue mobilisation allowing the Government to maintain substantial primary and overall Budget surpluses while also increasing capital expenditure during the period.

According to the IMF’s latest assessment, although fiscal policy is expected to ease temporarily in 2026, the Government remains committed to restoring the primary surplus target to 2.3% of GDP in 2027 to preserve macroeconomic stability.

The IMF said measures to improve tax compliance, broaden the tax base, and strengthen public financial management should continue. It also called for faster implementation of public expenditure, including funding for disaster-related assistance.

In addition, the IMF urged the Government to accelerate reforms of State-owned enterprises, maintain cost-reflective energy pricing, and further strengthen social safety nets to reduce fiscal risks.

The IMF also emphasised the importance of strengthening the Public Debt Management Office as debt restructuring approaches completion, noting that this will support prudent debt management, deepen the domestic debt market, and help facilitate Sri Lanka’s eventual return to international capital markets.