Monday Apr 27, 2026
Monday Apr 27, 2026
Monday, 27 April 2026 00:22 - - {{hitsCtrl.values.hits}}
Sri Lanka’s fiscal position strengthened markedly in January 2026, with a sharp expansion in the primary surplus and a near-elimination of the overall Budget deficit, according to data released by the Central Bank of Sri Lanka (CBSL) last Friday.
The Government recorded a primary surplus of Rs. 222.82 billion for the month, up 86.7% from Rs. 119.33 billion a year earlier, reflecting a continued improvement in revenue performance alongside restrained expenditure growth.
At the same time, the overall Budget deficit narrowed significantly to Rs. 3.81 billion from Rs. 119.4 billion, marking a contraction of 96.8% year-on-year (YoY) and indicating a near-balanced fiscal position at the start of the year.
Total revenue and grants rose 35.3% to Rs. 468.75 billion, driven by a 35.1% increase in tax revenue to Rs. 434.23 billion, while non-tax revenue grew 37.5% to Rs. 34.52 billion.
Grants remained negligible.
On the expenditure side, total spending, including lending minus repayments, increased marginally by 1.4% to Rs. 472.56 billion. Recurrent expenditure rose 1.2% to Rs. 429.41 billion, while capital expenditure and net lending increased 4.1% to Rs. 43.15 billion.
The strong expansion in the primary surplus, alongside minimal deficit levels despite allocating an additional post-Ditwah spending bill of Rs. 500 billion, suggests the continuation of fiscal consolidation, supported by robust revenue mobilisation and tight control over expenditure, in line with the Government’s ongoing fiscal consolidation program.
This has enabled it to announce a Rs. 100 billion short-term relief package to help the economy contain the global energy supply shock caused by the ongoing Mideast war.
The stronger fiscal outturn at the start of 2026 comes as Sri Lanka edges closer to the next tranche of International Monetary Fund (IMF) financing, following a staff-level agreement on the combined Fifth and Sixth Reviews under the Extended Fund Facility (EFF). Disbursement of about $ 700 million remains conditional on sustaining reforms, notably the restoration of cost-recovery pricing in fuel and electricity and continued fiscal discipline.
External pressures persist. Higher energy costs and reconstruction spending after Ditwah are set to weigh on public finances. The IMF has stressed the need to protect recent fiscal gains through stronger revenue mobilisation and tight expenditure control. Maintaining cost-reflective pricing will be central to limiting quasi-fiscal losses and preserving the primary surplus, while any support measures are expected to be targeted and time-bound.
Last week, Fitch Ratings said the recovery remains fragile, with the energy shock likely to widen the fiscal deficit in 2026 even as growth slows. It expects the primary surplus to be maintained, but notes that higher spending pressures could test consolidation, reinforcing the case for keeping pricing reforms in place and containing fiscal risks (https://www.ft.lk/top-story/Sri-Lanka-to-see-slow-growth-widening-fiscal-deficit-Fitch/26-790915).
