Budget Economic and Fiscal Position Report 2027

BEFPR 2027 · file page 1

BUDGET ECONOMIC AND FISCAL 
POSITION REPORT 
Issued under Section 49 of the
Public Financial Management Act, 
No. 44 of 2024
Ministry of Finance, Planning and Economic 
Development, Sri Lanka
November 12, 2026
2027

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i     
BUDGET ECONOMIC AND FISCAL 
POSITION REPORT - 2027
Anura Kumara Dissanayake, 
Minister of Finance, Planning and Economic Development, 
Sri Lanka
November 12, 2026
Issued under the Public Financial Management Act, No. 44 of 2024 by the Hon. Minister 
of Finance, Planning and Economic Development.

BEFPR 2027 · file page 4

ii              
Compiled by the Department of Fiscal Policy, printed at the Government Press, No. 118, 
Dr Danister De Silva Mawatha, Colombo 08, and published by the Ministry of Finance, 
Planning and Economic Development, The Secretariat, Colombo 01, Sri Lanka.

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iii     
CONTENTS
Page
Key Economic Indicators
vii
Reporting Requirements under the Public Financial Management Act, No. 44 of 2024 
(PFMA)
viii
Compliance – 2026
x
PART I
01. Medium-Term Fiscal Strategy Statement
1.1 Overview
5
1.2 Macro-Fiscal Performance
8
1.3 Fiscal Strategy in the Medium Term
11
PART II
02. Fiscal Developments, Treasury Operations and Foreign Financing
2.1 Overview
25
2.2 Government Revenue
29
2.3 Government Expenditure
44
2.4 Performance of the Cash Flow of the General Treasury
46
2.5 Management of Government Debt
48
2.6 Foreign Financing
49
03. Economic Perspectives
3.1 Overview
55
3.2 Economic Growth
57
3.3 Monetary Sector Developments
66
3.4 Stock Market
69
3.5 External Sector Developments
70
3.6 World Economic Outlook
74
04. Performance of State-Owned Enterprises
4.1 Overview
81
4.2 Review of the 10 Major State-Owned Business Enterprises (SOBEs)
81
05. Basis Used for the Preparation of 2027 Budget
5.1 Overview
91
5.2 Gross Domestic Product
91
5.3 Consumer Prices
91
5.4 Employment and Unemployment
92
5.5 External Sector
92
5.6 Monetary Aggregates
92
5.7 Revenue
92
5.8 Expenditure
92
5.9 Borrowings
94
5.10 Sensitivities to the Estimates
94

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iv              
Page
TABLES
PART I
TABLE 1.1
Medium-Term Fiscal Framework: 2027 – 2031
15
PART II
TABLE 2.1
Summary of Fiscal Operations
25
TABLE 2.2
Estimated and Actual Revenue and Expenditure – 2026
28
TABLE 2.3
Summary of Performance of Government Revenue - 2026
31
TABLE 2.4
Performance of Income Tax
32
TABLE 2.5
Performance of VAT
32
TABLE 2.6
Performance of Excise Duty
33
TABLE 2.7
Motor Vehicle Imports
34
TABLE 2.8
Coverage of Products and Value of Imports/Exports under Free Trade 
Agreements
35
TABLE 2.9
CESS Revenue from International Trade
35
TABLE 2.10
Variance Analysis of Government Revenue
36
TABLE 2.11
Performance of Government Expenditure
44
TABLE 2.12
Welfare Expenditure
45
TABLE 2.13
Government Treasury Cash Flow Operations
47
TABLE 2.14
Behaviour of Yield Rates on Government Securities and Exchange 
Rates: 2025-2026
48
TABLE 2.15
Domestic Debt Issuance: January-August 2026
49
TABLE 2.16
Disbursements of Foreign Loans: January-August 2026
49
TABLE 3.1
Sectoral Composition of GDP at Constant (2015) Prices
57
TABLE 3.2
Selected Indicators of Service Sector
63
TABLE 3.3
Performance of Tourism Sector
65
TABLE 3.4
Sectoral Distribution of GDP Growth (%)
67
TABLE 3.5
Inflation (Base: 2021=100)
69
TABLE 3.6
Movements in Capital Markets
70
TABLE 3.7
External Trade
73
TABLE 3.8
Key Economic Indicators Selected Countries – 2026 (Projection)
77
TABLE 4.1
Composition of Electricity Generation and Capacity
83
TABLE 4.2
Profit before Tax of 52 State-Owned Enterprises
86
TABLE 4.3
Levy/Dividend Income from SOEs
87
FIGURES
PART I
FIGURE 1.1
Interest Payments
5
FIGURE 1.2
Key Fiscal Aggregates: 2023–2025
10

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v     
Page
PART II
FIGURE 2.1
Composition of Total Revenue: January-August 2026
30
FIGURE 2.2
Tax Revenue by Sources: January-August 2026
31
FIGURE 2.3
Performance of Excise Duty: January-August 2026
33
FIGURE 2.4
Disbursements by Development Partner: January-August 2026
50
FIGURE 2.5
Disbursements by Purpose: January-August 2026
50
FIGURE 3.1
From Crisis to Recovery - Key Indicators, 2022 and 2025
55
FIGURE 3.2
GDP Growth
56
FIGURE 3.3
Composition of GDP – First Half of 2026
56
FIGURE 3.4
Composition of Agriculture Sector – First Half of 2026
59
FIGURE 3.5
Composition of Industry Sector – First Half of 2026
61
FIGURE 3.6
Composition of Manufacturing Sector – First Half of 2026
62
FIGURE 3.7
Composition of Services Sector – First Half of 2026
64
FIGURE 3.8
Labour Force Participation Rate and Unemployment Rate
66
FIGURE 3.9
Yield Rates, Monetary Aggregates Money Supply and Private Sector 
Credit Growth
67
FIGURE 3.10
Movements in Headline, Core and Food Inflation (Base: 2021=100)
68
FIGURE 3.11
Trade Balance and Movements in Exchange Rates
70
FIGURE 3.12
Composition of Exports
72
FIGURE 3.13
Composition of Imports
73
BOXES
BOX 2.1
Major Fiscal Measures: January–September 2026
39
ANNEXURES
ANNEX I
The Outstanding List of Treasury Guarantees & Letters of Comfort 
Issued by the General Treasury as at 31.08.2026
97
ANNEX II
Macroeconomic Indicators
99
ANNEX III
Assumptions for Revenue Estimates – 2027
107

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vii     
Key Economic Indicators
Indicator
Period
Unit
Value
2025
2026
REAL SECTOR
Economic Growth
First Half
%
4.8
4.7
   Agriculture
First Half
%
0.6
-0.6
   Industry
First Half
%
7.9
7.2
   Services
First Half
%
3.3
3.1
Inflation (Year on Year) - CCPI (2021=100)
End Oct
%
2.1
8.3
Inflation (Average) - CCPI (2021=100)
End Oct
%
-1.2
5.0
Unemployment Rate
2nd Quarter
%
             3.8 
4.0
Labour Force Participation Rate
2nd Quarter
%            49.3 
50.0
FISCAL SECTOR
Budget Balance
Jan-Aug
Rs. Bn.
-411
             35 
Total Revenue
Jan-Aug
Rs. Bn.          3,295 
        3,998 
    Tax Revenue
Jan-Aug
Rs. Bn.
         3,068 
        3,684 
    Non Tax Revenue
Jan-Aug
Rs. Bn.             226             315 
Total Expenditure
Jan-Aug
Rs. Bn.
          3,712 
        3,967 
   Recurrent Expenditure
Jan-Aug
Rs. Bn.          3,381          3,531 
   Public Investment
Jan-Aug
Rs. Bn.             339 
           446 
Government Debt
End Jun
Rs. Bn.
29,635
31,278
EXTERNAL SECTOR
Exports
Jan-Sep
USD Mn.
10,215
10,754
    Agriculture Exports
Jan-Sep
USD Mn.
2,324
2,317
    Industrial Exports
Jan-Sep
USD Mn.
7,854
8,398
             Textile and Garments
Jan-Sep
USD Mn.
4,021
3,797
             Other
Jan-Sep
USD Mn.
3,833
4,601
Imports
Jan-Sep
USD Mn.
15,390
18,666
   Consumer Goods
Jan-Sep
USD Mn.
3,816
4,485
   Intermediate Goods & other
Jan-Sep
USD Mn.
8,617
10,456
      o/w Petroleum Products
Jan-Sep
USD Mn.
2,961
4,487
   Investment Goods and other
Jan-Sep
USD Mn.
2,956
3,725
Trade Balance
Jan-Sep
USD Mn.
-5,174
-7,912
Tourist Arrivals
Jan-Sep
No.
1,725,494
  1,693,679 
Earnings From Tourism
Jan-Sep
USD Mn.
2,473
        2,245 
Workers' Remittances
Jan-Sep
USD Mn.
5,812
         6,865 
Portfolio Investments (Net)
End Jun
USD Mn.
526
           450 
Overall Balance of Payments (BOP)
Jan-Jun
USD Mn.
522
            136 
Gross Official Reserves
End Aug
USD Mn.
6,178
        6,929 
Exchange Rate (End Month)
End Oct
Rs. per USD
304.42
332.61
Exchange Rate (Monthly Average)
Oct
Rs. per USD
303.13
331.42
MONETARY SECTOR
Standing Deposit Facility Rate (SDFR) 
End Sep
%
7.25
8.25
Standing Lending Facility Rate (SLFR)
End Sep
%
8.25
9.25
Statutory Reserve Requirement (SRR) 
End Sep
%
2.00
2.00
Commercial Bank Weekly Average Weighted 
Prime Lending Rate (AWPR)
End Sep
%
8.10
11.04
Weighted Average Yield Rate of Treasury Bills 
(91 Days)
End Sep
%
7.57
9.25
Weighted Average Yield Rate of Treasury Bills 
(364 Days)
End Sep
%
8.02
9.95
Growth in Money Supply (M2b)
Aug 2025/Aug 
2026
%
10.7
11.5
Growth in Credit to the Private Sector
Aug 2025/Aug 
2026
%
20.5
24.5

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viii              
Reporting Requirements
Under the Public Financial Management Act, No. 44 of 2024 (PFMA)
Section
Requirement
Purpose
Mode of Compliance
Section 11
Submission of the 
Fiscal 
Strategy 
Statement*
To provide the Parliament and 
public with a formal statement 
of 
the 
Government’s 
fiscal 
strategy, 
provide 
strategic 
guidance 
for 
the 
upcoming 
annual budget, establish a basis 
upon which fiscal performance 
shall be evaluated objectively 
strengthen 
parliamentary 
oversight of performance against 
Government’s fiscal strategy and 
enhance fiscal transparency and 
accountability as per Section 
11(4) of the PFMA.
To be announced by the Minister 
of Finance at Parliament on or 
before thirtieth day of June of each 
year upon obtaining the approval 
of the Cabinet of Ministers. The 
Fiscal Strategy Statement shall be 
published on the official website 
of the Ministry of the Minister of 
Finance.
Section 49
Submission of the 
Budget Economic 
and Fiscal Position 
Report*
To provide information on all 
Government decisions and all 
other circumstances that may 
have material effect on the 
fiscal and economic position of 
the Government including the 
content specified under Section 
49(2) of the PFMA.
To be tabled in Parliament by the 
Minister of Finance on the day 
fixed for the second reading of the 
Appropriation Bill in Parliament, 
in each year. The report shall be 
published on the official website of 
the Ministry of the Minister of Finance 
upon submission to Parliament.
Section 50
Submission of the 
Mid-Year 
Fiscal 
Position Report*
To provide a basis for the public 
to evaluate the Government’s 
Mid-year fiscal performance as 
against its fiscal strategy as set 
out in its statement including the 
content specified under Section 
50(2) of the PFMA.
To be published in the website of the 
Ministry of the Minister of Finance, 
by the last day of the month of 
October of the relevant year or the 
lapse of ten months from the date of 
the passing of the Appropriation Act 
of the relevant year, whichever is 
later; and to be tabled in Parliament 
within two weeks of the date of such 
release or if Parliament is not sitting 
on the date of the release of the 
report, cause a copy of such report 
to be tabled within two weeks of 
the next sitting of Parliament.

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ix     
Section
Requirement
Purpose
Mode of Compliance
Section 51
Submission 
of 
the Final Budget 
Position 
Report 
(Annual Report)*
To provide a basis for the public 
to evaluate the Government’s 
annual fiscal performance as 
against its fiscal strategy as 
set out in its statement for the 
relevant financial year including 
the content specified under 
Section 51(2) of the PFMA.
To be published on the website 
of the Ministry of the Minister of 
Finance, not later than six months 
from the end of the financial 
year; and be tabled in Parliament 
within two weeks of the date of 
such release if Parliament is sitting 
on the date of the release of the 
final budget position report; or if 
Parliament is not sitting on the date 
of the release of the report, cause a 
copy of such report to be tabled in 
Parliament within two weeks of its 
next sitting.
Section 52
Submission 
of 
the 
Pre-election 
Budgetary Position 
Report**
To provide updated information 
to the public of the fiscal position 
of the country including the 
content specified under Section 
52(2) of the PFMA.
To be released to the public within 
three weeks of the publication of 
proclamation or Order requiring 
the holding of a General Election to 
elect the members of Parliament; 
and placed before Parliament within 
two weeks of the first sitting of the 
new Parliament and be published in 
the official website of the Ministry of 
the Minister of Finance. The Minister 
of Finance shall, for the purpose 
of enabling the Secretary to the 
Treasury to prepare the report, 
disclose to the Secretary, details 
of all Government decisions and 
other circumstances, within his 
knowledge, which have, or could 
have material, fiscal or economic 
implications.
Section 53
Submission 
of 
Reports on financial 
performance 
of 
the Ministry of the 
Minister of Finance*
To provide a statement on 
financial performance including 
revenue and expenditure, of the 
Government.
To be submitted to the Cabinet 
of Ministers and simultaneously 
published on the official website 
of the Ministry of the Minister of 
Finance, not later than forty-five 
days after the end of each quarter.
* By the Minister of Finance
** By the Secretary to the Treasury

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x              
Compliance – 2026
•	
Final Budget Position Report – 2025
	
As per the Section 51(1) of the Public Financial Management Act, No. 44 of 2024 (PFMA), the Final 
Budget Position Report was released to the public by the Minister of Finance as part of the Annual 
Report of the Ministry of the Minister of Finance on June 30, 2026.
•	
Fiscal Strategy Statement – 2027
	
As per the Section 11(3) of the Public Financial Management Act, No. 44 of 2024 (PFMA), the Fiscal 
Strategy Statement (FSS) was announced by the Minister of Finance at Parliament on June 26, 2026. 
The FSS was published on the official website of the Ministry of the Minister of Finance on June 26, 
2026 with the announcement made by the Minister of Finance.
•	
Mid-Year Fiscal Position Report – 2026
	
Status of the fiscal and economic position of the first six months of 2026 was released to the public 
on October 31, 2026 and was tabled in Parliament on November 12, 2026.
•	
The Budget Economic and Fiscal Position Report – 2027
	
This report contains the estimates related to the gross domestic product, consumer prices, 
employment and unemployment, balance of payment, revenue and expenditure and Government 
borrowing, the basis which has been used in the preparation of the aforementioned estimates, a 
statement relating to the sensitivity of the aforementioned estimates and the changes which may 
occur in connection with the economic or other basis used in preparation of such estimates, a 
statement, quantified as far as practicable, the risks that may have a material effect on the fiscal 
position among other information which was tabled in Parliament on November 12, 2026.

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xi     
Budget Economic and Fiscal Position Report – 2027
This Report contains two parts: Part I presents the Medium-Term Fiscal Strategy Statement 
specified in Section (20)(2)(c) of the Public Financial Management Act, No. 44 of 2024 and; 
Part II presents Information on all Government decisions and all other circumstances that 
may have material effect on the fiscal and economic position of the Government including 
the content specified in Section 49(2) of the Public Financial Management Act, No. 44 of 
2024.

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01
Medium-Term Fiscal 
Strategy Statement

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Budget Economic and Fiscal Position Report - 2027	
5   
1.1 Overview
Sri Lanka entered 2026 on a stronger 
macroeconomic 
and 
fiscal 
footing, 
reflecting 
continued 
policy 
reforms 
to 
restore 
macroeconomic 
stability, 
strengthen public finances, and rebuild 
confidence in the economy. Despite 
successive domestic and external shocks, 
including the impact of Cyclone Ditwah 
and heightened geopolitical tensions in the 
Middle East, the economy has stabilized. 
Real GDP expanded by 4.2 percent year-
on-year in the second quarter of 2026, 
marking twelve consecutive quarters of 
positive growth. In addition, the World 
Bank reclassified Sri Lanka as an upper-
middle-income country with effect from 
July 
1, 
2026. 
Recent 
high-frequency 
indicators continued to signal an expansion 
in economic activity. Headline inflation, as 
measured by the Colombo Consumer Price 
Index (CCPI), was 8.3 percent year-on-year 
in October 2026. 
Gross official reserves, including the swap 
facility with the People’s Bank of China, 
increased to about USD 6.9 billion by end-
September 2026, equivalent to more than 
3 months of imports, supported by net 
foreign exchange purchases by the Central 
Bank of USD 1.5 billion. 
The current account recorded a cumulative 
deficit of USD 420.4 million in the first nine 
months of 2026, compared with a surplus 
of USD 1,853.2 million in the same period of 
2025, reflecting heightened external sector 
pressures amid the escalation of the conflict 
in the Middle East. The merchandise trade 
deficit widened to USD 7.9 billion, from USD 
5.2 billion. The cumulative fuel import bill 
increased by 51.5 percent year-on-year to 
about USD 4.5 billion, exceeding the total 
annual fuel import bill for 2025 within first 
nine months of 2026. Earnings from tourism 
declined by 9.2 percent year-on-year to 
USD 2.2 billion, reflecting disruptions 
associated with the Middle East conflict 
and the downward revision of average 
tourist expenditure. Workers’ remittances 
provided an important offsetting inflow, 
rising by 18.1 percent year-on-year to USD 
6.9 billion in the first nine months of 2026.
Fiscal performance during the first eight 
months of 2026 remained strong, reflecting 
sustained 
revenue 
mobilisation 
and 
expenditure discipline. Recent reforms in 
tax policy and revenue administration have 
lifted revenue well above the pre-crisis 
(2015–2019) average of 12.6 percent of 
GDP. Total government revenue, including 
grants, is expected to reach 16.6 percent 
of GDP in 2026. The primary surplus is 
projected to rise to 3.6 percent of GDP, up 
from the earlier projection of 2.1 percent. 
The closing cash balance of Treasury cash 
flow operations stood at Rs. 1,131 billion at 
end-September 2026, compared with Rs. 
1,220 billion at end-September 2025. In 
addition, interest payments as a share of 
total revenue declined markedly, from 79.1 
percent in 2022 to 45.9 percent in 2025, 
and stood at around 40.2 percent during 
the first eight months of 2026. 
FIGURE 1.1 | Interest Payments
As a % of Total Revenue
Source: Department of Fiscal Policy
36.9 38.9 39.0 36.5 36.2 36.2 
40.2 
44.4 
47.7 
71.7 72.0 
79.1 80.5 
66.7 
45.9 
45.9 44.0 42.3 42.9 42.2 40.6 39.5
30
40
50
60
70
80
90
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Rev.
Est.
2027
Est.
2028
Proj.
2029
Proj.
2030
Proj.
2031
Proj.
Despite 
heightened 
operational 
and 
financial pressures arising from the Middle 
East conflict since the second quarter of 
2026, the financial performance of major 
State-Owned Enterprises (SOEs) remained 
broadly resilient, supported by ongoing 
governance, and operational reforms. 
The 51 major SOEs reported an aggregate 
before tax profit of Rs. 366.9 billion during 
the first eight months of 2026, compared 
with Rs. 307.5 billion in the same period of 
2025. However, higher energy and input 
costs, disruptions to trade and transport, 
and increased uncertainty have placed 
renewed pressure on the financial position 
of several SOEs.
The 
improvement 
in 
macroeconomic 
and fiscal conditions has also been 
reflected in recent sovereign credit rating

