Budget deficit down 60% YTD Oct., primary surplus exceeds Rs. 1.6 t

 President and Finance Minister Anura Kumara Dissanayake

• Deficit down 57% YoY to Rs. 455.8 b in Jan.-Oct. 2025 from Rs. 1 t 
• Primary surplus increases 96% YoY to Rs. 1.6 t
• Total revenue up 33% YoY to Rs. 4.3 t, recurrent expenditure up 11% YoY to Rs. 4.22 t
• Govt. to present supplementary estimates for post-Ditwah relief, Rs. 50 b for 2025, and Rs. 500 b for 2026

As the Government engages in post-Ditwah recovery efforts, for which it is seeking an additional Rs. 550 billion spending bill along with additional International Monetary Fund (IMF) financing, data for the first 10 months of 2025 showed Sri Lanka’s fiscal performance continued to strengthen, with the Budget deficit contracting by nearly 60% from a year ago and the primary surplus exceeding Rs. 1.6 trillion.

According to new Central Bank of Sri Lanka (CBSL) data, the Government’s Budget deficit for the first 10 months of 2025 reached Rs. 455.77 billion, down 57% from Rs. 1.06 trillion a year ago, with tax revenue growth outpacing expenditure.

Tax revenue was up 34% year-on-year (YoY) to Rs. 4.03 trillion in the first 10 months of 2025, non-tax revenue was up 19% YoY to Rs. 303 billion, and grants increased 24% YoY to Rs. 14 billion.

Recurrent expenditure was up 11% YoY to Rs. 4.22 trillion, while capital and net lending increased 9% YoY to Rs. 582 billion, while the total allocation for capital expenditure for 2025 was budgeted at Rs. 1.3 trillion.

The Government reported a primary surplus of Rs. 1.63 trillion, up 96% from Rs. 830.7 billion.

Opposition lawmakers have been calling on the Government to deploy the revenue surplus on post-Ditwah relief and recovery measures.

President Anura Kumara Dissanayake told Parliament last week that the Treasury had Rs. 30 billion at its immediate disposal for post-Ditwah relief from allocations made in the 2025 Budget. 

He also called on Parliament to convene this week to approve an additional Rs. 50 billon via a supplementary estimate. The President has proposed a separate suppliant estimate for Rs. 500 billion to be deployed in 2026, which would be presented to Parliament next year.

Earlier this month, in the wake of Cyclone Ditwah, Opposition MP Dr. Harsha de Silva said about Rs. 1 trillion was already available for immediate deployment without new legislation. 

Disaster spending would not fall under the 13% of GDP cap on other expenditure, and exemptions under the Central Bank Act allowed monetary support in the event of a natural disaster. Additional allocations would be needed in next year’s Budget as rebuilding advances.

Dr. de Silva said fiscal rules and improved public finance management had strengthened discipline, but warned against using buffers to accumulate surpluses “larger than necessary” at the expense of investment. 

Sri Lanka, he said, could not rely on incremental inflows. Sustainable growth depended on opening the economy, accelerating reforms, and attracting substantial foreign and domestic private capital.

The IMF is currently reviewing a Government request for about $ 200 million via a Rapid Financing Instrument to deal with Ditwah, while the Fifth Review under the ongoing Extended Fund Facility which was due to take place on 15 December has been postponed to early 2026 along with the expected $ 347 million tranche.

CBSL Governor Dr. Nandalal Weerasinghe told the recent Sri Lanka Economic and Investment Summit earlier this month that he was not concerned about the Government’s fiscal performance post-Ditwah, but warned that long-term structural reforms must not be forgotten in order to generate sustainable growth.