Friday Mar 06, 2026
Friday Mar 06, 2026
Friday, 6 March 2026 00:00 - - {{hitsCtrl.values.hits}}
Sri Lanka’s fiscal position strengthened markedly in 2025, with the Government recording a primary surplus of Rs. 1,776.3 billion, more than 2.7 times the Rs. 649.6 billion surplus reported in 2024, as stronger revenue collection and restrained expenditure significantly reduced the Budget deficit, according to an analysis by JB Securities based on Finance Ministry and Central Bank of Sri Lanka (CBSL) data.
The overall Budget deficit narrowed sharply to Rs. 724.4 billion in 2025, a 64.5% year-on-year (YoY) contraction from Rs. 2,039.9 billion in 2024, while the primary surplus exceeded the Budget estimate of Rs. 757.4 billion by 134.5%, underscoring stronger-than-expected fiscal consolidation driven by higher tax revenue and tighter control of recurrent spending.
JB Securities noted that the 2025 deficit amounted to roughly 33% of the Rs. 2,192.6 billion shortfall projected in the Budget, indicating a significantly smaller fiscal gap than initially anticipated.
Revenue and grants amounted to Rs. 5,540.7 billion in 2025, exceeding the Budget estimate of Rs. 5,042.4 billion, and rising 35.4% YoY from Rs. 4,090.8 billion in 2024.
Tax revenue amounted to Rs. 5,049.5 billion, up 36.3% YoY from Rs. 3,704.6 billion in 2024, and 110% of the 2025 Budget estimate of Rs. 4,590 billion.
Recurrent expenditure amounted to Rs. 5,263.2 billion in 2025, down 1.6% YoY from Rs. 5,339.9 billion in 2024, and 88.9% of the Rs. 5,920 billion estimated in the Budget 2025. Interest payments were Rs. 2,950 billion.
Capital expenditure and net lending rose 26.7% YoY from Rs. 790.8 billion in 2024 to Rs. 1,001.9 billion in 2025, equivalent to 76.2% of the Rs. 1,315 billion estimated in the Budget 2025.
The JB Securities analysis noted that the Budget deficit amounted to 6.7% of GDP in 2025, down from 9.9% in 2024, and 8.3% and 10.2% in 2023 and 2022, respectively.
It said a revenue surge and controlled expenses helped the Government record its highest primary balance in 2025, while an expenditure spike was noted in December. JB Securities said the increase in expenditure was driven by higher capital spending and primary recurrent outlays.
Capital expenditure was largely driven by spending on buildings and structures, equity contributions, infrastructure development, development assistance, and transfers to provincial councils. Primary recurrent expenditure was mainly driven by salaries, wages and allowances, medical supplies, welfare and development subsidies, provincial council grants, and retirement benefits.
Tax revenue for December 2025 amounted to Rs. 438.2 billion, up 31.1% YoY, while non-tax revenue rose 110% YoY to Rs. 96.2 billion. The main factors that contributed to the jump in non-tax revenue were profits from Government-owned assets, interest income from the large cash buffer, and social security contributions, JB Securities said.
Recurrent primary expenditure declined by 25.3% YoY. On a cumulative basis, it remained 4.2% higher compared to the corresponding period of the previous year; however, the pace of increase moderated relative to the preceding months. Meanwhile, total recurrent expenditure contracted sharply by 41.6% YoY, marking the largest monthly decline recorded during the year. On a cumulative basis, recurrent expenditure fell by 1.4% YoY, registering the first negative growth observed for the year.
In contrast, capital expenditure and net lending rose 92.7% YoY to Rs. 356.3 billion, indicating an acceleration in development-related spending towards the end of the year.
Interest payments declined 57.1% YoY to Rs. 233.3 billion.
As a result, the Government recorded a primary deficit of Rs. 165.5 billion in December 2025. The overall deficit for the month stood at Rs. 398.8 billion, narrowing 51.5% YoY.