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6                                                                      Budget Economic and Fiscal Position Report - 2027
developments. On September 22, 2026, 
Fitch Ratings upgraded Long-Term Issuer 
Default Ratings of Sri Lanka from ‘CCC+’ to 
‘B-’, with a Stable Outlook, citing progress 
in 
macroeconomic 
stabilisation 
and 
structural reforms, improvements in fiscal 
and external balances, and the rebuilding 
of foreign exchange reserves. 
The Report on Investor Relation and Debt 
Transparency 'The Transparency Dividend' 
released by Institute of International 
Finance ranked Sri Lanka fourth for year-
on-year improvement in investor relations 
and fifth among the strongest improvers 
in debt transparency across 57 emerging 
market and developing economies. These 
gains reflect stronger debt disclosure and 
investor engagement.
However, 
the 
progress 
achieved 
in 
strengthening macroeconomic stability, 
fiscal resilience and the external position 
continues to be tested by the aftermath 
of Cyclone Ditwah. The Post-Disaster 
Needs 
Assessment 
(PDNA) 
estimates 
total recovery and reconstruction needs 
at approximately Rs. 1,022.5 billion over 
a three year period. In response to the 
immediate recovery and reconstruction 
requirements, 
Parliament 
approved 
a 
supplementary budget of Rs. 500 billion for 
2026 to support the restoration of damaged 
infrastructure and housing, the recovery of 
livelihoods and other urgent post-disaster 
needs. 
Substantial 
rehabilitation 
and 
reconstruction expenditure will continue 
into 
2027, 
presenting 
an 
important 
challenge to the fiscal framework and 
requiring the Government to balance 
essential 
recovery 
needs 
with 
the 
preservation 
of 
fiscal 
discipline 
and 
medium-term fiscal sustainability. Current 
assessments 
indicate 
an 
additional 
expenditure requirement of approximately 
Rs. 260 billion in 2027. 
The continuation of reconstruction into 
2027 will require a temporary adjustment 
to the previously envisaged expenditure 
path. While the Fiscal Strategy Statement 
2027 envisaged primary expenditure of 
approximately 12.9 percent of GDP, within 
the statutory ceiling of 13.0 percent of GDP, 
the additional reconstruction requirement 
cannot be fully accommodated through 
expenditure 
reprioritisation 
without 
adversely 
affecting 
other 
priority 
investments. 
Accordingly, 
under 
the 
revised Medium Term Fiscal Framework 
(MTFF), primary expenditure is expected 
to temporarily increase to around 13.6 
percent of GDP in 2027, while capital 
expenditure and net lending are projected 
to increase from 4.4 percent to around 5.1 
percent of GDP. As such, the temporary 
deviation from the primary expenditure 
ceiling will be addressed in accordance 
with the provisions of the Public Financial 
Management Act (PFMA) applicable to 
exceptional circumstances, together with 
a clear path for restoring compliance with 
the statutory ceiling.
The 
reconstruction 
programme 
will 
place particular emphasis on the quality, 
resilience 
and 
efficiency 
of 
public 
investment. Expenditure will be prioritised 
on the basis of urgency, project readiness, 
implementation capacity and economic 
and social importance, while Build Back 
Better principles will be incorporated, 
where 
technically 
and 
economically 
appropriate, to strengthen the resilience 
of restored public assets and communities 
against future disasters. Strong expenditure 
controls, transparent procurement and 
regular 
monitoring 
of 
commitments, 
cash releases and actual expenditure 
will support effective implementation. 
Cyclone Ditwah-related expenditure will 
be separately identified and reported to 
ensure that it remains temporary, targeted 
and additional, while preventing temporary 
disaster-related recurrent expenditure from 
creating permanent fiscal commitments.
Alongside 
the 
domestic 
impact 
of 
Cyclone Ditwah, developments in the 
Middle East remain an important source 
of macroeconomic and fiscal risk through 
their effects on energy prices, import 
costs, tourism, the external sector and 
vulnerable households. In response to 
the sharp increase in energy costs and 
related pressures on household incomes 
and productive sectors, the Government

BEFPR 2027 · file page 21 printed page 7

Budget Economic and Fiscal Position Report - 2027	
7   
introduced a temporary relief package, 
initially budgeted at Rs. 100 billion. The 
package concluded in  September 2026, 
with total expenditure of Rs. 105.9 billion. 
Following the further escalation of the 
conflict, a new package of Rs. 41 billion was 
introduced in  October 2026 to provide 
additional fuel subsidies during October-
December 
2026. 
These 
interventions 
were designed to cushion the immediate 
impact of the external shock while limiting 
broader second-round effects on living 
costs and economic activity. At the same 
time, the Government will preserve cost-
reflective energy pricing over the medium 
term, thereby avoiding prolonged broad-
based subsidies that could generate high 
fiscal costs, weaken the financial position 
of SOEs and crowd out resources required 
for reconstruction and productive public 
investment.
The 
climate 
and 
weather-related 
risks are also expected to remain an 
important source of uncertainty for the 
macroeconomic and fiscal outlook. The 
ongoing El Niño event, which is expected 
to remain strong into early 2027, could 
contribute to abnormal rainfall patterns, 
disruptions 
to 
agricultural 
production 
and water availability, and renewed food-
price pressures. Such developments could 
have wider fiscal implications through 
their effects on economic activity and 
government revenue, as well as through 
potential 
additional 
requirements 
for 
disaster response, social protection and 
other targeted interventions. These risks 
reinforce the importance of maintaining 
adequate fiscal buffers and contingency 
arrangements, 
strengthening 
disaster-
risk monitoring and preparedness, and 
integrating climate resilience into public 
investment 
and 
medium-term 
fiscal 
planning.
Despite 
exceptional 
expenditure 
requirements, 
the 
Government 
will 
continue to pursue revenue-based fiscal 
consolidation. Under the revised recovery 
path, Government revenue is projected 
at approximately 15.8 percent of GDP 
in 2027 and around 16.0 percent of GDP 
thereafter. Continued revenue mobilisation 
will 
be 
essential 
to 
accommodate 
temporary 
reconstruction 
expenditure 
while preserving the primary surplus and 
maintaining the declining debt trajectory. 
The 
Medium-Term 
Revenue 
Strategy 
(MTRS) will be introduced to  strengthen 
the durability, efficiency, and fairness of 
the revenue system, rather than relying on 
temporary or distortionary taxes to finance 
one-off expenditure. Priority reforms will 
focus primarily on revenue administration 
and are expected to generate additional 
revenue of around 2.0 percent of GDP over 
the medium term. Key measures include 
further broadening of the tax base and tax 
net, strengthening risk-based audits and 
compliance 
management, 
accelerating 
the digitalisation of tax administration, 
enhancing 
Revenue 
Administration 
Management Information System (RAMIS), 
implementing 
e-invoicing, 
and 
taking 
further measures to reduce tax evasion and 
revenue leakages. 
The revised fiscal framework is expected 
to preserve a strong primary balance 
despite the exceptional reconstruction 
programme. Under the current recovery 
path, the primary surplus is projected at 
approximately 2.3 percent of GDP in 2027. 
As exceptional Cyclone Ditwah-related 
expenditure declines, primary expenditure 
is projected to return to approximately 
12.9 percent of GDP in 2028, restoring 
compliance with the statutory primary 
expenditure ceiling, while the primary 
surplus is expected to strengthen to 
approximately 3.0 percent of GDP over 
the medium term. From 2028 onwards, 
primary expenditure is expected to remain 
within the statutory ceiling, while revenue 
mobilisation, primary surplus objectives 
and continued debt reduction will guide 
the medium-term fiscal framework. 
Social protection will continue to form an 
integral part of the medium-term fiscal 
strategy. The experience of the economic 
crisis, Cyclone Ditwah and the Middle 
East conflict demonstrates that fiscal 
sustainability and effective social protection 
are mutually reinforcing. Strong fiscal 
buffers provide the Government with the 
capacity to support vulnerable households 
when exceptional shocks occur, while 
well-targeted social protection enables

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8                                                                      Budget Economic and Fiscal Position Report - 2027
assistance to be provided without resorting 
to costly and poorly targeted universal 
subsidies. Continued improvements in 
beneficiary identification, targeting and 
delivery systems will therefore remain 
important.
The Government will also continue to 
advance reforms aimed at strengthening the 
efficiency, transparency and accountability 
of the public sector while improving the 
management of fiscal risks. Key priorities 
include strengthening the governance 
and 
financial 
performance 
of 
SOEs, 
improving the management and utilisation 
of public assets, and establishing a robust 
framework for Public-Private Partnerships 
(PPPs) to mobilise private-sector expertise 
and financing for priority development 
initiatives. 
These 
reforms 
will 
be 
supported by the proposed State-Owned 
Enterprises Bill, Public Asset Management 
Bill and Public-Private Partnership Bill. In 
parallel, the Government will continue to 
strengthen governance and anti-corruption 
measures through the implementation 
of the National Anti-Corruption Action 
Plan 2025–2029 and the Governance 
Action Plan, including strengthening the 
institutional capacity and independence of 
Commission to Investigate Allegations of 
Bribery or Corruption (CIABOC), enhancing 
the electronic asset-declaration system, 
improving the reliability and verification 
of beneficial ownership information, and 
increasing transparency and accountability 
in public procurement and fiscal operations. 
On October 4, 2026, the Sri Lankan 
authorities and International Monetary Fund 
(IMF) staff reached a staff-level agreement 
on economic policies to conclude the 
Seventh Review under the four-year 
Extended Fund Facility (EFF) arrangement, 
alongside the conclusion of discussions 
under the 2026 Article IV Consultation. 
Subject to approval by the IMF Executive 
Board, completion of the Review would 
provide Sri Lanka access to SDR 254 
million, equivalent to approximately USD 
345 million in additional financing. The IMF 
assessment also highlighted the importance 
of rebuilding fiscal and external buffers, 
maintaining price stability, strengthening 
social safety nets, and sustaining the 
momentum of governance and structural 
reforms amid continued downside risks 
arising from geopolitical developments 
and weather-related shocks.
Over the medium term, fiscal policy will 
accordingly balance three interconnected 
priorities: completing Cyclone Ditwah-
related 
rehabilitation 
and 
resilient 
reconstruction; mitigating the economic 
and social effects of exceptional external 
shocks through temporary and targeted 
interventions; and preserving the fiscal 
consolidation and structural reform agenda 
required to safeguard macroeconomic and 
debt sustainability.
The experience of 2026 and the fiscal 
pressures anticipated in 2027 highlight the 
importance of maintaining a credible rules-
based fiscal framework that combines fiscal 
discipline with carefully defined flexibility in 
exceptional circumstances. The temporary 
deviation required to meet Cyclone Ditwah 
related reconstruction needs will therefore 
be accompanied by continued revenue 
mobilisation, strong expenditure controls, 
transparent reporting and a clearly defined 
path for restoring compliance with the 
statutory primary expenditure ceiling. This 
approach will enable the Government to 
address immediate reconstruction and 
social needs while preserving fiscal and 
debt sustainability and safeguarding the 
macroeconomic stability achieved through 
the adjustment and reform process.
1.2 Macro-Fiscal Performance
The Sri Lankan economy continued to 
expand during the first half of 2026, 
demonstrating 
resilience 
despite 
successive domestic and external shocks. 
Real GDP grew by 4.7 percent year-on-
year during the first half of 2026, with 
growth moderating from 5.1 percent in the 
first quarter to 4.2 percent in the second 
quarter. In the second quarter of 2026, 
industrial activities expanded strongly 
by 7.3 percent, while services activities 
grew by 2.7 percent. However, agricultural 
activities contracted by 2.3 percent, 
partly reflecting adverse weather-related

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Budget Economic and Fiscal Position Report - 2027	
9   
conditions, while taxes less subsidies on 
products increased by 11.9 percent. 
Global economic conditions remained 
challenging  so far in 2026 amid heightened 
geopolitical 
tensions, 
disruptions 
to 
energy markets and continued uncertainty 
in 
the 
global 
financial 
and 
trading 
environment. The outlook remains volatile, 
with the effects of geopolitical conflict 
weighing particularly on energy-importing 
and vulnerable economies, while global 
disinflation has stalled. Hence, preserving 
price stability, rebuilding fiscal space and 
strengthening economic adaptability to 
future shocks remain important.
Sri Lanka continued its revenue-based 
fiscal consolidation process in 2026. 
Government revenue and grants increased 
by 21.2 percent to Rs. 4,002.3 billion in 
the first eight months of 2026, from Rs. 
3,301.5 billion in the same period of 2025. 
Tax revenue increased by 20.0 percent to 
Rs. 3,683.6 billion, while non-tax revenue 
increased by 39.1 percent to Rs. 314.8 billion 
in the first eight months of 2026. The strong 
revenue performance was supported by 
higher collections from income taxes, 
VAT, taxes on motor vehicle imports, 
together with continued improvements in 
tax administration. By end-August 2026, 
approximately 75 percent of the annual 
tax revenue estimate had already been 
realised.
Revenue from income taxes increased by 
17.6 percent to Rs. 825.6 billion during the 
first eight months, from Rs. 702.4 billion in 
the same period of 2025. During the first 
eight months, revenue from taxes on goods 
and services increased to Rs. 2,366.7 billion, 
from Rs. 1,939.1 billion in the same period of 
2025, while revenue from taxes on external 
trade increased to Rs. 491.2 billion in the 
first eight months of 2026 from Rs. 427 
billion in the same period of 2025. Revenue 
from VAT increased by 22.0 percent to Rs. 
1,322.7 billion during the first eight months 
of 2026, from Rs. 1,084.2 billion in the same 
period of 2025. 
Revenue collection by the major revenue 
agencies remained strong during the 
first eight months of 2026. Sri Lanka 
Customs collected around Rs. 1,726.8 
billion, equivalent to 78.3 percent of its 
annual estimate, while the Inland Revenue 
Department collected around Rs. 1,727.5 
billion, or  71.9 percent of its annual estimate. 
The Department of Excise collected around 
Rs. 182.4 billion, representing 74.5 percent 
of its annual estimate. 
Revenue administration reforms continued 
to 
focus 
on 
strengthening 
taxpayer 
compliance 
and 
modernising 
tax 
administration through digitalization. The 
Inland Revenue Department continued 
to strengthen the use of a Compliance 
Risk Management framework to guide 
enforcement, audit selection and taxpayer 
services, while the High Wealth Individuals 
programme initiated risk-based audits 
targeting high-risk individuals and related 
entities. Further measures focused on 
strengthening Value Added Tax (VAT) 
compliance, cleaning and updating the 
taxpayer registry, and improving filing 
compliance. The continued modernisation 
of the Revenue Administration Management 
Information System (RAMIS) remains central 
to these reforms, with all taxes administered 
by the Inland Revenue Department moving 
towards processing and collection through 
the system. In parallel, implementation 
of the National e-Invoicing System has 
commenced through a phased approach, 
enabling the real-time transmission of VAT 
invoice data from taxpayers’ Enterprise 
Resource Planning systems to RAMIS 
through a secure Web API, with broader 
integration expected progressively.
The transition from the Simplified VAT 
system to the standard risk-based VAT 
refund mechanism continued during 2026. 
Following the repeal of the Simplified 
Value Added Tax (SVAT) scheme with effect 
from October 1, 2025, the Inland Revenue 
Department continued to strengthen the 
implementation of the risk-based refund 
system through enhanced monitoring, 
strengthened operational capacity and 
continued engagement with taxpayers. The 
VAT Compliance Improvement Programme 
was extended to the traditional VAT regime 
from January 2026, supported by measures

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10                                                                      Budget Economic and Fiscal Position Report - 2027
including field-based compliance activities, 
validation of temporary VAT numbers, and 
the cleaning and updating of the taxpayer 
registry. In addition, the annual registration 
threshold 
for 
the 
Social 
Security 
Contribution Levy (SSCL) was reduced from 
Rs. 60 million to Rs. 36 million with effect 
from July 1, 2026, thereby broadening the 
SSCL tax base. These reforms have been 
complemented by continued digitalisation 
of tax administration, including measures 
to 
strengthen 
VAT 
reporting 
and 
compliance through RAMIS and the phased 
implementation of electronic invoicing and 
API-based transmission of VAT invoice data.
Government 
expenditure 
increased 
moderately by 6.9 percent to Rs. 3,966.9 
billion in the first eight months of 2026, 
from Rs. 3,712.5 billion in the same period of 
2025. Recurrent expenditure increased by 
4.4 percent to Rs. 3,531 billion, while capital 
expenditure and net lending increased by 
31.6 percent to Rs. 435.9 billion. Interest 
payments declined by 4.6 percent to Rs. 
1,609.2 billion during the first eight months 
of 2026, from Rs. 1,687.6 billion during the 
same period of 2025. Interest payments 
accounted for 45.6 percent of recurrent 
expenditure, while salaries and wages 
accounted for 23.4 percent, subsidies and 
transfers for 25.2 percent, and expenditure 
on goods and services for around 5.8 
percent. 
The strong revenue performance, together 
with expenditure discipline, resulted in 
a significant improvement in the fiscal 
balances during the first eight months of 
2026. The primary surplus increased to Rs. 
1,644.6 billion during the first eight months, 
from Rs. 1,276.5 billion in the same period of 
2025. The overall budget balance recorded 
a surplus of Rs. 35.4 billion during the first 
eight months of 2026, compared with a 
deficit of Rs. 411 billion in the same period 
of 2025. This improvement reflects the 
continued strengthening of revenue-based 
fiscal consolidation, although substantial 
disaster-related 
rehabilitation 
and 
reconstruction expenditure is expected to 
materialise during the remainder of 2026 
and into 2027. 
Public debt nevertheless continues to be 
a key consideration in medium-term fiscal 
management. According to the Quarterly 
Statistical Debt Bulletin of the Public Debt 
Management Office, total gross public debt 
stood at approximately Rs. 32,977 billion at 
end-June 2026. Central government debt 
accounted for approximately Rs. 31,999 
billion, comprising around Rs. 19,203 billion 
in domestic debt and Rs. 12,796 billion in 
external debt.  While sustained primary 
surpluses and improved fiscal performance 
support the medium-term debt reduction 
path, prudent borrowing, effective debt 
and cash management, and continued 
adherence to the fiscal framework remain 
critical to reducing debt vulnerabilities.
Inflationary and exchange-rate pressures 
increased 
during 
2026, 
particularly 
following the escalation of geopolitical 
tensions in the Middle East and the 
associated increase in global energy 
prices. The Sri Lankan rupee depreciated 
by 6.8 percent against the US dollar on 
a year-to-date basis by end-October 
2026. Headline inflation, as measured by 
the year-on-year change in the Colombo 
Consumer Price Index, increased from 2.2 
percent in March 2026 to 8.3 percent in 
October 2026. Food inflation increased 
to 8.8 percent in October, while non-food 
inflation remained at 8.0 percent and core 
inflation increased to 5.6 percent. The 
increase in inflation largely reflected the 
pass-through of higher energy costs and 
associated spillovers across the economy. 
The Central Bank projects headline inflation 
to remain in the high single digits through 
9.9 
0.6
(8.3)
12.3 
2.2 
(6.8)
15.4 
5.4
(2.3)
-12
-8
-4
0
4
8
12
16
Government Tax Revenue
Primary Balance
Budget Deficit
2023
2024
2025
FIGURE 1.2 | Key Fiscal Aggregates: 2023-2025
As a % of GDP
Source: Department of Fiscal Policy

