Sri Lanka’s fiscal performance has shown a significant turnaround in 2025, with the budget deficit more than halving by September as stronger tax revenues and import duties boosted government income, according to the Finance Ministry’s latest Fiscal Review Report.
1. Budget Deficit
The budget deficit dropped 54.5% year-on-year to Rs. 441.4 billion during January–September 2025, compared to Rs. 970 billion in the same period last year.
2. Primary Account Surplus
The primary account surplus more than doubled to Rs. 1.4 trillion, reflecting an improved fiscal balance when excluding interest payments.
3. Revenue Growth
Total revenue rose 31% year-on-year to Rs. 3.83 trillion, driven primarily by higher VAT and import-related collections.
4. Customs Collections
The Customs Department generated Rs. 1.7 trillion, achieving 80% of its annual target and contributing nearly half of total tax revenue.
5. Expenditure
Total government spending increased 10% to Rs. 4.3 trillion, mainly due to recurrent expenditure of Rs. 3.8 trillion.
Capital spending fell 2% to Rs. 455 billion, while interest costs climbed to Rs. 1.9 trillion.
6. Vehicle Import Taxes
Revenue from vehicle imports surged 818% year-on-year to Rs. 349 billion, up from Rs. 38 billion a year earlier.
7. Import Value
The total value of motor vehicle imports is projected to reach USD 1.5 billion by year-end, up from an earlier estimate of USD 1.2 billion, according to the Central Bank.
The International Monetary Fund (IMF), in its October review, commended Sri Lanka’s improving fiscal performance but emphasized the need to sustain revenue momentum and spending discipline. The approval of the 2026 Budget in line with IMF program goals will be key to unlocking the next tranche under the USD 3 billion Extended Fund Facility.
