Sri Lanka’s budget came close to balance in January 2026, with the deficit narrowing to just Rs. 3.8 billion as tax revenues surged on the back of car-import liberalisation, EconomyNext reported.
Total revenues rose 35.2 percent year-on-year to Rs. 468 billion, with tax revenues up 35.1 percent to Rs. 434 billion and non-tax revenues up 37 percent to Rs. 34.5 billion. Recurrent spending grew only 1.2 percent to Rs. 429.4 billion, leaving the current account of the budget — revenues minus recurrent expenditure — in surplus, in line with the “golden rule of budgeting.”
Capital expenditure stood at Rs. 43.2 billion, up 4 percent from a year earlier and almost fully financed from current spending. Net interest costs fell on the month.
Daily FT, citing Treasury data, said the primary surplus almost doubled in the four months to end-January 2026 as the overall budget deficit was nearly eliminated.
The revenue surge has been driven largely by the lifting of import controls from February 2025, particularly on motor vehicles. Vehicle imports — which had been suspended since 2020 to conserve foreign exchange — have generated substantial customs duty and excise tax inflows since reopening, though vehicle imports reached USD 2.04 billion year-to-date and have raised separate concerns about external account pressure.
For the full year 2025, Sri Lanka recorded a current account budget surplus for the first time since 1987, EconomyNext noted, with the overall deficit collapsing to Rs. 744 billion from Rs. 2,199 billion in 2024.
EconomyNext flagged that the central bank depreciated the rupee from 296 to 310 against the US dollar over 2025 even as the budget improved, arguing that monetary policy had pushed up the cost of living independently of fiscal stance. The rupee weakened further in April on Hormuz-related fuel-import pressure.
Sources: EconomyNext, Daily FT.
