1H Budget posts Rs. 9.5 b surplus despite sharp fall in June

President and Finance Minister Anura Kumara Dissanayake  

• Overall Budget surplus narrows from Rs. 197.3 b at end-May to Rs. 9.5 b at end-June
• Revenue and grants rise 27.1% YoY to Rs. 2.96 t; expenditure increases 7.9% to Rs. 2.95 t
• Tax revenue grows 25.9% to Rs. 2.71 t; non-tax revenue up 43.6%
• Primary surplus expands 44.8% YoY to Rs. 1.24 t

Sri Lanka ended the first half of 2026 with an overall Budget surplus of Rs. 9.51 billion, reversing a Rs. 405.6 billion deficit a year earlier, although the surplus narrowed sharply from Rs. 197.34 billion at end-May as expenditure accelerated in June.

According to the latest fiscal operations data released by the Central Bank of Sri Lanka (CBSL), total revenue and grants increased by 27.1% year-on-year (YoY) to Rs. 2.96 trillion during the January-June period from Rs. 2.33 trillion a year earlier.

The 1H outturn marked a significant moderation from the fiscal position at end-May, when the Government had accumulated an overall Budget surplus of Rs. 197.34 billion. Based on the cumulative figures, the reduction to Rs. 9.51 billion at end-June implies an overall Budget deficit of about Rs. 187.83 billion during June.

Revenue increased by 27.2% YoY to Rs. 2.95 trillion in 1H from Rs. 2.32 trillion in the corresponding period of 2025.

Tax revenue, which accounted for the bulk of Government income, rose 25.9% to Rs. 2.71 trillion from Rs. 2.15 trillion a year earlier. Non-tax revenue increased by 43.6% to Rs. 243.64 billion from Rs. 169.63 billion, while grants declined 46.6% to Rs. 1.81 billion from Rs. 3.39 billion.

Compared with the first five months, revenue and grants increased by about Rs. 416 billion in June, rising from Rs. 2.54 trillion at end-May to Rs. 2.96 trillion at end-June.

Meanwhile, expenditure and lending minus repayments increased by 7.9% YoY to Rs. 2.95 trillion during 1H from Rs. 2.73 trillion a year earlier.

The cumulative expenditure figure rose from Rs. 2.34 trillion at end-May, indicating an increase of about Rs. 606 billion during June. The faster increase in expenditure relative to revenue during the month accounted for the sharp narrowing of the overall Budget surplus.

Recurrent expenditure increased by 6.5% YoY to Rs. 2.67 trillion from Rs. 2.51 trillion. Capital expenditure and lending minus repayments rose by 23.6% to Rs. 276.6 billion from Rs. 223.88 billion in the corresponding period last year.

The primary balance, a key fiscal indicator monitored under Sri Lanka’s International Monetary Fund (IMF)-supported reform program, strengthened further to a surplus of Rs. 1.24 trillion during 1H from Rs. 858.99 billion a year earlier, an increase of 44.8%.

The primary surplus also increased from Rs. 1.13 trillion at end-May, even as the overall Budget surplus narrowed sharply during June.

For 1H as a whole, revenue and grants increased by Rs. 630.9 billion YoY, compared with a Rs. 215.78 billion increase in expenditure and lending minus repayments. This resulted in a Rs. 415.11 billion improvement in the overall Budget balance from 1H 2025.

According to the IMF’s latest assessment, following temporary fiscal easing in 2026, the Government remains committed to restoring the primary surplus target to 2.3% of GDP in 2027 to safeguard macroeconomic stability.

The IMF has called for continued efforts to strengthen tax compliance, broaden the tax base, and improve public financial management, while accelerating public spending execution, including disaster-related support.

It has also urged accelerated State-owned enterprise reforms, continued cost-reflective energy pricing, and stronger social safety nets to contain fiscal risks.

The IMF has further stressed the need to strengthen the Public Debt Management Office as debt restructuring nears completion to support prudent debt management, deepen the domestic debt market, and facilitate Sri Lanka’s eventual return to international capital markets.