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Budget Economic and Fiscal Position Report - 2027	
11   
Implementation of the PFMA continued 
to advance during 2026, with increasing 
emphasis on translating the statutory 
framework into effective budget execution, 
commitment 
control, 
fiscal 
reporting 
and 
fiscal-risk 
management. 
Further 
operationalisation of the Act includes the 
development of implementing regulations 
and directives covering budget execution, 
commitment controls and enforcement 
mechanisms, while the existing Financial 
Regulations 
and 
applicable 
Treasury 
circulars remain in force to the extent that 
they are consistent with the PFMA until 
the new regulations become effective. 
The fiscal-management framework has 
also been strengthened through enhanced 
monitoring and disclosure of exceptional 
expenditure, 
including 
disaster-related 
procurement and beneficial ownership 
information.
The debt-reduction objective remains 
the overarching fiscal anchor under the 
PFMA and is operationalised through the 
primary balance target and the primary 
expenditure ceiling established under the 
MTFF. Section 15 of the PFMA generally limits 
primary expenditure to 13.0 percent of 
estimated nominal GDP, while the primary 
balance target is determined consistently 
with the medium-term debt-reduction 
objective. At the same time, Section 16 
provides carefully defined flexibility to 
accommodate 
additional, 
temporary 
and targeted expenditure arising from 
qualifying unforeseen events and natural 
disasters, subject to the relevant statutory 
requirements, 
including 
Parliamentary 
approval and a recovery path towards 
restoring compliance with the fiscal rules.
The medium-term fiscal strategy will 
therefore focus not only on maintaining 
strong fiscal aggregates, but also on 
improving their quality and durability. 
Sustained domestic revenue mobilisation, 
supported by the Medium-Term Revenue 
Strategy, 
strengthened 
revenue 
administration and a broader and more 
efficient tax base, will remain central 
to 
maintaining 
Government 
revenue 
around 16.0 percent of GDP. On the 
expenditure side, greater emphasis will 
the first quarter of 2027 before gradually 
easing towards the 5.0 percent target.
The Central Bank maintained the Overnight 
Policy Rate at 7.75 percent during the 
early part of 2026. However, in May 2026, 
in response to emerging inflationary 
pressures, elevated global energy prices, 
strengthening 
domestic 
demand 
and 
heightened uncertainty arising from the 
Middle East conflict, the Monetary Policy 
Board increased the Overnight Policy 
Rate (OPR) by 100 basis points to 8.75 
percent. The OPR has subsequently been 
maintained at 8.75 percent, including 
during September 2026 monetary policy 
review, assessing the impact of the 
earlier monetary policy tightening and 
evolving domestic and global economic 
conditions. The current monetary policy 
stance is aimed at containing second-
round inflationary pressures and anchoring 
inflation 
expectations 
while 
allowing 
sufficient credit flows to support economic 
activity. The Central Bank continues to 
monitor risks arising from geopolitical 
developments, global commodity prices, 
and potential El Niño-related conditions in 
determining the appropriate policy stance.
1.3 Fiscal Strategy in the Medium Term
The fiscal operations of the Government 
are governed by the Public Financial 
Management Act, No. 44 of 2024 , which 
establishes 
a 
rules-based 
framework 
for 
responsible 
fiscal 
management. 
The Act requires the Government to 
pursue sustainable public debt, maintain 
adequate fiscal buffers against future 
shocks, manage fiscal risks prudently, 
and strengthen discipline, transparency 
and accountability in the management 
of public finances. It also institutionalises 
medium-term fiscal planning through the 
annual FSS and a rolling five-year Medium 
Term Fiscal Framework (MTFF), which 
provide the strategic basis for annual 
budget preparation and the assessment 
of fiscal performance. The Fiscal Strategy 
Statement (FSS) 2027, published in June 
2026 in accordance with Section 11 of the 
PFMA, incorporates the MTFF for 2027–2031 
together with the Fiscal Risk Statement.

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12                                                                      Budget Economic and Fiscal Position Report - 2027
be placed on expenditure prioritisation, 
effective commitment controls, improved 
public investment management and the 
prevention of temporary shock-related 
spending from generating permanent 
recurrent 
obligations. 
Fiscal-risk 
management will also assume greater 
importance, particularly in relation to 
natural 
disasters 
and 
climate-related 
shocks, SOEs, PPPs and government 
guarantees. These measures are intended 
to rebuild fiscal buffers while maintaining 
the declining public-debt trajectory and 
safeguarding 
macroeconomic 
stability 
over the medium term.
Fiscal Strategy
The fiscal strategy is guided by the MTFF 
for 2027–2031, as set out in the FSS 2027 
and governed by the fiscal responsibility 
framework established under the PFMA. The 
overarching objective of the fiscal strategy 
is to place public debt on a sustainable 
downward trajectory while rebuilding 
fiscal 
buffers, 
strengthening 
revenue 
mobilisation, improving the efficiency and 
composition of public expenditure, and 
safeguarding 
macroeconomic 
stability. 
Under the PFMA, the debt reduction 
objective 
is 
operationalised 
through 
medium-term primary balance targets 
and a primary expenditure ceiling, with 
primary expenditure generally required 
to remain below 13 percent of GDP 
during the initial implementation period. 
The Act also provides carefully defined 
flexibility to accommodate temporary and 
targeted additional expenditure arising 
from unforeseen emergencies and natural 
disasters, subject to the relevant statutory 
requirements. 
Fiscal performance in 2026 has been 
stronger than envisaged at the time of 
publication of the FSS 2027, reflecting 
continued 
revenue 
mobilisation 
and 
expenditure discipline despite substantial 
additional 
expenditure 
requirements 
arising 
from 
Cyclone 
Ditwah 
and 
developments in the Middle East. Under 
the amended MTFF, total revenue and 
grants are projected at around 16.6 percent 
of GDP in 2026, while the primary surplus 
is expected to reach around 3.6 percent 
of GDP, compared with the 2.1 percent 
projection contained in the published FSS 
2027. This stronger fiscal position provides 
an important buffer for accommodating 
exceptional 
expenditure 
requirements 
while preserving the medium-term fiscal 
consolidation path.
For 2027, the published FSS originally 
envisaged primary expenditure of 12.9 
percent of GDP, revenue and grants 
of 15.5 percent of GDP and a primary 
surplus of 2.6 percent of GDP. Subsequent 
improvements in the revenue outlook 
and the additional rehabilitation and 
reconstruction requirements associated 
with Cyclone Ditwah have required an 
update to this baseline. Under the amended 
MTFF, before incorporating the additional 
reconstruction 
expenditure, 
revenue 
and grants are projected at around 15.8 
percent of GDP and the primary surplus 
at around 2.9 percent of GDP. Following 
the incorporation of the supplementary 
Ditwah-related 
expenditure, 
primary 
expenditure is expected to increase 
temporarily to around 13.6 percent of GDP, 
capital expenditure and net lending to 
around 5.1 percent of GDP, and the primary 
surplus to moderate to around 2.3 percent 
of GDP, while the overall budget deficit is 
projected at around 4.5 percent of GDP. 
The temporary deviation will be managed 
within the rules-based fiscal framework, 
with primary expenditure projected to 
return to around 12.9 percent of GDP from 
2028 and the primary surplus strengthening 
to around 3.0 percent of GDP over the 
remainder of the medium-term period.
Revenue-based fiscal consolidation will 
remain at the centre of the fiscal strategy. 
While the published FSS 2027 envisaged 
Government 
revenue 
at 
around 
15.5 
percent of GDP over the medium term, the 
amended MTFF reflects a stronger revenue 
path of around 16 percent of GDP from 2027 
onwards. The Government will continue 
to broaden the tax base, rationalise tax 
exemptions and incentives, strengthen 
tax 
administration 
and 
compliance,

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Budget Economic and Fiscal Position Report - 2027	
13   
and improve the efficiency and fairness 
of the tax system. Development and 
implementation of the MTRS will provide 
a sequenced framework for reforms across 
tax policy, revenue administration and the 
legal framework. The latest IMF discussions 
have 
similarly 
emphasised 
sustained 
revenue 
mobilisation, 
broadening 
the 
tax base and strengthening revenue 
administration 
as 
key 
priorities. The 
long-term policy objective of increasing 
Government revenue towards 20.0 percent 
of GDP and gradually improving the direct 
to indirect tax ratio towards 40:60 remains 
part of the broader Government revenue 
strategy, distinct from the medium-term 
MTFF projections. 
On the expenditure side, the Government 
will 
continue 
to 
prioritise 
prudent 
expenditure management while protecting 
essential social expenditure and increasing 
the share of resources allocated to 
productive public investment. The FSS 
2027 sets an objective of maintaining 
public investment above 4.0 percent 
of GDP from 2027 onwards. Under the 
amended MTFF, capital expenditure and 
net lending are expected to increase to 
around 5.1 percent of GDP in 2027, partly 
reflecting Ditwah-related reconstruction, 
before remaining at elevated levels over 
the medium term. Greater emphasis will 
therefore be placed on project readiness, 
prioritisation, 
implementation 
capacity 
and value for money to ensure that higher 
capital allocations translate into timely and 
productive investment. This is particularly 
important given recent under-execution 
of capital expenditure and the need to 
accelerate reconstruction while avoiding 
the creation of permanent recurrent 
expenditure obligations. 
Public financial management reforms will 
continue to strengthen the institutional 
foundations 
of 
the 
fiscal 
strategy. 
Further, operationalisation of the PFMA 
remains focused on improving budget 
execution, 
commitment 
controls, 
fiscal 
reporting 
and 
enforcement, 
supported by the continued expansion 
of the Integrated Treasury Management 
Information 
System 
(ITMIS). 
During 
2026, the Government also introduced 
strengthened disclosure requirements for 
disaster-related procurement, including 
reporting of procurement expenditure and 
beneficial ownership information, while 
implementation of electronic Government 
procurement continued to expand. The 
Ministry reported 324 active procuring 
entities on the national e-GP platform by 
July 2026, with the next phase of the e-GP 
system planned for 2027. 
The 
Government 
remains 
committed 
to 
restoring 
and 
preserving 
debt 
sustainability. 
Debt 
restructuring 
is 
now 
largely 
completed, 
while 
debt 
management has been institutionalised 
under the Public Debt Management Office 
(PDMO) established pursuant to the Public 
Debt Management Act, No. 33 of 2024. The 
Medium-Term Debt Management Strategy 
(MTDS) 2026–2030 and Annual Borrowing 
Plan 2026 provide the current framework 
for managing borrowing costs and risks. 
The strategy emphasises greater reliance 
on concessional bilateral and multilateral 
external financing, gradual reduction of 
refinancing risk through longer-maturity 
domestic instruments, development of 
the 
domestic 
Government 
securities 
market and improved transparency and 
liability management. The debt reduction 
objective of keeping public debt below 
95.0 percent of GDP by 2032 remains an 
important medium-term fiscal anchor, while 
the Government guarantee framework 
limits the outstanding stock of guarantees 
to below 7.5 percent of the relevant three-
year average GDP. 
The FSS 2027, incorporating the MTFF 
for 2027–2031 was published in June 
2026 to provide the strategic basis for 
preparation of Budget 2027. The amended 
MTFF reflects subsequent macro-fiscal 
developments and the additional 2027 
expenditure requirements associated with 
Cyclone Ditwah, while maintaining an 
explicit return path towards the statutory 
fiscal parameters over the medium term.

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14                                                                      Budget Economic and Fiscal Position Report - 2027
Fiscal Path:
•	 Maintaining a primary surplus of at least 
2.3 percent GDP in the medium term 
through strong revenue enhancing 
efforts and rationalizing government 
expenditure.
•	 Maintaining Government revenue at 
around 16.0 percent of GDP over the 
medium term, while progressively 
advancing towards the longer-term 
objective of raising revenue to around 
20.0 percent of GDP. 
•	 Gradually improving the direct-to-
indirect tax ratio towards 40:60 over 
the medium to long term to strengthen 
the progressivity and fairness of the 
tax system. 
•	 Strengthening 
compliance 
of 
core 
taxes, 
including 
continued 
implementation of  the  VAT  Compliance 
Improvement  Programme, timely 
operation of the risk-based VAT refund 
mechanism following the repeal of 
SVAT, monitoring of tax-compliance 
KPIs, cleaning of the taxpayer registry, 
risk-based 
audits 
and 
continued 
modernisation of RAMIS.
•	 Developing 
and 
implementing 
the 
MTRS, 
supported 
by 
tax 
diagnostics, 
broadening 
of 
tax 
bases, rationalisation of exemptions 
and 
incentives, 
improved 
tax 
administration and compliance, and a 
sequenced reform programme across 
tax policy, administration and the 
legal framework. 
•	 Managing primary expenditure within 
the PFMA framework, recognising the 
temporary increase to around 13.6 
percent of GDP in 2027 associated 
with 
exceptional 
Ditwah-related 
expenditure and restoring primary 
expenditure to around 12.9 percent of 
GDP from 2028.
•	 Containing 
the 
overall 
budget 
deficit below 5 percent of GDP over 
the medium term, consistent with 
the Government’s debt reduction 
objective.
•	 Sustaining public debt reduction 
consistent with the objective of 
reducing public debt below 95.0 
percent of GDP by 2032, supported by 
sustained primary surpluses, prudent 
borrowing and strengthened debt 
management.
•	 Containing 
fiscal 
risks 
from 
Government guarantees, maintaining 
the statutory ceiling on outstanding 
Government guarantees at below 
7.5 percent of the average GDP 
of 
the 
relevant 
financial 
year 
and the preceding two financial 
years, supported by strengthened 
assessment 
and 
monitoring 
of 
guarantees. 
•	 Maintaining public investment above 
4.0 percent of GDP, while improving 
project 
readiness, 
prioritisation, 
procurement 
and 
implementation 
capacity.
•	 Strengthening targeted social safety 
nets to protect vulnerable households 
from economic, disaster-related and 
external shocks while avoiding broad-
based and poorly targeted subsidies.
•	 Strengthening 
public 
financial 
management, 
including 
budget 
execution, 
commitment 
controls, 
fiscal reporting, cash management and 
the prevention of expenditure arrears 
through further implementation of 
ITMIS and the PFMA framework.
•	 Expanding 
e-GP, 
strengthening 
procurement 
transparency 
and 
accountability, integrating e-GP with 
wider PFM systems as implementation 
progresses, and enhancing disclosure 
of disaster-related procurement and 
beneficial ownership information. 
•	 Maintaining 
cost-reflective 
energy 
pricing while providing temporary and 
targeted assistance where necessary, 
thereby limiting fiscal risks arising

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Budget Economic and Fiscal Position Report - 2027	
15   
from SOEs. Continuing SOE, public 
asset and PPP reforms to improve 
governance, financial viability, public 
asset utilisation and the management 
of contingent fiscal risks.
•	 Supporting price stability and broader 
macroeconomic stability, consistent 
with the Central Bank’s medium-term 
inflation-targeting framework and the 
need to rebuild fiscal and external 
buffers. 
Medium Term Fiscal Framework
The Medium-Term Fiscal Framework is 
anchored on the following key fiscal 
objectives:
•	
Maintaining Government revenue 
at around 16.0 percent of GDP over 
the medium term.
•	
Maintaining primary expenditure 
within the statutory ceiling of 13.0 
percent of GDP over the medium 
term, 
except 
for 
temporary 
deviations permitted under the 
PFMA in exceptional circumstances, 
while maintaining public investment 
above 4.0 percent of GDP.
•	
Maintaining a primary surplus of at 
least 2.3 percent of GDP over the 
medium term.
•	
Containing 
the 
overall 
budget 
deficit below 5.0 percent of GDP 
over the medium term, consistent 
with 
the 
Government’s 
debt-
reduction objectives.
•	
Gradually reducing public debt to 
sustainable levels, consistent with 
the medium-term debt-reduction 
objective.
TABLE 1.1 | Medium-Term Fiscal Framework: 2027-2031
As a percentage of GDP
Indicator
2025
2026
2027
2027
2028
2029
2030
2031
Provisional
Revised 
Estimates
Estimates Budget(a)
Projections
Total Revenue and Grants
16.7
16.6
15.8
15.8
15.9
16.0
16.0
16.0
Total Revenue
16.6
16.5
15.8
15.8
15.8
15.9
15.9
15.9
Tax Revenue
15.4
15.2
14.6
14.6
14.6
14.7
14.7
14.7
Non-Tax Revenue
1.2
1.3
1.2
1.2
1.2
1.2
1.2
1.2
Grants
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Total Expenditure
19.0
20.3
19.7
20.3
19.8
19.7
19.4
19.3
Recurrent Expenditure
16.0
16.2
15.2
15.2
15.2
14.9
14.5
14.3
Non-Interest Recurrent 
Expenditure
8.3
9.0
8.4
8.5
8.3
8.1
8.0
8.0
Interest Expenditure
7.6
7.3
6.8
6.8
6.8
6.7
6.5
6.3
Capital Expenditure and 
Net Lending
3.0
4.1
4.5
5.1
4.6
4.8
4.9
5.0
o/w Public 
Investments
3.1
4.1
4.5
5.1
4.6
4.8
4.9
5.0
Primary Balance
5.4
3.6
2.9
2.3
3.0
3.0
3.0
3.0
Budget Balance 
-2.3
-3.7
-3.8
-4.5
-3.9
-3.7
-3.5
-3.3
Source: Department of Fiscal Policy
(a) With Supplementary

