Saturday Nov 08, 2025
Saturday Nov 08, 2025
Saturday, 8 November 2025 02:15 - - {{hitsCtrl.values.hits}}
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| President and Finance Minister Anura Kumara Disanayake pauses to smile at Opposition during his 4-hour presentation of the 2026 Budget in Parliament yesterday (See Pages 5 to 11 for full Budget Speech) |
President and Finance Minister Anura Kumara Disanayake yesterday in Parliament presented a Budget for 2026 and beyond delivering broadly beneficial measures to the people, public and private sectors, all of whom are key stakeholders.
In tandem with the President’s 2026 Budget presentation in Parliament which lasted four hours, the Treasury also released a public-friendly version titled “Citizens Budget.” For the public higher expenditure and new proposals aimed at better healthcare and transportation are key initiatives. Differently abled people, migrant workers, estate workers are also receiving support apart from extra care for animals.
The 2026 Budget has expenditure proposals targeting relief for people in multiple ways, support for public servants and encouraging private sector including the Small and Medium Enterprises (SMEs).
In fact, there were over 60 expenditure proposals as against a dozen revenue measures.
Estimated expenditure for 2026 is Rs. 7 trillion, above revised estimate of Rs. 6.5 trillion in 2025. Apart from the traditional high expenditure items such as salaries and wages, interests and subsidies and transfers, the big ticket expenditure proposals were increasing the total allocation for “Praja Shakthi Program” to Rs. 25 billion, for district and divisional-level implementation which will cost Rs. 20.75 billion, the construction of Rambukkana–Galagedara section of the Central Expressway Rs. 16 billion and provision of vehicles/machineries required for Government institutions and provincial councils Rs. 12.5 billion. Public investment has been increased to Rs. 1.38 billion (4% of GDP) as against Rs. 1 billion in 2025. For overall road development Rs. 342 billion has been allocated with a major focus on recommencing suspended projects.
The higher expenditure is amidst forecasts of modest growth in Government revenue Rs. 5.3 trillion in 2026 as against Rs. 5.1 trillion in 2025. The net result is a higher Budget deficit of Rs. 1.75 trillion or 5.1% as against Rs. 1.44 trillion or 4.5% in 2025. However, the 2026 figure is still lower than the 6.8% deficit in 2024.
During his speech, the President in fact, took credit for lower Budget deficit in 2025 as against previous regimes’ track record of miserably failing on their targets.
“A country’s Budget is not just an accounting exercise that measures what we earn, what we spend and what we borrow as a nation. It is not just a document. It is a reflection of the difficult and transparent trade-offs that are necessary to balance fiscal sustainability while achieving our development goals. In short, we believe that the Budget is the one that allocates the financial resources needed to fulfil the rights of all citizens,” the President said in Parliament.
He also said the aim of the 2026 Budget is to create a renaissance by eradicating bribery and corruption, stimulating development, restoring trust, and starting a good life.
The Government has boosted revenue by over Rs. 1 trillion in 2025 to Rs. 5.1 trillion or 15.9% of GDP as against 13.5% in 2024. Forecast for 2026 is lower at 15.4% of GDP reflecting the revenue buoyancy has been optimised for the time being.
However, a key revenue proposal is widening the tax net with Value Added Tax (VAT) and social security contribution levy (SSCL) threshold being reduced to Rs. 36 million from Rs. 60 million at present. The President said this move is to ensure businesses with actual turnover of Rs. 60 million resorting to malpractices by splitting it among two or more companies to evade VAT liability. Another is retail prices of unregistered businesses being on par with those paying VAT, hence there was no relief to consumers.
From 1 April 2026, the 2.5% SSCL will be charged at the time of import or manufacture and sale of vehicles, and exempt from this tax at the time of after-sales. This is expected to be implemented effective from April 2026.
The President said efforts are underway to achieve a 60:40 ratio between direct and indirect taxes as opposed to 25:75.
Another revenue proposal is increasing the Customs Import Duty rates by adding two more tiers (10% and 30%) as opposed to 0%, 15% and 20%. This is to enhance competitiveness of external trade and protect domestic industries. However the President said that para tariffs will be phased out gradually.
The President said the plan is to achieve 7% GDP growth in the medium term from 4-5% at present.
The 2026 Budget unveiled a host of opportunities for investors in a wide range of sectors including exports, digital and IT infrastructure, tourism, port and aviation, blue economy, energy, water supply, agriculture and livestock, and telecom infrastructure.
In terms of explicit concessions there wasn’t much from an immediate context contrary to expectations. However there was scope in terms of the SMEs getting enhanced capital allowance threshold reduced to $ 250,000 from $ 3 million to qualify for enhanced capital allowance. Further, SMEs will receive targeted subsidies.
KPMG Sri Lanka’s Suresh Perera said that the 2026 Budget hadn’t introduced new taxes and the expected revenue increase was by expanding the indirect tax base and strengthening tax administration.
First Capital Research said the Budget 2026 broadly concentrates on creating a digital economy while accelerating capital expenditure through infrastructure development and social welfare spending though the fiscal consolidation is kept in check with a target to achieve a budget deficit of 5.1% supported by continued primary surplus in line with the IMF estimates.
