Sri Lanka Budget 2026 sets path for productivity
The Sri Lankan government has specified a clear fiscal vision before the country’s 2026 Budget presentation on November 7 under the theme: “A Productive Economy and Foster the Engagement of Everyone in Economic Development”.
It will not include new taxes. Instead, it will focus on boosting state revenue by strengthening tax administration, primarily through digitisation and widening the tax net.
This marks a decisive axis from the work done to date and it will be reforming existing tax instruments, mobilising revenue more effectively, reining in borrowing, and spending in ways which drive productivity and include rural and middle‑income households, Finance Ministry sources said.
The removal of Social Security Contribution Levy (SSCL) on financial services or adjustments to Value Added Tax (VAT) thresholds is on the cards.
Linking digital tax systems with other databases, including financial and legal records (such as national ID numbers, bank accounts, and vehicle registrations), is expected to bring more people and businesses into the tax net.
The fiscal framework underpinning the budget reflects the government’s commitment to consolidation, one official said.
The Appropriation Bill has set expenditure for 2026 at approximately Rs. 4.54 trillion with recurrent spending at Rs. 3.03 trillion dominating over capital spending’s Rs. 1.51 trillion, paired with a borrowing ceiling of around Rs. 3.8 trillion.
The budget is projected to have a revenue target exceeding Rs. 5.2 trillion, focusing on improved tax administration and state-owned enterprise performance, rather than new taxes.
While a full revenue target has yet to be officially declared, observers believe the aim is to lift the tax‑to‑GDP ratio beyond present levels, consistent with the requirements of the International Monetary Fund (IMF)‑supported programme.
The IMF has emphasised that Sri Lanka must pursue a primary surplus of 2.3 per cent of GDP and embed “strong revenue measures and appropriate spending allocations” into the 2026 budget.
Treasury Secretary Harshana Suriyapperuma has directed all ministries and provincial councils to submit spending plans under strict fiscal limits, prioritising arrears settlement, the revival of stalled infrastructure, public transport upgrades and digitalisation.
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