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16                                                                      Budget Economic and Fiscal Position Report - 2027
Justification of the Deviation from the 
Fiscal Framework Target
The amended MTFF reflects stronger 
revenue projections, slower execution of 
capital expenditure in 2026 and additional 
disaster reconstruction requirements in 
2027. The resulting revisions to revenue, 
primary expenditure and fiscal balances 
are explained below. 
Government Revenue
The FSS 2027 projected total revenue and 
grants at 15.8 percent of GDP in 2026 and 
15.5 percent of GDP in 2027. Under the 
amended MTFF, these projections have 
been revised upward to approximately 16.6 
percent of GDP in 2026 and 15.8 percent 
of GDP in 2027. This represents favourable 
deviations of around 0.8 percentage points 
of GDP in 2026 and 0.3 percentage points 
of GDP in 2027 relative to the published 
FSS projections.
The stronger revenue outlook reflects 
the continued impact of tax policy and 
revenue-administration reforms, improved 
compliance, 
recovery 
in 
economic 
activity 
and 
stronger-than-anticipated 
collections 
from 
several 
major 
tax 
categories, including taxes associated 
with motor vehicle imports. The FSS 2027 
had already observed significant revenue 
overperformance during the early months 
of 2026, including strong growth in major 
tax categories and vehicle-related revenue. 
Continued implementation of revenue-
administration 
reforms 
are 
expected 
to support the durability of this higher 
revenue base over the medium term.
Primary Expenditure
The PFMA establishes a statutory ceiling 
of 13.0 percent of GDP for primary 
expenditure, subject to the exceptional-
circumstances provisions applicable to 
unforeseen events and natural disasters. 
The FSS 2027 initially projected primary 
expenditure at 13.7 percent of GDP in 2026, 
exceeding the statutory ceiling by 0.7 
percentage points, primarily reflecting the 
Rs. 500 billion supplementary allocation 
approved 
following 
Cyclone 
Ditwah 
for housing, infrastructure restoration, 
rehabilitation and livelihood recovery. 
However, 
despite 
the 
supplementary 
allocation, 
the 
execution 
of 
capital 
expenditure, particularly disaster-related 
rehabilitation and reconstruction activities, 
has been slower than initially anticipated. 
The published FSS envisaged primary 
expenditure returning to 12.9 percent of 
GDP 
in 
2027. 
However, 
subsequent 
assessments 
indicate 
that 
substantial 
rehabilitation 
and 
reconstruction 
requirements will continue beyond 2026. 
Under the amended MTFF, approximately 
Rs. 260 billion of additional expenditure 
is expected to be required in 2027. 
Consequently, 
primary 
expenditure 
is 
projected to increase temporarily to around 
13.6 percent of GDP in 2027, approximately 
0.6 percentage points above the statutory 
ceiling.
The expected 2027 deviation is therefore 
attributable 
to 
the 
continuation 
of 
exceptional and time bound disaster 
recovery expenditure rather than to an 
underlying structural increase in recurrent 
spending. The additional expenditure will 
be separately identified, prioritised and 
monitored, with the recurrent component 
strictly limited to temporary recovery 
requirements. 
Primary 
expenditure 
is 
projected to return to around 12.9 percent 
of GDP in 2028 and remain within the 
statutory ceiling thereafter. This explicit 
return path is critical to demonstrating that 
the deviation is temporary and consistent 
with the principles of the rules-based fiscal 
framework.
Capital Expenditure and Public Investment
The composition of expenditure is also 
expected to differ materially from the 
path envisaged in the FSS. The published 
FSS projected capital expenditure and net 
lending of around 4.8 percent of GDP in 
2026 and 4.4 percent of GDP in 2027. Under 
the amended MTFF, capital expenditure 
and net lending are estimated at around 4.1 
percent of GDP in 2026, reflecting slower

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Budget Economic and Fiscal Position Report - 2027	
17   
than anticipated execution of some capital 
expenditure, while the ratio is projected 
to increase to around 5.1 percent of GDP 
in 2027 following the incorporation of 
additional Ditwah related reconstruction 
expenditure.
Primary Surplus
The primary balance is expected to 
perform substantially better in 2026 than 
envisaged in the FSS 2027. The published 
FSS revised the primary surplus target for 
2026 to 2.1 percent of GDP in recognition 
of the additional expenditure arising from 
Cyclone Ditwah and external shocks. Under 
the latest estimates, the primary surplus 
is projected at approximately 3.6 percent 
of GDP in 2026, representing a favourable 
deviation of around 1.5 percentage points 
from the FSS projection. This improvement 
reflects stronger than expected revenue 
mobilisation, expenditure discipline and 
lower than envisaged execution of certain 
capital expenditure during the year.
For 2027, the published FSS envisaged 
a primary surplus of 2.6 percent of GDP. 
Under the amended MTFF, the stronger 
revenue outlook would have supported 
a primary surplus of around 2.9 percent 
of GDP before incorporating additional 
reconstruction 
expenditure. 
Following 
the inclusion of the additional Ditwah-
related expenditure, the primary surplus 
is projected to moderate to around 2.3 
percent of GDP. Accordingly, the revised 
2027 primary surplus represents only 
a marginal downward deviation of 0.3 
percentage points from the published FSS 
target, despite the substantial additional 
reconstruction expenditure.
Importantly, the projected 2.3 percent 
primary surplus remains equal to primary 
surplus level identified under the IMF-EFF 
programme as the medium-term target 
for 2027. Thus, although the additional 
reconstruction programme reduces the 
primary surplus relative to the updated 
pre-supplementary baseline, the revised 
balance 
remains 
broadly 
consistent 
with 
medium-term 
debt-sustainability 
objectives.
Overall Budget Deficit
The overall budget balance is also 
expected to perform more favourably than 
envisaged in the published FSS. The FSS 
2027 projected an overall budget deficit 
of 5.6 percent of GDP in 2026, largely 
reflecting the impact of the supplementary 
expenditure 
associated 
with 
Cyclone 
Ditwah. It projected the deficit to narrow 
to 4.5 percent of GDP in 2027 and remain 
below 5.0 percent thereafter. 
Under the amended MTFF, the budget 
deficit is projected at approximately 3.7 
percent of GDP in 2026, substantially below 
the FSS projection, reflecting stronger 
revenue performance and expenditure 
developments during the year. For 2027, the 
deficit is projected at around 4.5 percent of 
GDP after incorporating additional Ditwah-
related expenditure, compared with around 
3.8 percent under the updated baseline 
before the supplementary reconstruction 
requirement. 
Although 
the 
additional 
expenditure therefore widens the 2027 
deficit relative to the pre supplementary 
position, the deficit remains below the 5.0 
percent medium-term threshold. 
Accordingly, the temporary expenditure 
deviations in 2026 and 2027 do not imply a 
departure from the Government's broader 
fiscal 
consolidation 
strategy. 
Rather, 
they reflect the use of carefully defined 
fiscal flexibility to respond to exceptional 
shocks while preserving strong revenue 
performance, primary surpluses and the 
medium-term debt-reduction path.
Return to the Medium-Term Fiscal Path
The credibility of the temporary deviations 
depends on the Government's ability 
to ensure that exceptional expenditure 
remains 
temporary, 
targeted 
and 
transparently managed. The amended 
MTFF therefore provides for primary 
expenditure to return to approximately 
12.9 percent of GDP from 2028, while the 
primary surplus is projected to strengthen 
to around 3.0 percent of GDP and 
Government revenue to remain at around 
16.0 percent of GDP over the medium term.

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18                                                                      Budget Economic and Fiscal Position Report - 2027
Continued 
revenue 
mobilisation, 
expenditure prioritisation, improved public 
investment management, strengthened 
commitment and cash controls, and 
transparent monitoring of disaster-related 
expenditure will underpin the return to 
the normal fiscal path. The Government 
will also continue to rebuild fiscal buffers 
to strengthen its capacity to absorb future 
domestic and external shocks without 
compromising debt sustainability.
The 
temporary 
deviations 
associated 
with Cyclone Ditwah should therefore be 
viewed within the broader context of a 
rules-based fiscal framework that combines 
fiscal discipline with carefully defined 
flexibility 
to 
respond 
to 
exceptional 
circumstances. The 
explicit 
return-to-
compliance path from 2028, together 
with sustained primary surpluses and 
stronger revenue mobilisation, is expected 
to preserve the credibility of the fiscal 
framework and support the continuing 
decline in public debt.

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Budget Economic and Fiscal Position Report - 2027	
21   
Budget Economic and Fiscal Position Report - 2027
Issued by the Hon. Minister of Finance, Planning and Economic Development
Under Section 49 of the Public Financial Management Act, 
 No. 44 of 2024
This Report is issued under Section 49 of the Public Financial Management Act, No. 44 of 
2024, which is required to be tabled in Parliament by the Minister of Finance on the day 
fixed for the second reading of the Appropriation Bill in Parliament, in each year.
It includes estimates relating to gross domestic product, consumer prices, employment and 
unemployment, balance of payments, revenue and expenditure, Government borrowing, 
basis used to prepare the aforementioned estimates among others. The information 
contained in this report takes into account, as far as possible, all Government decisions and 
all other circumstances that may have material effect on the fiscal and economic position 
of the Government.

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Fiscal 
Developments, 
Treasury 
Operations and 
Foreign Financing
02

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Budget Economic and Fiscal Position Report - 2027	
25   
2.1 Overview 
In the first eight months of 2026, the 
Government’s 
fiscal 
position 
proved 
resilient to multiple shocks on both the 
domestic and external fronts, creating 
comfortable fiscal space for swift policy 
responses 
while 
delivering 
surpluses 
in the current account, primary and 
overall budget balances and protecting 
the poor and vulnerable. Government 
revenue, including grants, increased by 
21.2 percent, while recurrent expenditure 
increased marginally by 4.4 percent 
during the period. The execution of capital 
expenditure remained low at 25.4 percent 
of the annual estimate due to both domestic 
and external challenges. Accordingly, the 
overall budget recorded a surplus of Rs. 
35.4 billion, compared to a deficit of Rs. 
411.0 billion in the same period of 2025, 
while the primary surplus increased by 
Rs. 368.1 billion to Rs. 1,644.6 billion, from 
Rs. 1,276.5 billion. This improvement was 
achieved despite the additional spending 
requirements arising from the recovery 
and 
reconstruction 
efforts 
following 
Cyclone Ditwah and the relief measures 
introduced to cushion the impact of 
the conflict in the Middle East. The fiscal 
outcome was supported by the continued 
implementation of revenue-based fiscal 
consolidation and structural fiscal reforms. 
These included tax policy measures to 
broaden the tax base, the modernization of 
revenue administration, the strengthening 
of 
fiscal 
oversight 
of 
state-owned 
enterprises, and improvements in public 
financial and investment management.
As at end-June 2026, the primary surplus 
of Rs. 1,244.1 billion significantly surpassed 
the Quantitative Performance Criterion 
(QPC) target of Rs. 72 billion set under 
the Extended Fund Facility Program of the 
International Monetary Fund (IMF-EFF). 
In view of the fiscal impact of Cyclone 
Ditwah, the escape clause under Section 
16 of the Public Financial Management 
Act, No. 44 of 2024 was invoked to allow 
primary expenditure to exceed the ceiling 
of 13 percent of GDP in 2026. Accordingly, 
Rs. Million
Item
Jan. - Aug.
2025
2026 (a)
Revenue and Grants
3,301,459
4,002,317
Revenue
3,294,740
3,998,291
Tax
3,068,495
3,683,527
Non Tax
226,244
314,764
Grants
6,720
4,026
Expenditure
3,712,492
3,966,913
Current
3,381,309
3,531,045
Salaries
760,687
826,962
Interest Payments
1,687,571
1,609,194
Other
933,051
1,094,889
Capital and net lending
331,183
435,867
Public Investments
338,846
446,283
Other
-7,663 
-10,416 
Current Account Deficit (-)/Surplus (+)
-86,569
467,245
Primary Deficit (-)/Surplus (+)
1,276,538
1,644,598
Overall Budget Deficit (-)/Surplus (+)
-411,033
35,404
Financing
411,033
-35,404
Foreign Financing (Net)
-51,849 
29,712
Domestic Financing (Net)
462,882
-65,116 
Source: Department of Fiscal Policy
(a) Provisional
TABLE 2.1 | Summary of Fiscal Operations

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26                                                                      Budget Economic and Fiscal Position Report - 2027
the primary balance target of 2.3 percent 
of GDP originally set for 2026 under the 
IMF-EFF Program was lowered, while 
the Government remains committed to 
reverting to the primary balance target 
of 2.3 percent of GDP and to the primary 
expenditure ceiling from 2027 onwards. 
Meanwhile, the current account balance 
of the budget turned to a surplus of Rs. 
467.2 billion in the first eight months of 
2026, from a deficit of Rs. 86.6 billion in the 
corresponding period of 2025, indicating 
that government revenue was sufficient 
to fully finance recurrent expenditure, 
including interest payments.
Total 
government 
revenue, 
including 
grants, increased by 21.2 percent to Rs. 
4,002.3 billion in the first eight months of 
2026, from Rs. 3,301.5 billion in the same 
period of 2025, achieving 75.5 percent of 
the annual estimate of Rs. 5,300.0 billion. 
Tax revenue increased by 20.0 percent to 
Rs. 3,683.5 billion, while non-tax revenue 
increased by 39.1 percent to Rs. 314.8 
billion, mainly due to profit transfers of 
Rs. 42.1 billion from the Central Bank of Sri 
Lanka. As at end-June 2026, tax revenue of 
Rs. 2,710.6 billion exceeded the tax revenue 
QPC target of Rs. 2,000 billion by Rs. 710.6 
billion. Among the revenue-collecting 
agencies, Sri Lanka Customs achieved 78.3 
percent of its annual tax revenue estimate 
in the first eight months of 2026, mainly due 
to motor vehicle taxes, which exceeded its 
annual estimate by 30.5 percent, while the 
Inland Revenue Department (IRD) and the 
Excise Department achieved 71.9 percent 
and 74.5 percent of their annual estimates, 
respectively. VAT on imports remained the 
largest source of revenue collected by Sri 
Lanka Customs, accounting for about 35 
percent of its total collections.
The increase in tax revenue was mainly 
driven by higher collections from Value 
Added Tax (VAT), income taxes and excise 
duties, which accounted for 35.9 percent, 
22.4 percent and 20.3 percent of total 
tax revenue, respectively. Revenue from 
VAT increased by 22.0 percent to Rs. 
1,322.7 billion. VAT on domestic activities 
increased by 27.5 percent, mainly reflecting 
the expansion of domestic economic 
activities and improved VAT compliance. 
While VAT on imports increased by 15.9 
percent, supported by higher imports, 
particularly of motor vehicles, and the 
depreciation of the rupee. Revenue from 
excise duties increased by 23.0 percent to 
Rs. 748.0 billion, mainly due to the increase 
in excise duty on motor vehicles by 28.3 
percent to Rs. 347.0 billion. Excise duty on 
liquor increased by 24.3 percent, owing  to 
higher production, while excise duty on 
cigarettes increased by 22.6 percent.
Revenue from income taxes increased by 
17.6 percent to Rs. 825.6 billion. This was 
mainly due to the increase in corporate 
income tax by 21.9 percent, reflecting 
the full year impact of the increase in the 
rate applicable to the liquor, tobacco, and 
betting and gaming industries from 40 
percent to 45 percent and the introduction 
of a 15 percent tax on gains and profits 
derived from foreign sources. It also reflects 
the increase in the Withholding Tax rate 
on interest income from 5 percent to 10 
percent. Revenue from the Social Security 
Contribution Levy (SSCL) increased by 
22.2 percent to Rs. 233.2 billion, with SSCL 
on imports increasing by 53.0 percent. 
Revenue from taxes on external trade 
increased by 15.0 percent to Rs. 491.2 
billion, driven by the increase in Customs 
Import Duty by 33.1 percent, reflecting 
higher vehicle imports and the imposition 
of a 50 percent surcharge on the Customs 
Import Duty applicable on motor vehicles.
Tax policy and administrative reforms 
continued to support revenue mobilization 
during the period. The tax policy measures 
introduced in 2026 included the application 
of the standard VAT rate on imported 
fabric with effect from April 1, 2026 and 
the imposition of SSCL on motor vehicles 
at the point of importation, manufacture or 
sale with effect from May 1, 2026. The first 
phase of the National Tariff Policy was also 
implemented, through the introduction of 
a four-band Customs Import Duty structure 
and the removal of CESS on intermediate 
inputs.

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Budget Economic and Fiscal Position Report - 2027	
27   
In revenue administration from  the 
transition from the SVAT system to a risk-
based VAT refund system was implemented 
successfully. The IRD completed the 
first phase of cleaning and updating 
the taxpayer registry and initiated risk-
based 
audits 
targeting 
high-wealth 
individuals. All taxes administered by the 
IRD continued to be processed through 
the Revenue Administration Management 
Information 
System 
(RAMIS), 
and 
a 
simplified personal income tax return with 
a pre-filled option is being implemented. 
Key Performance Indicators (KPIs) on 
tax compliance continued to be tracked 
and reported quarterly, while quarterly 
progress reports on the implementation of 
anti-corruption measures by each revenue-
collecting 
agency 
continued 
to 
be 
published. Meanwhile, Sri Lanka Customs 
has eliminated face-to-face review of 
customs declarations with the introduction 
of digital signatures and has strengthened 
risk-based clearance.
Further, tax policy and tax administration 
diagnostics were conducted with the 
support of IMF technical assistance to guide 
the formulation of a Medium-Term Revenue 
Strategy. In order to improve governance, 
and transparency. A list of firms receiving 
tax exemptions through the Board of 
Investment, the Strategic Development 
Projects Act and the Colombo Port City, 
together with the estimated value of 
these exemptions, also continued to be 
published semi-annually.
During the first eight months of 2026, 
total government expenditure increased 
by 6.9 percent to Rs. 3,966.9 billion, from 
Rs. 3,712.5 billion in the corresponding 
period of 2025. This was a 52.5 percent 
achievement against the annual estimate 
of Rs. 7,557.0 billion, which includes the 
Supplementary Estimate of Rs. 500 billion 
approved by Parliament on December 
19, 2025 for recovery and reconstruction 
following 
Cyclone 
Ditwah. 
Primary 
expenditure, excluding interest payments, 
increased by 16.4 percent to Rs. 2,357.7 
billion, mainly reflecting higher spending 
on subsidies and transfers, salaries and 
wages and capital expenditure.
Recurrent expenditure increased marginally 
by 4.4 percent to Rs. 3,531.0 billion, mainly 
due to the increased spending on subsidies 
and transfers by 23.2 percent to Rs. 890.3 
billion and on salaries and wages by 8.7 
percent to Rs. 827.0 billion. The increase 
in salaries and wages was driven by the 
implementation of the second phase of 
the public sector salary revision with effect 
from January 2026. Within transfers to 
households, pension payments increased 
by 17.5 percent to Rs. 332.4 billion, 
reflecting the rectification of pension 
anomalies and the pension revisions, while 
Aswesuma cash transfers increased by 14.6 
percent to Rs. 164.3 billion, reflecting the 
six-month extension of benefit payments 
to households in the 'vulnerable' category, 
in response to the impact of Cyclone 
Ditwah, together with a one-off cash 
top-up in April 2026. Expenditure on free 
medicine increased by 52.4 percent to Rs. 
115.3 billion, reflecting higher spending on 
medical supplies for government hospitals. 
However, expenditure on goods and 
services declined by 2.9 percent to Rs. 
204.6 billion, reflecting tighter controls on 
such operational expenditure.
In response to the rise in energy prices 
arising from the conflict in the Middle East, 
the Government introduced a temporary 
relief package comprising fuel subsidies of 
Rs. 100 per litre of diesel and Rs. 20 per litre 
of petrol, electricity subsidies to maintain 
stable tariffs for households consuming 
less than 180 kWh per month and for low-
consumption segments of selected non-
residential tariffs, an increased fertilizer 
subsidy for farmers for the Yala season, 
a subsidy for fishermen, and a one-off 
cash top-up to Aswesuma households. 
The package, which amounted to Rs. 
105.9 billion by end-September 2026, 
was provided on budget and financed 
through the annual budget reserve and 
expenditure reallocations. These subsidies 
compensated fuel suppliers and the 
electricity sector for losses arising from the

