Fiscal position strengthens in Jan.-Feb. as Govt. records Rs. 545 b primary surplus

Monday, 11 May 2026 00:30 - - {{hitsCtrl.values.hits}}

Primary surplus expands 66% YoY
Overall Budget swings to Rs. 169.7 b surplus from Rs. 86.6 b deficit a year earlier
Revenue and grants surpass Rs. 1 t, rising 35.5% YoY amid strong tax collections
Expenditure growth contained at 1.6% YoY despite post-Ditwah reconstruction pressures

Sri Lanka’s fiscal position strengthened markedly in the first two months of 2026, with the Government recording a sharp expansion in the primary surplus and reversing the Budget deficit into a surplus position, according to latest data released by the Central Bank of Sri Lanka (CBSL).

The Government recorded a primary surplus of Rs. 545.42 billion during January-February 2026, up 66.1% from Rs. 328.45 billion a year earlier, reflecting continued improvement in revenue performance alongside restrained expenditure growth.

At the same time, the overall Budget balance recorded a surplus of Rs. 169.71 billion, compared to a deficit of Rs. 86.62 billion in the corresponding period of 2025, marking a turnaround of nearly 296% year-on-year (YoY).

Total revenue and grants increased by 35.5% YoY to Rs. 1.03 trillion during the first two months of the year, supported by strong growth in tax revenue. Tax revenue rose 35.8% to Rs. 959.9 billion, while non-tax revenue increased 32.8% to Rs. 71.26 billion. Grants remained negligible.

Meanwhile, total expenditure and lending minus repayments increased by only 1.6% YoY to Rs. 861.45 billion.

Recurrent expenditure rose marginally by 1.5% to Rs. 802.91 billion, while capital expenditure and lending minus repayments increased 4.2% to Rs. 58.53 billion.

The stronger fiscal outturn indicates the continuation of fiscal consolidation supported by robust revenue mobilisation and restrained expenditure growth, despite ongoing post-Cyclone Ditwah reconstruction pressures and emerging global energy-related risks linked to the Middle East conflict.

The improved fiscal performance comes as Sri Lanka moves closer to the next tranche of International Monetary Fund (IMF) financing following the staff-level agreement on the combined Fifth and Sixth Reviews under the Extended Fund Facility (EFF).

External pressures nevertheless remain elevated. Higher global energy prices and reconstruction-related spending are expected to weigh on public finances in 2026, while the IMF and rating agencies have continued to stress the need to sustain revenue mobilisation, maintain cost-reflective pricing mechanisms, and contain fiscal risks to preserve recent gains in fiscal consolidation.