Sri Lanka on course for lowest budget deficit in decades while outperforming fiscal targets

As 2025 draws to a close, Sri Lanka is set to record its highest revenue intake and lowest fiscal deficit in many decades, with data for the first 11 months showing only a fraction of the deficit recorded in 2024.
According to the latest available fiscal data, in the 11 months to November 2025, the government collected a record Rs.4,961.76 billion in revenue, up a robust 35.4 percent year-on-year or Rs.1,297.12 billion higher than the same period last year.
This performance is also expected to outperform the revised full-year revenue estimate of Rs.5,100 billion.
It was against this backdrop that President Anura Kumara Dissanayake highlighted his government’s fiscal performance in the preamble to his maiden full-year budget last month, although the improvement has little to do with the policies of his National People’s Power (NPP) administration.
In fact, this fiscal outperformance was effectively handed down to the Dissanayake government by the former administration of Ranil Wickremesinghe, which sharply raised taxes under an International Monetary Fund (IMF) programme entered into in mid-2022, with revenue inflows gathering pace from March 2023. Sri Lanka’s economic recovery reflects a natural rebound from the severe contraction triggered by years of policy missteps and misinformation that pushed the economy into crisis.
Meanwhile, tax revenue rose 36.8 percent or Rs.1,241.04 billion, to Rs.4,611.50 billion in the 11 months to November.
Despite significantly outperforming fiscal targets, the government remains committed to implementing the proposed property tax from 2027.
The administration is also leaning towards continuing engagement with the IMF, even after the current programme concludes in 2027.
During the 11-month period, the overall fiscal deficit narrowed sharply to Rs.325.60 billion, compared with Rs.1,217.30 billion in the corresponding period of 2024.
This was largely driven by subdued public investment, with only Rs.645.60 billion spent, around half of Rs.1,033.0 billion estimated for the full year under the revised budget.
As a result, the overall budget deficit could come in well below the projected 4.5 percent of GDP for 2025.