BEFPR 2027 · file page 42 printed page 28

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28                                                                      Budget Economic and Fiscal Position Report - 2027
partial pass-through of higher costs, while 
electricity tariffs were revised upwards 
in May 2026. As the Middle East conflict 
persisted, the Government decided to 
extend targeted support until end-2026 
at an estimated cost of Rs. 47 billion, to 
be met through reallocations within the 
approved expenditure ceiling of the 2026 
Budget. Accordingly, a subsidy of up to 
Rs. 40.7 billion on auto diesel is being 
provided from October to December 2026, 
which will expire on December 31, 2026, 
with no provision for fuel subsidies in the 
TABLE 2.2 | Estimated and Actual Revenue and Expenditure - 2026
Rs. Billion
Item
Annual 
Estimate
Jan.- Aug. 
(Provisional)
Achievement 
%
Total Revenue
5,270.0
3,998.3
75.9
Tax Revenue
4,910.0
3,683.5
75.0
Inland Revenue Department
Tax on Income and Profit
1,210.0
825.6
68.2
VAT - Domestic (Net)
937.0
723.6
77.2
SSCL (Domestic)
236.0
164.3
69.6
Other
18.1
13.9
77.0
Sub Total
2,401.1
1,727.5
71.9
Customs Department
VAT - Imports (Net)
875.0
599.0
68.5
SSCL (Import)
97.0
68.9
71.0
Ports & Airports Development Levy (PAL)
190.0
130.8
68.8
Cess Levy
90.0
54.5
60.5
Special Commodity Levy
129.0
105.0
81.4
Import Duty
235.0
201.0
85.5
Excise Special Provisions
Cigarettes
105.0
75.7
72.1
Petroleum
205.0
135.1
65.9
Motor Vehicles & Other
279.0
354.8
127.2
Other
1.1
2.1
181.6
Sub Total
2,206.1
1,726.8
78.3
Excise Department
Liquor/Tobacco
245.0
182.4
74.5
Sub Total
245.0
182.4
74.5
Other
Telecommunication Levy
17.0
9.3
54.9
Licence Tax & Other
40.8
37.5
92.0
Sub Total
57.8
46.8
81.1
Non Tax Revenue
360.0
314.8
87.4
Total Expenditure
7,557.0
3,966.9
52.5
Current Expenditure
5,838.0
3,531.0
60.5
Salaries and Wages
1,323.0
827.0
62.5
Interest Payments
2,617.0
1,609.2
61.5
Pension Payments
517.0
332.4
64.3
Transfers to Public Corporations & Institutions
184.0
84.7
46.0
Other
1,197.0
677.8
56.6
Capital Expenditure and Net Lending
1,719.0
435.9
25.4
Source: Department of Fiscal Policy
2027 Budget. In addition, a cash payment 
of Rs. 6,250 per extremely poor household 
and Rs. 4,000 per poor household is being 
provided to Aswesuma beneficiaries, at an 
estimated cost of Rs. 6 billion.
Interest payments declined by 4.6 percent 
to Rs. 1,609.2 billion in the first eight 
months of 2026, from Rs. 1,687.6 billion 
in the same period of 2025. Interest 
payments on domestic borrowing, which 
constituted 86.4 percent of total interest 
expenditure, declined by 5.2 percent to Rs.

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Budget Economic and Fiscal Position Report - 2027	
29   
1,389.7 billion, while interest payments on 
foreign borrowing marginally declined by 
0.7 percent to Rs. 219.5 billion. Accordingly, 
interest payments absorbed 43.7 percent 
of tax revenue, compared to 55.0 percent 
in the same period of 2025.
Expenditure on public investment increased 
by 31.7 percent to Rs. 446.3 billion in the 
first eight months of 2026, from Rs. 338.8 
billion in the same period of 2025. The 
achievement of public investment against 
the annual estimate remained low at 25.8 
percent. 
The Government continued to strengthen 
public 
financial 
and 
investment 
management to improve budget execution 
and fiscal discipline. In October 2026, a 
standardized methodology for assessing 
project readiness and transparent project 
selection criteria for the Public Investment 
Committee were published, while a review 
of the existing public investment portfolio 
is being undertaken. The core modules 
of the Integrated Treasury Management 
Information System (ITMIS) were rolled 
out to all spending heads to strengthen 
commitment 
controls, 
and 
previously 
accumulated expenditure arrears were 
cleared. 
Further, 
the 
Fiscal 
Strategy 
Statement 2027, including a Fiscal Risks 
Statement, was published in June 2026. 
Companies bidding for cyclone-related 
procurement contracts are also required 
to disclose their beneficial ownership 
information, 
ensuring 
transparency 
in 
reconstruction spending.
Overall, the budget surplus recorded in the 
first eight months of 2026 was largely driven 
by strong revenue performance supported 
by tax policy and administrative reforms, 
the decline in interest payments and the 
slower-than-planned execution of capital 
expenditure. These more than offset the 
higher spending on salaries, pensions and 
social transfers and the expenditure related 
to Cyclone Ditwah and the conflict in the 
Middle East. The surplus, together with net 
foreign financing of Rs. 29.7 billion, enabled 
a net repayment of domestic financing 
amounting to Rs. 65.1 billion. Going 
forward, as the temporary boost to revenue 
from vehicle imports gradually normalizes, 
sustaining 
revenue 
performance 
will 
depend on further broadening the tax base 
and improving tax compliance. At the same 
time, improving the execution of capital 
expenditure, particularly for post-cyclone 
reconstruction, remains a key priority.
2.2 Government Revenue 
Total 
government 
revenue 
excluding 
grants increased by 21.4 percent to Rs. 
3,998.3 billion in the first eight months of 
2026 compared to Rs. 3,294.7 billion in 
the same period of 2025 mainly due to the 
increase in tax revenue by 20.0 percent 
to Rs. 3,683.5 billion in the period from 
January to August in 2026 compared to Rs. 
3,068.5 billion recorded in the same period 
of 2025. 
The surge in tax revenue was led by the 
increase in revenue from: 
1.	 Income taxes by 17.6 percent or 
Rs. 123.3 billion mainly due to increase 
of corporate income tax by 21.9 
percent to Rs. 484.2 billion reflecting 
increase in tax rate to 45.0 percent 
from 40.0 percent on the liquor, 
tobacco and betting and gaming 
industries and introduction of 15.0 
percent tax on the gains and profit 
earned or derived from any foreign 
source with effect from April 1, 2025. 
Revenue from withholding tax (WHT) 
increased by 21.2 percent to Rs. 142.9 
billion reflecting the increase of WHT 
on interest rate to 10.0 percent from 
5.0 percent with effect from April 
01, 2025 and increase to the interest 
rates. Meanwhile, improvements in 
tax administration, reflected in a 12.1 
percent increase in total income tax 
file registrations to 1,425,144 as at 
end-August 2026, compared to end-
August 2025, also contributed to this 
revenue growth;
2.	 VAT by 22.0 percent or Rs. 238.4 billion 
driven by increase of VAT on imports 
by 15.9 percent to Rs.  599.0 billion 
due to increase of motor vehicle 
imports by 154.0 percent to 445,546 
vehicles for the period from January to 
August in 2026 with the relaxation of

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30                                                                      Budget Economic and Fiscal Position Report - 2027
Income Tax
21%
VAT
33%
Excise
19%
PAL
3%
SSCL
6%
Import Duty
5%
SCL
3%
CESS
1%
TL
0%
Other
1%
Non Tax
8%
import restrictions of all type of motor 
vehicles with effect from February 
2025. The imposition of VAT on 
imported fabric with effect from April 
01, 2026 and increase of domestic VAT 
by 27.5 percent to Rs. 723.6 billion 
resulted from expansion of domestic 
activities and administrative measures 
reflecting increase of VAT registrations 
including VAT on financial services 
by 25.5 percent to 38,024 files as at 
end-August 2026, compared to end-
August 2025;
3.	 Excise duty on motor vehicles by 
28.3 percent or Rs. 76.5 billion due 
to increase of motor vehicle imports 
by 150.0 percent to 441,097 vehicles 
for the period from January to August 
in 2026 with the relaxation of import 
restrictions of all type of motor 
vehicles with effect from February 
2025; 
4.	 Excise Duty on liquor by 24.3 percent 
or Rs. 35.4 billion mainly due to 
increase of liquor production by 9.2 
percent to 26.1 million absolute litres 
in the first eight months of 2026;
5.	 SSCL by 22.2 percent or Rs. 42.4 billion 
driven by increase of SSCL on imports 
by 53.0 percent to Rs. 68.9 billion 
due to imposition of SSCL on motor 
vehicles in the point of Customs with 
effect from May 01, 2026 and increase 
of domestic SSCL by 12.7 percent to 
Rs. 164.3 billion due to expansion of 
domestic activities together with 
improved tax administration measures 
reflecting growth of number of SSCL 
file registrations by 34.0 percent to 
19,957 as at end-August 2026;
6.	 Customs import duty (CID) by 33.1 
percent or Rs. 50.0 billion mainly due 
to application of CID on motor vehicles 
together with 50.0 percent Surcharge 
on applicable CID on motor vehicles 
and increase of import value of goods 
by 24.1 percent to USD 16,557 million 
in the respective period; 
7.	 Ports and Airports Development Levy 
by 12.9 percent or Rs. 14.9 billion due 
to the increase in imports.
The increase of non-tax revenue by 39.1 
percent or Rs. 88.5 billion in the first eight 
FIGURE 2.1 | Composition of Total Revenue : January - August 2026  
Source : Department of Fiscal Policy

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Budget Economic and Fiscal Position Report - 2027	
31   
months of 2026 also contributed to the 
escalation in revenue. This was mainly led 
by transfer of Central Bank profit of Rs. 42.1 
billion and the increase in revenue from 
fines, fees and charges by Rs. 21.0 billion. 
Meanwhile, revenue from interest income 
and social security contributions also 
positively contributed to the escalation of 
this non-tax revenue.
TABLE 2.3 | Summary of Performance of Government Revenue - 2026
Rs. Million
Item
Jan. - Aug.
Change (%)
2025
2026 (a)
Tax Revenue
3,068,495
3,683,527
20.0
Income Tax
702,351
825,625
17.6
Domestic Consumption Based Tax
929,865
1,153,779
24.1
VAT
567,470
723,643
27.5
Excise Tax
216,614
265,825
22.7
SSCL
      145,781 
164,310
12.7
Import Based Tax
1,380,169
1,641,284
18.9
Import Duty
150,988
200,975
33.1
VAT
516,778
599,037
15.9
SSCL
       45,032 
68,905
53.0
Ports & Airports Development Levy (PAL)
115,886
130,806
12.9
Special Commodity Levy (SCL)
103,641
104,959
1.3
Excise Tax
391,313
482,148
23.2
Cess
56,529
54,454
-3.7
Licence Taxes and Other
56,110
62,840
12.0
Non Tax Revenue
226,244
314,764
39.1
Total Revenue
3,294,740
3,998,291
21.4
Source: Department of Fiscal Policy
(a) Provisional
FIGURE 2.2 |  Tax Revenue by Source : January - August 2026  
Source : Department of Fiscal Policy
Income Tax 
Revenue from income taxes increased by 
17.6 percent to Rs. 825.6 billion in the first 
eight months of 2026, compared to Rs. 
702.4 billion recorded in the same period 
of 2025. This reflects an achievement of 
68.2 percent of the annual estimate of 
Rs. 1,210.0 billion, driven by sustained 
administrative 
improvements 
and 
enhanced tax compliance.
Income Tax
18%
Domestic 
Cosumption 
Based Taxes
34%
Import Based 
Taxes
46%
License Taxes 
and Other
2%

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32                                                                      Budget Economic and Fiscal Position Report - 2027
Revenue from Advance Personal Income 
Tax (APIT / PAYE) demonstrated a growth 
of 6.1 percent to Rs. 152.7 billion in the first 
eight months of 2026 compared to Rs. 
143.9 billion in the same period of 2025. 
The revenue collection from APIT in the 
first eight months of 2026 accounted for 
71.0 percent of the annual estimate of Rs. 
215.0 billion.
Personal income tax revenue increased by 
5.9 percent to Rs. 45.8 billion during the 
first eight months of 2026 compared to 
Rs. 43.2 billion in the same period of 2025, 
reaching 45.8 percent of its annual target 
of Rs. 100.0 billion. Meanwhile, corporate 
tax revenue expanded significantly by 21.9 
percent to Rs. 484.2 billion in the first eight 
months of 2026, up from Rs. 397.3 billion 
recorded in the same period of 2025. 
Overall, Corporate and Non-Corporate 
tax revenue grew by 20.3 percent to Rs. 
530.0 billion (achieving 65.4 percent of the 
annual estimate of Rs. 810.0 billion). This 
expansion reflects improved corporate 
profitability across key growth sectors 
and enhanced revenue realization from 
statutory tax revisions.
Revenue from WHT/AIT grew by 21.2 per 
cent to Rs. 142.9 billion in the first eight 
months of 2026, up from Rs. 117.9 billion 
in the same period of 2025. WHT/AIT 
collection achieved 77.2 per cent of its 
annual estimate of Rs. 185.0 billion.
TABLE 2.4 | Performance of  Income Tax
Rs. Million
Tax Base
Jan. - Aug.
Growth 
(%)
2025
2026 (a)
Corporate and Non 
Corporate
440,513
530,033
20.3
PAYE
143,949
152,686
6.1
Tax on Interest Income
117,890
142,905
21.2
Total
702,351
825,625
17.6
Source: Department of Fiscal Policy
(a) Provisional
Value Added Tax (VAT) 
Revenue from VAT increased by 22.0 
percent to Rs. 1,322.7 billion in the first 
eight months of 2026, compared to 
Rs. 1,084.2 billion in the same period of 
2025, supported by higher domestic and 
import-related revenue collections, as well 
as improvements in tax administration 
and the continued digitalization of tax 
administration aimed at strengthening 
compliance and collection efficiency.  VAT 
on domestic activities increased by 27.5 
percent to Rs. 723.6 billion in the first eight 
months of 2026 from Rs. 567.5 billion in the 
same period of 2025 due to the expansion 
of domestic economic activities. Import 
VAT revenue increased by 15.9 percent to 
Rs. 599.0 billion in the first eight months 
of 2026 from Rs. 516.8 billion in the 
same period of 2025, which was mainly 
attributable to the VAT revenue collection 
from imported vehicles. The realization of 
revenue from VAT was 73.0 percent in the 
first eight months of 2026 from the annual 
estimate of Rs. 1,812.0 billion.
TABLE 2.5 | Performance of  VAT 
Rs. Million
Tax Base
Jan. - Aug.
Growth 
(% )
2025
2026 (a)
Domestic
567,470 
723,643 
27.5
Imports
516,778
599,037
15.9
Net Revenue
1,084,248 1,322,680
22.0
Source : Department of Fiscal Policy
(a) Provisional
Excise Duty 
Revenue generated from Excise Duty 
increased by 23.0 percent to Rs. 748.0 
billion in the first eight months of 2026, 
compared to Rs. 607.9 billion in the same 
period of 2025. This growth was mainly 
driven by higher revenue from motor 
vehicles, liquor, petroleum and cigarettes 
despite a decline in revenue from other 
excisable articles. Revenue from Excise 
Duty accounted for 20.3 percent of total tax 
revenue and 18.7 percent of total revenue 
collection during the first eight months of 
2026, while achieving 89.7 percent of the 
annual estimate. Revenue from Excise Duty 
on motor vehicles increased substantially 
by 28.3 percent to Rs. 347.0 billion in the 
first eight months of 2026, compared 
to Rs. 270.5 billion in the same period of 
2025, resulting from continued strong 
demand for motor vehicles which had

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Budget Economic and Fiscal Position Report - 2027	
33   
been restricted from importation up until 
February 1, 2025. Revenue from petroleum 
products increased moderately by 11.9 
percent to Rs. 135.1 billion during the first 
eight months of 2026, compared to Rs. 
120.8 billion in the same period of 2025. 
This increase was mainly driven by increase 
in global fuel prices resulting from the 
prevailing Middle East conflict.
Revenue from Excise Duty on liquor 
increased notably by 24.3 percent to Rs. 
181.1 billion in the first eight months of 
2026, compared to Rs. 145.7 billion in the 
same period of 2025, contributing 24.2 
percent to the total Excise Duty revenue. 
The realization of revenue from tax on liquor 
in the first eight months of 2026 was 74.5 
percent of the annual estimate for 2026. 
The overall production of alcohol increased 
by 9.2 percent to 26.1 million absolute litres 
in the first eight months of 2026 compared 
to 23.9 million absolute litres in the same 
period of 2025. Hard liquor production 
increased by 16.3 percent to 16.4 million 
absolute litres whereas beer production 
declined marginally by 2 percent to 9.4 
million absolute litres. 
Meanwhile, revenue from Excise Duty on 
other excisable items, including sweetened 
beverages, refrigerators, palm oil, and fatty 
acids, declined marginally by 4.7 percent 
to Rs. 7.7 billion in the first eight months 
of 2026, compared to Rs. 8.1 billion in the 
same period of 2025. However, tax revenue 
from cigarettes and tobacco increased 
substantially by 22.6 percent to Rs. 77.0 
billion during the first eight months of 
2026, compared to Rs 62.8 billion in the 
same period of 2025.
TABLE 2.6 | Performance of Excise Duty 
Rs. Million
Tax Base
Jan. - Aug.
Growth 
(% )
2025
2026 (a)
Liquor
     145,698         181,105 
24.3
Cigarettes and 
Tobacco
       62,810         76,995 
22.6
Motor Vehicles
     270,526       347,032 
28.3
Petroleum 
     120,787         135,116 
11.9
Other
         8,105           7,726 
-4.7
Total
     607,927       747,973 
23.0
Source : Department of Fiscal Policy
(a) Provisional
 -
 40
 80
 120
 160
 200
 240
 280
 320
 360
 400
Liquor
Cigarettes &
Tobacco
Motor
Vehicles
Petroleum
Other
2025
2026
FIGURE 2.3 | Performance of Excise Duty : January 
- August 2026 
Rs. Billion
Source : Department of Fiscal Policy
Social Security Contribution Levy (SSCL) 
Social Security Contribution Levy (SSCL) 
revenue increased by 22.2 percent to Rs. 
233.2 billion in the first eight months of 
2026, from Rs. 190.8 billion in the same 
period of 2025. This was driven by the 
expansion 
of 
domestic 
and 
external 
activities together with improved tax 
administration measures, with SSCL on 
imports recording a notable growth of 
53.0 percent to Rs. 68.9 billion, largely 
attributable to the imposition of SSCL on 
motor vehicles at the point of importation 
w.e.f. May 01, 2026. The realization of 
revenue from SSCL was 70.0 percent in the 
first eight months of 2026 from the annual 
estimate of Rs. 333.0 billion.
Customs Import Duty (CID) 
Revenue collected from CID significantly 
increased by 33.1 percent to Rs. 201.0 billion 
in the first eight months of 2026 compared 
to Rs. 151.0 billion in the same period of 2025 
achieving the 85.5 percent from the annual 
estimate. The growth is mainly attributable 
to the increase of import volume in general 
and increase vehicle importation and 
surcharge imposed on CID rates. 
Special Commodity Levy (SCL) 
Revenue collected from SCL increased 
slightly by 1.3 percent to Rs. 105.0 billion in 
the first eight months of 2026, compared 
to Rs. 103.6 billion in the same period of 
2025 by achieving 81.4 percent of the

