Tuesday Jun 16, 2026
Tuesday Jun 16, 2026
Tuesday, 16 June 2026 04:08 - - {{hitsCtrl.values.hits}}
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| President and Finance Minister Anura Kumara Dissanayake |
Sri Lanka’s fiscal position strengthened sharply in the first four months of 2026, with the Government posting a Budget surplus of Rs. 105 billion compared to a deficit of Rs. 261.6 billion in the corresponding period of last year, driven by a surge in revenue collection led by taxes linked to motor vehicle imports.
According to the latest Fiscal Review Report issued by the Finance Ministry’s Department of Fiscal Policy, total revenue and grants increased by 34.6% to Rs. 1.958 trillion during January-April 2026 from Rs. 1.455 trillion a year earlier, comfortably outpacing the 8% increase in expenditure to Rs. 1.853 trillion.
The report attributed the increase in revenue mainly to substantial collections from motor vehicles following the resumption of vehicle imports.
The stronger revenue performance also translated into a substantially higher primary surplus of Rs. 862.7 billion, up from Rs. 532.7 billion recorded in the corresponding period of 2025, underscoring continued progress in fiscal consolidation efforts.
A key feature of the fiscal outturn was the growing contribution from import-related taxes. Sri Lanka Customs emerged as the largest revenue collecting agency during the first four months of the year, contributing Rs. 876 billion or 49% of total tax revenue, surpassing the Inland Revenue Department (IRD), which collected Rs. 780 billion or 44% of total tax revenue. The Excise Department contributed Rs. 97 billion.
The report noted that Customs achieved 39.7% of its annual revenue target during the period, mainly due to increased revenue collection from motor vehicles. Revenue from excise duty on motor vehicles surged to Rs. 187.1 billion during January-April 2026 from Rs. 53.2 billion in the corresponding period of last year, an increase of Rs. 133.9 billion. Revenue from Value Added Tax (VAT) on imports also increased by 35% to Rs. 299.9 billion from Rs. 222.6 billion a year earlier. Overall excise duty collections through Customs rose by Rs. 128.3 billion to Rs. 294.4 billion.
Tax revenue increased by 31.7% to Rs. 1.777 trillion from Rs. 1.349 trillion a year earlier and accounted for around 91% of total Government revenue, while non-tax revenue recorded even stronger growth of 73.3% to Rs. 180.6 billion from Rs. 104.2 billion, accounting for around 9% of total revenue. Grants amounted to Rs. 0.8 billion.
Taxes on goods and services remained the largest source of Government revenue, generating Rs. 1.214 trillion and accounting for 62% of total revenue and around 68% of total tax revenue. Within this category, VAT contributed Rs. 677.4 billion, excise taxes Rs. 391.8 billion, and the Social Security Contribution Levy (SSCL) Rs. 113.3 billion. Income tax revenue increased by 13.2% to Rs. 310.2 billion, while taxes on external trade rose by 30.4% to Rs. 253 billion.
The IRD’s collections were supported by stronger domestic economic activity. Revenue from VAT on domestic activities increased by 26%, while SSCL revenue from domestic activities rose by 15% compared to the corresponding period of last year. Corporate income tax accounted for 50% of total income tax collections, followed by individual income tax at 29% and withholding tax at 21%.
The Finance Ministry noted that the economy maintained its recovery momentum, with GDP at constant prices increasing to Rs. 13.13 trillion in 2025 from Rs. 12.51 trillion in 2024. The economy expanded by 5% in both 2024 and 2025, supporting revenue mobilisation efforts.
On the expenditure side, recurrent expenditure increased by 5.1% to Rs. 1.685 trillion from Rs. 1.603 trillion a year earlier. Interest payments remained the largest expenditure component, accounting for approximately half of recurrent expenditure. However, total interest payments declined by 4.6% to Rs. 757.7 billion from Rs. 794.3 billion in the corresponding period of 2025.
Meanwhile, capital expenditure and net lending increased by 49.3% to Rs. 168.6 billion from Rs. 112.9 billion. Despite the increase, capital spending remained below planned levels, with only 9.8% of the annual allocation utilised by the end of April, compared to 28.9% utilisation of recurrent expenditure allocations.
The January-April outturn shows the Government has already achieved 36.9% of its full-year revenue target of Rs. 5.3 trillion and 36.2% of its tax revenue target of Rs. 4.91 trillion. Non-tax revenue has reached 50.2% of the annual estimate, while total expenditure stood at 24.5% of the annual allocation.
The strong fiscal performance during the first four months of 2026 was supported by higher collections from vehicle-related taxes, stronger domestic tax revenue, and lower interest costs, enabling the Government to maintain a sizeable primary surplus while recording an overall Budget surplus.