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34                                                                      Budget Economic and Fiscal Position Report - 2027
annual estimate. This was mainly driven 
by the removing of the import restriction 
on maize, the increase in the applicable 
tax rate on potato and B’onion and the 
measures taken to facilitate the importation 
of rice.  
Commodity 
Export 
Subsidy 
Scheme 
(CESS) 
Revenue collected from CESS decreased 
by 3.7 percent to Rs. 54.5 billion in the 
first eight months of 2026 compared to 
Rs. 56.5 billion in the same period of 2025. 
The decrease was mainly attributable 
to the elimination of CESS under the 
Government’s para tariff removal scheme 
as well as the removal of CESS on imported 
fabric with effect from April 01, 2026. 
Ports and Airports Development Levy 
(PAL) 
The total revenue collected from PAL 
increased by 12.9 percent to Rs. 130.8 billion 
in the first eight months of 2026 compared 
to Rs. 115.9 billion recorded in the same 
period of 2025 recording the 68.8 percent 
achievement of the annual estimate. This 
was mainly due to the general increase 
in the import volumes as well as increase 
in import values by 24.1 percent to USD 
16,557.1 million in the first eight months of 
2026. 
Telecommunication Levy (TL)
Revenue generated from TL decreased 
by 11.6 percent to Rs. 9.3 billion in the 
first eight months of 2026 from Rs. 10.6 
billion in the same period of 2025. This 
continuous decrease was due to the 
reduction in the value of supply of non-
internet telecommunication services.
Luxury Motor Vehicle Tax and Other Taxes 
Revenue generated from Motor Vehicle Tax 
and other taxes increased by 18.6 percent 
to Rs. 53.5 billion in the first eight months 
of 2026 from Rs. 45.1 billion in the same 
period of 2025. Revenue from luxury tax on 
motor vehicles increased by 32.1 percent 
to Rs. 29.5 billion in the first eight months 
of 2026, compared to Rs. 22.3 billion in the 
same period of 2025. Revenue from betting 
and gaming levy significantly increased by 
65.3 percent to Rs. 9.9 billion in the first 
eight months of 2026 compared to Rs. 6.0 
billion recorded in the same period of 2025. 
However revenue from share transaction 
levy also decreased by 16.0 percent to 
Rs. 3.8 billion in the first eight months of 
2026, compared to Rs. 4.6 billion recorded 
in the same period of 2025. This was mainly 
due to volatility in value and volume of 
share transactions as a result of external 
economic shocks. 
TABLE  2.7 | Motor Vehicle Imports 
Item
Imports  
Jan. - Aug.
Change in 
Nos.
Change %
2025
2026
Motor Cars
36,969
75,321
38,352
    103.7 
Passenger Vans & Buses
1,077
3,000
1,923
    178.6 
Three Wheelers
9,479
38,667
29,188
    307.9 
Motor Cycles
97,969
288,573
190,604
    194.6 
Goods Transport Vehicles (a)
4,942
10,443
5,501
     111.3 
Land Vehicles (b)
4,373
7,265
2,892
      66.1 
Other  (c )
20,861 
22,277 
1,416
       6.8 
Total
175,670 
445,546 
269,876
154
Source: Department of Customs 
(a) Lorries, other Goods Transport Vehicle and Special Purpose Vehicles
(b) Tractor, Hand Tractor, Bowser and Other Land Vehicles
(c)  Single cab, Dual Purpose vehicle, Qadricycles, Motor Homes

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35   
TABLE 2.8 | Coverage of Products and Value of Imports/Exports Under Free Trade Agreements                                
Free Trade Agreement
Jan. - Aug. 2026
Import Value
Export Value
(CIF/Rs. 
Mn)
(CIF/USD 
Mn)
(FOB/Rs 
Mn)
(FOB/
USD Mn)
India - Sri Lanka Free Trade Agreement (ISFTA)
96,950
301
147,071
456
Pakistan - sri Lanka Free Trade Agreement (PSFTA)
4,631
14
11,569
36
South Asia Free Trade Agreement (SAFTA)
4,792
15
32,279
100
Asia- Pacific  Trade Agreement (APTA)
9,187
29
55,742
173
Sri Lanka - Singapore Free Trade Agreement (SSFTA)
2,969
9
33
0.1
Total
118,529
368
246,694 
766
Sources: Sri Lanka Customs, Department of Trade and Investment Policy
Non-Tax Revenue 
Non-tax revenue moderately increased 
by 39.1 percent to Rs. 314.8 billion in the 
first eight months of 2026, compared 
to Rs. 226.2 billion in the same period of 
2025 while revenue from non-tax revenue 
contributed to 7.9 percent of the total 
revenue. This was mainly due to Rs. 42.1 
billion of CBSL profit transfers together 
with an increase in revenue generated 
from Profits and dividends, rent, fines, fees 
and charges, interest income and social 
security contribution. Accordingly, revenue 
from interest increased by 19.1 percent to 
Rs. 51.7 billion in the first eight months of 
2026, compared to Rs. 43.4 billion in the 
same period of 2025. Revenue from fines, 
fees, and charges increased by 18.7 percent 
to Rs. 133.6 billion in the first eight months 
of 2026 compared to Rs. 112.6 billion in 
the same period of 2025, mainly due to 
the increase in revenue from fees and 
TABLE 2.9 |  CESS Revenue from International Trade
Rs. Million
Item
Jan. - Aug. 
2025
2026(a)
Cess on Exports
          954 
     1,261 
Tea-under Tea (Tax and Control of Export) Act, Sri Lanka Tea Board Law
           312 
       326 
Rubber-under Rubber Replanting Subsidy Act
              2 
          4 
Coconut-under Coconut Development Act
           96 
        112 
EDB Cess- under Sri Lanka Export Development Act
          544 
       819 
Cess on Imports- under Sri Lanka Export Development Act
      55,575 
   53,193 
Total
     56,529 
 54,454 
Sources: Department of Fiscal Policy and Sri Lanka Customs
(a) Provisional
charges of the Department of Motor Traffic, 
Department of Immigration and Emigration 
and the Department of Registration of 
Persons. Revenue from Social Security 
Contributions also increased by 23.8 
percent to Rs. 45.3 billion in the first eight 
months of 2026, compared to Rs. 36.6 
billion in the same period of 2025 due to 
the increase in the contribution rate and 
salaries of the public servants.  Revenue 
from rent also increased by 31.8 percent to 
Rs. 5.1 billion in the first eight months of 
2026 from Rs. 3.9 billion in the same period 
of 2025. Meanwhile, non-tax revenue from 
profits and dividends from State Owned 
Enterprises (SOEs) significantly increased 
by 36.0 percent to Rs. 19.9 billion in the first 
eight months of 2026 from Rs. 14.6 billion 
in the same period of 2025. The realization 
of non-tax revenue was 87.4 percent in the 
first eight months of 2026 as against the 
annual estimate of Rs. 360 billion.

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36                                                                      Budget Economic and Fiscal Position Report - 2027
 
 
 
Rs. Billion
Item
2025  
Jan - 
August 
2026 
(Annual 
Estimate)
2026 
Jan-
August(a) 
Major Reasons for Variance
Income Taxes
 702.3
 1,210.0 
825.6 Revenue from Income tax increased by 17.6 percent 
to Rs. 825.6 billion in the first eight months of 2026 
compared to the same period of the last year, reaching 
68.2 percent of the annual estimate for 2026. This 
performance was mainly attributable to: 
−	
Increase in the Corporate Income Tax (CIT) rate 
on the liquor, tobacco, and betting and gaming 
industries to 45 percent from 40 percent, with 
effect from 01.04.2025;
−	
Imposition of a 15 percent income tax on the 
gains and profit earned or derived from any 
foreign source, with effect from 01.04.2025
−	
Increase in the Withholding Tax (WHT) rate on 
interest to 10 percent from 5 percent, with effect 
from 01.04.2025;
−	
Increase in wages in the public and private 
sectors;
−	
Increase Capital Gains Tax rate applicable to 
individuals and partnerships from 10 percent to 
15 percent with effect from 03.06.2026.
−	
Growth in Gross Domestic Product (GDP) of 4.7 
percent in the first half of 2026, reflecting the 
expansion of economic activities; and
−	
Broaden the tax base by strengthening tax 
administration measures reflecting surge of 
number of tax file registrations on income tax by 
12.1 percent to 1,425,144 as end August 2026 from 
1,270,851 files registered at end August 2025.
Despite the growth of 6.1 percent in PAYE/APIT 
revenue during the first eight months of 2026, 
compared to the same period of 2025, the 
combined effect of increasing the annual tax-free 
threshold from Rs. 1.2 million to Rs. 1.8 million 
and broadening the 18 percent tax slab, effective 
from 01 April 2025, contributed to lower overall 
income tax collection. 
Value Added 
Tax (VAT)
 1084.2 
 1,812.0 
1322.7 
Revenue from VAT showed a significant increase of 
22.0 percent to Rs. 1,322.7 billion in the first eight 
months of 2026, compared to the same period of 
2025 achieving 73.0 percent of the annual estimate for 
2026. This performance was mainly driven by:
−	
Growth in Gross Domestic Product (GDP) of 4.7 
percent in the first half of 2026, reflecting the 
expansion of economic activities;
−	
Removal of zero-rated VAT on imported fabric and 
application of the standard VAT rate, with effect 
from 01.04.2026;
−	
Increase in the number of motor vehicles imported 
by 150.1 percent to 441,097 units in the first eight 
months of 2026, compared to the same period of 
2025;  
−	
Increase in total imports by 24.1 percent to USD 
16,557.1 million in the first eight months of 2026, 
compared to the same period of 2025; and
TABLE 2.10 | Variance Analysis of Government Revenue

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Budget Economic and Fiscal Position Report - 2027	
37   
 
 
 
Rs. Billion
Item
2025  
Jan - 
August 
2026 
(Annual 
Estimate)
2026 
Jan-
August(a) 
Major Reasons for Variance
−	
Increase in the number of registered taxpayers by 
25.5 percent to 38,024 as at end August 2026, from 
30,298 at end August 2025, reflecting improved 
VAT compliance supported by tax administration 
measures.
Excise Duty
607.9 
 834.0
 748.0
The realization of Excise Duty was 89.7 percent as 
against the annual estimate for 2026 mainly due to:
−	
Increase in production of liquor by 9.2 percent 
to 26.1 million liters in the first eight months of 
2026, compared to the same period of 2025;
−	
Increased revenue from Excise Duty on motor 
vehicles, 
following 
relaxation 
of 
import 
restrictions on all types of motor vehicle imports 
with effect from February 2025;
−	
Increase in the number of motor vehicles 
imported by 150.1 percent to 441,097 units in 
the first eight months of 2026, compared to the 
same period of 2025; 
−	
Increase in revenue from Excise Duty on 
cigarettes by 22.2 percent to Rs. 75.7 billion, 
owing to an increase in the sale of cigarette 
sticks by 5 percent to 1,282 million sticks during 
the review period;  and
−	
Growth in Excise Duty on petroleum by 11.9 
percent due to increase of petrol imports by 
2.2 percent and diesel imports by 8.7 percent 
during the first eight months of 2026 compared 
with the same period of 2025.
However, revenue from other Excisable articles such 
as sugar-based beverages, refrigerators and palm oil 
fatty acids declined by 4.7 percent during the review 
period and negatively contributed to the overall 
performance of excise duty revenue.
Customs Import 
Duties
 151.0  235.0
 201.0 The revenue collection from Customs Import Duty 
(CID) significantly increased by 33.1 percent to Rs. 
201 billion in the first eight months of 2026 realizing 
85.5 percent of annual budget estimate for 2026. This 
performance was mainly driven by:
−	
Introduction on CID on motor vehicles 
together with 50 percent Surcharge on 
applicable CID on motor vehicles;
−	
Increase in the number of motor vehicles 
imported by 154.0 percent to 445,546 units in 
the first eight months of 2026, compared to 
the same period of 2025;
−	
Introduction of a four-band Customs Import 
Duty structure, revising the existing rates 
of 0 percent, 15 percent and 20 percent to 
0 percent, 10 percent, 20 percent and 30 
percent, with effect from 01.04.2026; and
−	
Increase in total imports by 24.1 percent to 
USD 16,557.1 million in the first eight months of 
2026, compared to the same period of 2025
TABLE 2.10 | Variance Analysis of Government Revenue  (Contd..)

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38                                                                      Budget Economic and Fiscal Position Report - 2027
 
 
 
Rs. Billion
Item
2025  
Jan - 
August 
2026 
(Annual 
Estimate)
2026 
Jan-
August(a) 
Major Reasons for Variance
Port and Airport 
Development 
Levy (PAL)
 115.9     190.0 
130.8 The realization of Ports and Airports Development 
Levy (PAL) was 68.8 percent as against the annual 
budget estimate for 2026 in the first eight months of 
2026 mainly driven by:
−	
Increase in total imports by 24.1 percent to USD 
16,557.1 million in the first eight months of 2026, 
compared to the same period of 2025
Special 
Commodity 
Levy (SCL)
103.6    129.0 
 105.0
 
Revenue from Special Commodity Levy (SCL) grew 
modestly by 1.3 percent to Rs. 105.0 billion in the first 
eight months of 2026, compared to the same period 
of 2025, reaching 81.4 percent of the annual budget 
estimate for 2026. This growth was mainly attributable 
to:
−	
Upward revision of the duty rates on big onions 
from Rs. 10 per kg to Rs. 50 per kg and on 
potatoes from Rs. 60 per kg to Rs. 80 per kg, with 
effect from 26.08.2025
Social Security 
Contribution 
Levy (SSCL)
 190.8 
 333.0 
 233.2 The Social Security Contribution Levy (SSCL) revenue 
significantly increased by 22.2 percent to Rs.233.2 
billion in the first eight months of 2026 compared to 
the same period of last year, realizing 70.0 percent of 
the annual budget estimate for 2026, This performance 
was mainly driven by:
−	
Growth in Gross Domestic Product (GDP) of 
4.7 percent in the first half of 2026, reflecting 
the expansion of economic activity;
−	
Imposition of SSCL at the point of importation 
of motor vehicles with effect from 01.05.2026; 
and
−	
Increase in total imports by 24.1 percent to 
USD 16,557.1 million in the first eight months of 
2026, compared to the same period of 2025.
Other Taxes
 112.6 
 167.0
117.3
 
Revenue from other taxes increased by 4.1 percent 
to Rs. 117.3 billion in the first eight months of 2026, 
compared to the same period of 2025, realizing 70.2 
percent of the annual estimate for 2026. This was 
primarily driven by:
−	
Increase in revenue from Luxury Tax on motor 
vehicles to Rs. 29.5 billion in the first eight 
months of 2026, from Rs. 22.3 billion in the 
same period of 2025, following the relaxation of 
restrictions on motor vehicle imports
However, revenue from the Telecommunication 
Levy declined by 11.6 percent in the first eight 
months of 2026, reflecting lower consumption of 
telecommunication services and partly offsetting the 
overall performance of other taxes. In addition, the 3.7 
percent decline in revenue from the CESS Levy further 
widened the deviation from the estimate.
TABLE 2.10 | Variance Analysis of Government Revenue  (Contd..)

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Budget Economic and Fiscal Position Report - 2027	
39   
 
 
 
Rs. Billion
Item
2025  
Jan - 
August 
2026 
(Annual 
Estimate)
2026 
Jan-
August(a) 
Major Reasons for Variance
Non-Tax 
Revenue
226.2
 360.0 
314.8 Non-tax revenue increased by 39.1 percent in the first 
eight months of 2026, compared to the same period of 
2025, reaching 87.4 percent of the annual estimate for 
2026. This strong performance was mainly supported 
by profits transferred by the Central Bank, interest 
income, social security contribution receipts, fines, 
fees and charges, rent, and profits and dividends of 
State-Owned Enterprises (SOEs).
Total
3,294.7
 5,270.0 
3,998.3  
Compiled by the Department of Fiscal Policy
(a)Provisional
BOX 2.1 І Major Fiscal Measures: January–September 2026
Effective Date
Measures
Income Tax- Amendments to the Inland Revenue Act, No. 24 of 2017
03.06.2026
Inland Revenue (Amendment) Act, No. 11 of 2026
-	
The Inland Revenue (Amendment) Act, No. 11 of 2026 was enacted to give effect 
to the tax revisions proposed in the Budget 2025 and 2026.
•	
To remove the requirement of filing the Statement of Estimated Tax payable 
(SET) with effect from the Year of Assessment 2025/2026. 
•	
To calculate the amount of each instalment of tax payable by a person for a 
year of assessment based on the income tax payable by such person for the 
previous year of assessment.
•	
To exempt payments made by the Sri Lanka Air Force to non-residents for 
aircraft, software licenses, or related services from income tax.
•	
To clarify the chargeability of income tax on proceeds from life insurance 
policies. Accordingly, the amounts received under a life insurance policy 
by an individual upon, the death of the insured person, the maturity of the 
policy or the surrender of the policy was excluded in calculating assessable 
income. However, any annuity, pension, retirement, superannuation or 
similar payments made under the life insurance policy are not excluded from 
assessable income.
•	
To treat the amount realized by transferring an asset as a gift or donation to 
the Government of Sri Lanka or to a university established or deemed to be 
established under the Universities Act, No. 16 of 1978, as equal to its net cost 
immediately before the transfer. 
•	
To increase the Capital Gains Tax rate applicable to individuals and 
partnerships from 10 percent to 15 percent. The Capital Gains Tax rate 
applicable to all other entities is 30 percent.
•	
To revise Tax resident rules as follows: -
i.	 Any individual holding a special residence visa is not consider a 
resident of Sri Lanka for income tax purpose.
ii.	 An individual employed on a Sri Lanka-flagged vessel is consider as 
a resident of Sri Lanka only for the period they are employed on the 
vessel.
iii.	 A foreign citizen working on a Sri Lanka-flagged vessel is only pay 
income tax solely on income derived from such employment, and 
not on any other foreign income.
TABLE 2.10 | Variance Analysis of Government Revenue  (Contd..)

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Cited in: Cyberlaw and policy scorecard, Home

40                                                                      Budget Economic and Fiscal Position Report - 2027
Effective Date
Measures
•	
To consider any unit trust or mutual fund that fails to provide the unit holders, 
with a certificate detailing income, exempt amounts, withholding tax, and 
other information as specified by the Commissioner General, as a company 
resident in Sri Lanka, and the provisions of the Act applicable to resident 
companies are apply accordingly.
•	
To allow any donations to the Government or government established 
funds that cannot be fully deducted in the year of assessment to be carried 
forward as qualifying deductions in subsequent years.
•	
To waive off the interest imposed under the provisions of the Inland Revenue 
Act, No. 24 of 2017, and the Surcharge Tax Act, No.14 of 2022. 
•	
To reduce the minimum investment required to qualify for enhanced capital 
allowances from USD 3 million to USD 250,000.
•	
 Other Administrative provisions
In addition to the above amendments, various administrative reforms aimed 
at enhancing compliance, streamlining procedures, and strengthening the 
efficiency and effectiveness of tax administration have been incorporated in 
the IR Bill.
Stamp Duty- Stamp Duty (Special Provisions) Act, No. 12 of 2006
24.02.2026
Gazette Notification No. 2477/22 dated 24.02.2026
-	
To exempt the Stamp Duty of Rs. 25/= levied on receipts issued for payments 
exceeding Rs. 25,000/= made by the Government to people affected by 
disasters.
Betting and Gaming Levy - Betting and Gaming Levy Act, No. 40 of 1988
17.12.2025
w.e.f. 01.01.2026
Betting and Gaming Levy (Amendment) Act, No. 25 of 2025
-	
The Betting and Gaming Levy Act, No. 40 of 1988 was amended to give effect to 
the following revenue measures proposed in the Budget Speech 2025:
•	
To increase the Gross Collection Levy from 15 percent to 18 percent; and
•	
To increase the Casino Entrance Levy imposed on Sri Lanka citizens from 
USD 50 to USD 100.
Social Security Contribution Levy (SSCL) – Social Security Contribution Levy Act, No. 25 of 2022
09.04.2026
w.e.f. 01.07.2026
w.e.f.
01.05.2026
Social Security Contribution Levy (Amendment) Act, No. 10 of 2026
•	
To reduce the annual turnover threshold for the registration of Social Security 
Contribution Levy (SSCL) from Rs. 60 million to Rs. 36 million with effect from 
July 01, 2026; and
•	
To impose SSCL at the time of importation or manufacture and sale of motor 
vehicles, and to exempt motor vehicles from SSCL at the point of after-sales 
transactions, with effect from May 01, 2026.
Value Added Tax (VAT)- Value Added Tax Act, No. 14 of 2002
01.04.2026
Gazette Notification No. 2478/07 dated 03.03.2026
-	 To remove zero rate VAT on imported fabric and apply standard VAT rate.
30.06.2026
Value Added Tax (Amendment) Act, No. 14 of 2026
-	
Value Added Tax (Amendment) Act, No. 14 of 2026 was enacted to give effect 
to the following key measures:
•	
To postpone the effective date of the imposition of VAT on the supply of 
services through electronic platforms by the non-resident suppliers until 
July 01, 2026.
•	
To introduce the provisions relating to the manner of registration, charging, 
collection, filing return, etc. relating to the imposition of VAT on the supply 
of services through digital platforms by non-resident suppliers;
•	
To incorporate amendments to the VAT Act consequential to the removal of 
SVAT and to facilitate the refunding process;
BOX 2.1 І Major Fiscal Measures: January–September 2026 (Contd..)

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Budget Economic and Fiscal Position Report - 2027	
41   
Effective Date
Measures
•	
To allow for the deduction of Entertainment tax charged by the local 
authorities in ascertaining the value of supply of film exhibition service;
•	
To write off VAT arrears as per the records of Commissioner General of Inland 
Revenue in respect of projects carried out by construction contractors of 
Tsunami projects;
•	
To disallow input tax deduction on the capital goods such as machinery, 
equipment or vehicles imported for projects on re-export basis where the 
Value Added Tax at the time of import is deferred, unless such goods are 
re-exported as agreed;
•	
To mandate and operationalize the use of Point of Sale (POS) Machines by 
the VAT registered persons, within three months of the date so prescribed. 
•	
To combine the Social Security Contribution Levy (SSCL) and VAT on financial 
services and to charge as VAT at an increased rate of 20.5% on financial 
services; 
•	
To introduce criminal proceedings and sanctions on the offences committed 
under the VAT Act; and 
                                                                                            
•	
To clarify the policy relating to the applicability of VAT on the supply of 
financial services, on Dividend Income.
Excise (Special Provisions) Duty -Excise (Special Provisions) Act, No. 13 of 1989
01.04.2026
Gazette Notification No. 2478/06 dated 03.03.2026
-	
To impose Excise Duty on newly created National Subdivisions, with rates 
assigned based on the prevailing rate applicable to the relevant HS Heading/ 
Subdivision.
Excise (Ordinance) Duty – Excise Ordinance (Chapter 52)
12.12.2025
Excise Notification No.03/2025 (Gazette Notification No. 2466/22 dated 11.12.2025)
-	
To revise the Annual Excise License Fee and the Security Deposit and to impose 
one-time fee for industry entry.
Ports and Airports Development Levy (PAL) – Ports and Airports Developments Levy Act, No. 18 of 2011
01.04.2026
Gazette Notification No. 2478/05 dated 03.03.2026
-	
To impose PAL on newly created National Subdivisions, with rates assigned 
based on the prevailing rate applicable to the relevant HS Heading/ Subdivision.
CESS Levy – Sri Lanka Export Development Act, No. 40 of 1979
01.04.2026
Gazette Notification No. 2478/04 dated 03.03.2026
-	
To impose CESS levy on newly created or amended National Subdivisions.
01.04.2026
Gazette Notification No. 2479/38 dated 10.03.2026
-	
To remove CESS levy on imported fabric as proposed in Budget Speech 2026.
-	
To reduce CESS rate by 50 percent on intermediate input in line with the 
Development Policy Operation (DPO).
Customs Import Duty (CID) – Revenue Protection Act, No. 19 of 1962
01.04.2026
Revenue Protection Order No. 01/2026 (Gazette Notification No. 2478/03 dated 
03.03.2026)
-	
To introduce a Four Band Customs, Import Duty Structure, revising the existing 
Customs Import Duty Rates of 0 percent, 15 percent, and 20 percent to 0 percent, 
10 percent, 20 percent and 30 percent effective from April 01, 2026. 
Customs Surcharge- Customs Ordinance (Chapter 235)
01.02.2026
Gazette Notification No. 2473/31 dated 31.01.2026
-	
To continue the imposition of a 50 percent surcharge on the importation of 
Motor Vehicles till December 31, 2026.
BOX 2.1 І Major Fiscal Measures: January–September 2026 (Contd..)

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42                                                                      Budget Economic and Fiscal Position Report - 2027
Effective Date
Measures
01.04.2026
Gazette Notification No. 2479/55 dated 12.03.2026
-	
To remove the 50 percent of surcharge on the importation of Motor Vehicles 
considering the increase of CID from 20 percent to 30 percent with effect from 
April 01, 2026.
16.05.2026
Gazette Notification No. 2488/56 dated 15.05.2026
-	
To continue the imposition of a 15 percent of surcharge on the importation of 
Motor Vehicles with effect from May 16,2026 for a period of three months.
18.05.2026
Gazette Notification No. 2488/69 dated 17.05.2026
-	
To avert the manipulation of concession that has been granted the letter of 
credit established on or before May 15,2026 for importation of motor vehicles.
15.08.2026
Gazette Notification No. 2501/88 dated 14.08.2026
-	
To continue the imposition of a 50 percent of surcharge on importation of Motor 
Vehicles with effect from August 15,2026 to December 31,2026 considering the 
ongoing war situation in the middle east and the pressure exerted on the foreign 
exchange rate.                          
Special Commodity Levy (SCL) – Special Commodity Levy Act, No. 48 of 2007
01.01.2026
Gazette Notification No. 2469/12 dated 31.12.2025
-	
To extend the validity period of prevailing SCL on importation of 62 commodities 
till December 31, 2026.
01.04.2026
Gazette Notification No. 2482/09 dated 31.03.2026
-        Granting approval to provide a concessional Special Commodity Levy, exempting 
the remainder of the applicable tax, subject to specific regulatory approvals, for 
the importation of desiccated coconut pieces for local coconut oil production 
and the importation of salt for pharmaceutical manufacturing purposes, effective 
from April 1, 2026, to December 31, 2026.
05.05.2026
Gazette Notification No. 2487/02 dated 04.05.2026
-	
To Increase SCL on importation of Maize, considering recommendation by Food 
Policy and Security Committee till December 31, 2026.
Imports & Exports (Control) Regulations- Imports and Exports (Control) Act, No. 01 of 1969
23.03.2026
Imports and Exports (Control) Regulations No. 01 of 2026 (Gazette Extraordinary No. 
2481/02 of 23.03.2026)
-	
To allow Air Carriers of Sri Lanka providing international air services to 
import retreaded aircraft tyres that confirm to the requirements specified by 
internationally accredited aviation authorities and are classified under HS Code 
4012.13, subject to conditions.
01.04.2026
Imports and Exports (Control) Regulations No. 02 of 2026 (Gazette Extraordinary No. 
2482/08 of 31.03.2026)
-	
To update the Special Import License Regulations No. 01 of 2023, in accordance 
with the National Subdivisions of the Harmonized System Codes published 
by the Revenue Protection Order published in the Gazette Extraordinary No. 
2478/03 dated March 03, 2026.
02.04.2026
Imports and Exports (Control) Regulations No. 03 of 2026 (Gazette Extraordinary No. 
2482/12 of 02.04.2026)
-	
To remove Import Control License (ICL) requirement on importation of rice variety 
known as GR 11 rice including Ponni Samba and Kiri/Paal Ponni rice considered 
to be substitutes to Samba and Keeri Samba, respectively and classified under 
Harmonized System (HS) Code of 1006.30.29, until April 30, 2026.
BOX 2.1 І Major Fiscal Measures: January–September 2026 (Contd..)

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Budget Economic and Fiscal Position Report - 2027	
43   
Effective Date
Measures
06.06.2026, 
01.01.2028
Imports and Exports (Control) Regulations No. 04 of 2026 (Gazette Extraordinary No. 
2487/29 of 07.05.2026)
-	
To ban importation of refrigeration and Air Conditioning equipment and 
accessories categorized under HS Headings 84.15, 84.18, 84.19, 84.79, 87.04, and 
87.07 and working only with Hydrochlorofluorocarbons (HCFCs) with effect from 
June 06, 2026 and to ban importation of compressors categorized under HS 
Code 8414.30 which are used as a component of refrigeration system for such 
refrigeration and Air Conditioning equipment and accessories and working only 
with Hydrochlorofluorocarbons with effect from January 01, 2028.
15.06.2026
Imports and Exports (Control) Regulations No. 05 of 2026 (Gazette Extraordinary No. 
2493/03 of 15.06.2026)
-	
To impose Export Control License (ECL) requirement on export of metal related 
products, classified under fifty-five (55) Harmonized System (HS) Codes.
19.06.2026
Imports and Exports (Control) Regulations No. 06 of 2026 (Gazette Extraordinary No. 
2493/39 of 18.06.2026)
-	
To amend regulations pertaining to Payment Terms for importation of goods, 
making it mandatory for; 
•	
All banks to assign a unique number to each transaction and forthwith 
notify the Sri Lanka Customs Department of all information including 
the valid Taxpayer Identification Number (TIN) of the respective 
remitter (importer), address of the remitter (importer), address of the 
beneficiary, account number of the beneficiary, bank code, branch 
code, type of currency and amount, terms of payment, terms of 
delivery, date of remittance, proforma invoice number, and description 
of goods, regarding each transaction relating to, or made under, the 
number so assigned, 
•	
Importers to register with the Sri Lanka Customs Department as an 
eligible importer for the purpose of making advance payments prior to 
making an advance payment.
10.07.2026
Imports and Exports (Control) Regulations on Prohibition of Importation of Goods No. 
07 of 2026 (Gazette Extraordinary No. 2496/38 of 10.07.2026)
-	
To prohibit the importation of goods that are mined, produced or manufactured 
wholly or partially by forced labour; 
Embarkation Levy - Finance Act, No. 25 of 2003
29.12.2025
Gazette Notification No. 2469/03 dated 29.12.2025 
-	
To extend tax exemption period for persons leaving Sri Lanka by aircraft from 
Mattala Rajapaksa International Airport (MRIA) for 18 months from December 29, 
2025, to June 26, 2027.
Strategic Development Projects- Strategic Development Projects Act, No. 14 of 2008
08.02.2026
Gazette Notification No. 2474/66 dated 08.02.2026
-	
To prescribe eligibility criteria for projects to be identified as a Strategic 
Development Project and applicable tax exemptions or concessions.
The Colombo Port City Economic Commission Act, No. 11 of 2021
20.01.2026
Colombo Port City Economic Commission (Amendment) Act, No. 1 of 2026
-	
The Port City Economic Commission Act, No. 11 of 2021 was amended to give 
effect to the following key measures:
•	
To remove income tax exemption applicable on employment income of 
individuals employed within the area of Colombo Port City.
•	
To Strengthen Compliance and Monitoring via Annual Estimation and 
Disclosure of Tax Expenditure, mandatory filing of Corporate Income Tax 
Returns and ongoing monitoring of performance targets (jobs, investment 
realized, time period stipulated) by Colombo Port City Economic 
Commission.
•	
To provide regulatory measures including effective banking supervision in 
line with international standards.
BOX 2.1 І Major Fiscal Measures: January–September 2026 (Contd..)

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44                                                                      Budget Economic and Fiscal Position Report - 2027
2.3 Government Expenditure
Government expenditure during the first 
eight months of 2026 amounted to Rs. 
3,966.9 billion of which Rs. 3,531.0 billion 
was recurrent expenditure and Rs. 435.9 
billion was capital expenditure and net 
lending. 
Government 
expenditure 
is 
required to be authorized by Parliament 
annually. Accordingly, the Appropriation 
Act, No. 23 of 2025, was passed by 
Parliament, enabling the government to 
incur expenditure in 2026.
Table 2.11 | Performance of Government 
Expenditure
Rs. Million
Item
Jan-Aug
2025
2026(a)
Recurrent Expenditure
3,381,309      3,531,045 
Salaries
        760,687        826,962 
Pension
282,905        332,363 
Interest
1,687,571      1,609,194 
Other
650,146        762,526 
Capital & Net Lending
         331,183        435,867 
Total Expenditure
     3,712,492      3,966,913 
Source : Department of Fiscal Policy
(a) Provisional
Personal Emoluments and Pensions
The expenditure on personal emoluments 
of public servants, including employees 
of Provincial Councils, increased by 8.7 
percent to Rs. 827.0 billion in the first 
eight months of 2026, from Rs. 760.7 billion 
in the same period of 2025. Meanwhile, 
expenditure 
on 
pension 
payments 
increased by 17.5 percent to Rs. 332.4 
billion in the first eight months of 2026, 
compared to Rs. 282.9 billion in the same 
period of 2025. This increase was mainly 
driven by increases in the basic salaries of 
public servants and pension revisions in 
line with the 2025 Budget Proposal.
Interest Payments
Interest payments on both domestic and 
foreign debt, decreased by 4.6 percent to 
Rs. 1,609.2 billion in the first eight months 
of 2026, compared to Rs. 1,687.6 billion 
in the same period of 2025. The interest 
payments on domestic debt decreased 
by 5.2 percent to Rs. 1,389.7 billion in the 
first eight months of 2026, compared to 
Rs. 1,466.5 billion in the same period of 
2025. Interest payments on foreign debt 
decreased by 0.7 percent to Rs. 219.5 
billion in the first eight months of 2026 
from Rs. 221.1 billion in the same period of 
2025.
Welfare Expenditure
The 
Government 
continued 
the 
strengthening of social safety net programs 
with special attention of providing a 
relief to the vulnerable and marginalized 
segments of society through improved 
targeting and coverage while empowering 
them to improve their livelihoods.
In the first eight months of 2026, the total 
welfare spending including social welfare, 
social security, education, health and 
nutrition, development assistance and 
subsidy programs on production and labor 
market inclusion increased by 17.2 percent 
to Rs. 738.1 billion compared to Rs. 629.4 
billion to the same period of 2025. Social 
welfare and social security expenditures 
amounted to Rs. 667.4 billion in the first 
eight months of 2026. This includes specific 
allocations such as Rs. 164.2 billion for the 
“Aswesuma” program including categorical 
payments for Elderly allowance, allowance 
for differently abled persons and Kidney 
patients’ allowance which is a 14.5 percent 
increase compared to the same period of 
2025. 
Furthermore, government expenditure on 
medical supplies for government hospitals, 
including Ayurvedic hospitals, increased 
by 54 percent, rising from Rs. 74.9 billion in 
the first eight months of 2025 to Rs. 115.4 
billion during the corresponding period in 
2026. This increase was mainly attributed 
to the improved efficiency of procurement 
methods and the smooth functioning of 
medical supply chains.

BEFPR 2027 · file page 59 printed page 45

Budget Economic and Fiscal Position Report - 2027	
45   
TABLE 2.12 | Welfare Expenditure 
Rs.Million
Programme
  Jan.- Aug.
2025
2026 
Provisional
Social Welfare
 94,426
133,030
Medical supplies for Government Hospitals (including Ayurvedha)
 74,952
115,394
Health insurance for school children (Suraksha)
1,376
857
Agrahara insuarance scheme for pensioners
486
602
Allowance for pre-school teachers
490
565
"Ranaviru Mapiya Rakawarana" allowance
916
994
Property loan interest to public servants
958
856
Subsidy for economically unprofitable routes, contribution of socially 
obligatory bus services (Sisu sariya, Gami seriya and Nisi seriya) and 
Armed Forces Bus Passes
2,608
2,778
"Suwasariya" - 1990 free ambulance service
1,686
2,021
Interest difference on senior citizens' accounts
10,000
1,734
World Food Programme
332
136
Flood and Drought Relief
41
6,683
Other
581
411
Social Security
462,944
534,407
Cash grant for low income families
98,132
113,200
Support for low-income differently abled persons
9,453
12,331
Financial support for elderly people 
29,769
32,305
Financial support for kidney patients
3,166
3,649
Financial assistance to purchase school stationeries
2,833
2,793
Pension
282,631
332,363
Service compensation for death & injured soldiers
33,312
34,653
Pension for Farmers
3,523
2,942
Other
126
171
Health and Nutrition
25,442
25,123
Thriposha programme
1,750
1,621
Nutritional food package for expectant mothers
4,196
3,472
School nutritional foods programme
17,894
18,219
Morning meal for pre-school children
1,342
1,229
Other
260
582
Education
18,931
19,000
School texbooks
1,567
867
School uniforms
58
236
Shoes for students in difficult schools
2,490
1,891
Scholarships – grade 5 students
824
347
Mahapola and bursaries
3,245
3,578
Loan scheme for the students who are unable to get into the state 
universities
1,335
1,059
School & higher education season Tickets
8,250
9,000
Others
1,162
2,022
Development Subsidies
27,683
26,628
Fertilizer subsidy
22,625
23,179
Other
5,058
3,449
Total
629,426
738,188
Source: Department of National Budget

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46                                                                      Budget Economic and Fiscal Position Report - 2027
Public Investment
According to the accounting format, 
Public investments amounting to over Rs. 
445.5 billion were incurred during the first 
eight months of 2026. Of this amount, Rs. 
45.2 billion was spent on the rehabilitation 
and 
improvement 
of 
infrastructure 
damaged 
by 
Cyclone 
“Ditwah.” The 
overall implementation progress stood 
at around 27 percent. The relatively low 
level of progress was mainly attributable 
to several bottlenecks, including supply 
chain disruptions, particularly the shortage 
of bitumen required for road construction, 
delays in procurement processes, land 
acquisition and environmental clearances, 
changes in projects’ scope, and project 
management-related issues.
The 
above 
public 
investments were 
incurred mainly across the following 
sectors during the first eight months of 
2026:
i.	 Rs. 126.0 billion for the maintenance, 
rehabilitation, and development of 
rural roads, bridges, highways, and 
expressways;
ii.	 Rs. 25.7 billion for the development 
and expansion of pipe borne water 
supply schemes, development of 
housing schemes, and facilities in 
urban areas;
iii.	 Rs. 
28.7 
billion 
for 
transport 
development 
including 
the 
rehabilitation 
and 
improvement 
of railway fleet, rail roads and bus 
transportation 
iv.	 Rs. 23.5 billion for the improvement 
of productivity and efficiency in 
the  agriculture value chain by 
introducing modern technology; 
v.	 Rs. 22.5 billion for ensuring water 
security for agriculture purposes, 
mainly 
by 
constructing 
and 
maintaining 
irrigation-related 
infrastructure; 
vi.	 Rs. 19.1  billion for the rehabilitation 
and 
infrastructure 
development 
of 
schools, 
higher 
education 
institutions, 
vocational 
training 
centers, 
and 
teacher 
training 
programs, 
with 
the 
aim 
of 
enhancing the quality of education;
vii.	 Rs. 24.4 billion for the maintenance 
and development of hospitals and 
the provision of medical equipment 
to hospitals; 
viii.	 Rs. 2.3  billion for the development 
of infrastructure related to provision 
of electricity; 
ix.	 Rs. 28.2 billion for Micro, Small 
and 
Medium-sized 
Enterprises 
development loan schemes; and
x.	 Rs. 55.2 billion for providing equity 
for State Owned Enterprises.
2.4 Performance of the Cash Flow of the 
General Treasury
The General Treasury's cash flow operations 
during 2026 show a strong improvement in 
the government's fiscal liquidity position 
compared with budget estimates. Higher-
than-anticipated cash inflows, together 
with prudent expenditure management, 
significantly 
reduced 
the 
projected 
cash deficit and enabled the Treasury to 
maintain a healthy cash balance at the 
end of the period. These developments 
reflect 
the 
government's 
continued 
efforts to strengthen revenue collection 
mechanisms, enhance fiscal discipline, and 
improve the efficiency of public financial 
management.
According to the Treasury Cash Flow 
Statement, total cash inflows from revenue 
and other receipts reached Rs. 3,886.8 
billion compared to the estimated inflow 
of Rs. 3,347.5 billion, recording an increase 
of Rs. 539.3 billion or 16.1 percent above 
the estimate. This favorable performance 
reflects improved revenue mobilization 
and stronger-than-expected collections 
from government revenue sources and 
other receipts.
On the expenditure side, total cash 
outflows for recurrent payments amounted

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Budget Economic and Fiscal Position Report - 2027	
47   
to Rs. 3,441.0 billion against an estimated 
Rs. 4,342.8 billion. This represents a 
reduction of Rs. 901.8 billion compared to 
the budget estimate, indicating effective 
expenditure 
management 
and 
the 
containment of recurrent spending during 
the period under review. Similarly, cash 
outflows for capital payments amounted to 
Rs. 497.7 billion compared to the estimated 
allocation of Rs. 774.0 billion, resulting in 
a lower utilization of Rs. 276.3 billion. This 
outcome may be attributed to the phased 
implementation of development projects 
and prioritization of public investment 
expenditure.
As a result of higher-than-estimated 
cash inflows and lower-than-estimated 
expenditure, the net cash deficit was 
substantially 
lower 
than 
originally 
anticipated. While a deficit of Rs. 1,769.2 
billion had been projected, the actual 
deficit amounted to only Rs. 51.9 billion. 
This represents an improvement of Rs. 
1,717.3 billion compared to the estimated 
position and highlights the positive impact 
of enhanced revenue performance and 
expenditure control measures on overall 
Treasury operations.
To finance its obligations, the Government 
raised gross borrowings amounting to 
Rs. 2,217.9 billion during the period, which 
was slightly higher than the estimated 
borrowing requirement of Rs. 2,214.1 
billion. 
Meanwhile, 
debt 
repayments 
amounted to Rs. 2,206.3 billion compared 
to the estimated repayment requirement 
of Rs. 2,225.1 billion. Consequently, net 
borrowing recorded a positive balance 
of Rs. 11.6 billion against the estimated 
negative net borrowing position of Rs. 11.0 
billion, indicating that gross borrowings 
exceeded debt repayments during the 
period. This reflects the structural dynamics 
of treasury financing during the period.
Consequently, the closing cash balance 
at period-end stood at Rs. 936.0 billion, 
significantly outperforming the estimated 
negative balance of Rs. 864.3 billion. 
Maintaining a substantial positive cash 
balance demonstrates the effectiveness of 
government cash management strategies 
and provides an important liquidity buffer 
to meet future expenditure requirements 
and debt service obligations.
Overall, the General Treasury's cash flow 
performance in 2026 reflects a notable 
strengthening 
of 
fiscal 
operations, 
supported by robust revenue growth, 
controlled expenditure levels, and prudent 
debt management practices. The improved 
cash position achieved during the period 
enhances 
the 
government's 
financial 
resilience and strengthens its capacity to 
sustain fiscal stability while supporting 
priority economic and social programs.
TABLE 2.13 | Government  Treasury Cash Flow Operations
Rs. Billion
Item
Jan. - Aug.
2025
2026
Actual
Estimate
Actual
Opening Cash balance year /month
805.1
915.8
915.8
 Total cash inflow from revenue and other receipts 
3,187.4
3,347.5
3,886.8
 Total cash outflow for recurrent payments  
-3,292.4
-4,342.8
-3,441.0
 Total cash outflow for capital payments  
-327.7
-774.0
-497.7
 Net cash surplus / (deficit) 
-432.7
-1,769.2
-51.9
 Gross borrowing 
2,295.6
2,214.1
2,217.9
 Debt repayment  
-1,457.6
-2,225.1
-2,206.3
 Net borrowing 
838.0
-11.0
11.6
 Adjustment account balance (TEB, net deposits, Other Transfer etc.) 
-4.7
          - 
60.5
Closing Cash balance year / month end
1,205.8
-864.3
936.0
Source: Department of Treasury Operations

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48                                                                      Budget Economic and Fiscal Position Report - 2027
2.5 Management of Government Debt
Parliament 
approved 
a 
total 
gross 
borrowing limit of Rs. 3,740 billion for the 
fiscal year 2026, of which Rs.2,536 billion 
was allocated for the period from 1 January 
to 31 August, 2026. The borrowings during 
this period were sourced from both 
domestic and foreign markets, amounting 
to Rs. 1,859.8 billion and Rs. 304.1 billion 
respectively. The primary purposes of 
these borrowings were to meet debt 
service obligations and to fund various 
development initiatives. 
As of the reporting date, approximately 
85.9 percent of the total borrowings 
in the first eight months of 2026 were 
secured domestically. Treasury Bonds 
were exclusively utilized for domestic 
debt 
servicing. 
Utilization 
of 
the 
approved borrowing limit during this 
period amounted to Rs. 1,403.9 billion , 
predominantly through the issuance of 
Treasury Bonds. 
Data indicate a net negative issuance 
of Treasury Bills of approximately Rs. 
760 billion, meaning that redemptions 
exceeded new issuances. This suggests 
that other sources of financing were used 
to reduce the outstanding stock of Treasury 
Bill during the period.  Gross Treasury Bill 
issuances amounted to Rs. 3,568.8 billion, 
while the outstanding stock of Treasury 
Bills stood at Rs. 2,378.6 billion as at the 
end of August 2026.
As at 31 August 2026, the outstanding 
domestic debt of the Central Government 
amounted to Rs. 19,419.2 billion. Treasury 
Bonds accounted for 83.8 percent of the 
domestic debt stock (Rs. 16,278.4 billion), 
followed by Treasury Bills at 12.2 percent 
(Rs. 2,378.6 billion) and term loans at 3.7 
percent (Rs. 716.4 billion).
TABLE 2.14 | Behaviour of Yield Rates on Government Securities and Exchange Rates: 2025-2026
Period
Treasury Bills (%)
Treasury Bonds (%)
Average 
Exchange 
Rate Rs/
USD
91 days
182 days
364 days
2 year
3 year
4 year
5 year
2025
Jan
7.93
8.09
8.47
          - 
          - 
10.42 
10.73 
296.18
Feb
7.57
7.87
8.35
          - 
          - 
10.63 
296.80
Mar
7.50
7.84
8.25
          - 
          - 
10.72 
295.91
Apr
7.65
7.97
8.30
          - 
          - 
10.30 
10.64 
298.53
May
7.55
7.77
7.98
          -        8.85 
9.47 
299.41
Jun
7.55
7.75
7.94
          - 
          - 
9.41 
299.90
Jul
7.62
7.91
8.03
          - 
          - 
9.46 
9.77 
301.12
Aug
7.58
7.89
8.03
          - 
          - 
301.49
Sep
7.57
7.89
8.02
          - 
          - 
9.76 
302.20
Oct
7.52
7.90
8.04
          - 
          - 
9.80 
303.13
Nov
7.52
7.91
8.03
          - 
          - 
9.53 
9.56 
306.35
Dec
7.74
8.27
8.45
          - 
          - 
9.55 
9.80 
309.20
2026
Jan
7.84
8.26
8.36
          - 
          - 
9.72 
309.65
Feb
7.63
7.92
8.24
          - 
          - 
9.50 
309.36
Mar
7.80
8.09
8.41
          - 
          - 
9.63 
311.91
Apr
8.20
8.25
8.52
          - 
          - 
10.12 
316.45
May
9.36
9.68
9.83
          - 
          - 
11.86 
324.91
Jun
10.14
10.21
10.17
          - 
          - 
11.44 
334.43
Jul
9.86
10.21
10.20
          - 
          - 
11.57 
11.90 
336.02
Aug
9.06
9.44
9.89
          - 
          - 
10.54 
- 
332.91
Sources : Public Debt Management Office and Central Bank of Sri Lanka

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Budget Economic and Fiscal Position Report - 2027	
49   
TABLE 2.15 | Domestic Debt Issuance: January-
August 2026
Rs. Billion
Instrument
Jan - Aug 2026
Treasury Bonds (Gross)
             1,859.8 
Treasury Bills (Gross)
             3,568.8 
Total
            5,428.6 
Source: Public Debt Management Office
2.6 Foreign Financing
Overview
Sri Lanka’s debt restructuring process 
has now largely concluded, a key step 
towards restoring debt sustainability and 
macroeconomic stability. Over the four-
year IMF programme period, Sri Lanka will 
benefit from approximately USD 9.5 billion 
in debt service payment reductions, a 31 
percent reduction in the coupon rate of 
Sri Lanka’s Bonds to 4.4 percent, and an 
extension of the average maturity profile of 
over five years. 
Foreign Financing Commitments
The Government entered into a loan 
agreement 
with 
the 
International 
Development Association (IDA) of the 
World Bank for USD 50 million to finance 
the Digital Transformation Project. The loan 
agreement was signed on May 13, 2026 
and carries an interest rate of 1.50 percent, 
with a total tenure of 25 years, including a 
5-year grace period. 
On 04 August 2026, the Government 
entered into an agreement with the 
Export-Import Bank of India (EXIM Bank) for 
a total financing of USD 350 million under 
the Indian Credit Line – Rehabilitation 
and Reconstruction Package to address 
the 
devastation 
caused 
by 
Cyclone 
Ditwah. The facility comprises two loan 
components of USD 250 million and USD 
100 million, carrying floating interest rates 
of 1.5 and 0.3 percentage points below the 
one-year MCLR, respectively. Both loans 
have a 20-year maturity, including a 5-year 
grace period.
Foreign Financing Disbursements and 
Utilization
During the period from 1 January to 
31  August 2026, total foreign loan 
disbursements amounted to USD 1,069.1 
million. 
The largest share of disbursements was 
recorded under the International Monetary 
Fund’s Extended Fund Facility (IMF-EFF), 
accounting for 77.5 percent of the total. 
This was followed by disbursements under 
loan agreements with the World Bank (10 
percent) and the Asian Development Bank (7 
percent) . Following the signing of bilateral 
debt restructuring agreements with the 
main bilateral creditors, disbursements 
resumed, and  bilateral disbursements 
during the period amounted to USD 30.1 
million.
TABLE 2.16 | Disbursements of Foreign Loans: 
January-August 2026
 USD million
Development Partner/ Lending 
Agency
Disbursements*
Loan
Bilateral
30.1
Japan
15.1
Saudi Fund
9.7
Export Import Bank of India
5.3
Multilateral
1,039.0
IMF
828.2
World Bank
103.1
Asian Development Bank
75.9
Asian Infrastructure Investment 
Bank
23.5
OPEC Fund
4.8
International Fund for Agricultural 
Development
3.5
Total
1,069.1
Source: Public Debt Management Office
For conversion of disbursements made in different 
currencies into USD, the exchange rates prevailed on 
each disbursement date have been used
For conversion of SDR into USD, month end exchange rate 
of SDR applied to the end of previous month published by 
CBSL have been used.
*Provisional 
In terms of disbursement allocation by 
purpose, the Budget Support sector 
accounted for the majority share at 82 
percent of total disbursements,  followed 
by the Roads and Bridges development 
(6.0 percent) and the Water Supply and 
Sanitation  (2.5 percent).

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50                                                                      Budget Economic and Fiscal Position Report - 2027
IMF
78%
World Bank
10%
Asian Development Bank
7%
Asian Infrastructure 
Investment Bank
2%
Japan
1%
Saudi Fund For Arab 
Economic Development
1%
Export-Import Bank of 
India
0.5%
OPEC Fund
0.5%
International Fund for 
Agricultural Development
0.3%
FIGURE 2.4 | Disbursements by Development Partner: January-August 2026
Source : Public Debt Management Office
Budget Support
82%
Roads and Bridges
6%
Water Supply & 
Sanitation
2%
Ground Transport
2%
Humanitarian Assistance
2%
Agriculture
2%
Housing & Urban 
Develop.
1%
** Other
3%
FIGURE 2.5 | Disbursements by Purpose: January-August 2026
Source : Public Debt Management Office
** Other = Education & Training, Health & Social Welfare, Land Development, Power & Energy, Rural Development,
  Media, Finance & Insurance, Tourism & Hotel Industry, Science & Technology, Trade

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Budget Economic and Fiscal Position Report - 2027	
51   
External Debt Stock and External Debt 
Service Payments
External debt of the central government as 
of the end of August 2026 amounted to USD 
37.7 billion1.  Multilateral debt accounted for 
39 percent of total government external 
debt, followed by commercial debt at 33 
percent and bilateral debt at 28 percent. 
Approximately 81 percent of commercial 
debt comprised outstanding International 
Sovereign Bond (ISB) issuances, with the 
remainder consisting of foreign currency 
term financing facilities (syndicated loans). 
Among multilateral creditors, the Asian 
Development Bank (ADB) and the World 
Bank 
(WB) 
together 
accounted 
for 
approximately 78 percent of the total 
multilateral debt. Of bilateral debt, 59 
percent was held by non-Paris Club 
creditors, with the remaining 41 percent 
held by Paris Club members. Total debt 
service payments2 from 1 January to 
 
1	 - 	 Provisional, 
Only 
the 
Central 
Government 
outstanding Foreign Debt are depicted.
   	 - 	 Included unpaid Principal accumulated from the 
date of debt standstill policy was adopted.
   	 - 	 Non-resident holdings of T-bill / T-bonds are not 
included.
   	 - 	 Outstanding amounts of ISBs have not been 
classified on the current resident/ non-resident 
basis of their holdings.
2	 Debt Service = Principal Payments + Interest 
Payments
31 August in 2026 amounted to USD 
1,708.8 million, of which USD 1,039.1 million 
was for principal repayments and the 
remaining USD 669.7 million for  interest 
payments. 
As of end-August 2026, there were no 
external payment arrears. External payment 
arrears consist of debt-service obligations 
(principal and interest) to non-residents 
that have not been paid when due, as 
specified in the contractual agreements, 
subject to any applicable grace period. 
For the purposes of IMF-EFF program 
monitoring, 
overdue 
debt 
and 
debt 
service obligations that are in dispute are 
not considered external payment arrears. 
Arrears arising from the non-payment of 
debt service for which a rescheduling 
or 
restructuring 
agreement 
is 
being 
sought are likewise excluded from this 
definition. Arrangements are being made 
to meet payment requirements under both 
restructured and non-restructured loan 
agreements.

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Budget Economic and Fiscal Position Report - 2027	
55   
3.1 Overview 
The 
Sri 
Lankan 
economy 
remained 
resilient in 2026 despite back-to-back 
shocks: Cyclone 'Ditwah' and the surge 
in energy prices arising from the conflict 
in the Middle East, recording a growth 
of 4.7 percent in the first half of the year 
and 
twelve 
consecutive 
quarters 
of 
positive growth. This was an improved 
performance achieved since the economic 
crisis of 2022. The economy moved from 
a contraction of 7.3 percent in 2022 to a 
growth of 5.0 percent in 2025, while year 
end inflation declined from 57.2 percent 
to 2.1 percent respectively. Over the same 
period, government revenue doubled from 
8.2 percent to 16.6 percent of GDP, the 
primary balance improved from a deficit 
of 3.7 percent to a surplus of 5.4 percent 
of GDP, and central government debt 
declined from 114.2 percent to 91.6 percent 
of GDP. These gains were preserved in 
2026, with primary and overall budget 
surpluses maintained during the first eight 
months of the year, while gross official 
reserves increased to USD 6.9 billion by 
end-September 2026 from USD 1.9 billion 
at end-2022, equivalent to more than three 
months of imports. Reflecting this recovery, 
the World Bank reclassified Sri Lanka as an 
'Upper-Middle-Income Country' with effect 
from July 01, 2026.
All sectors of the economy except 
agriculture expanded during the first 
half of 2026, although quarterly growth 
moderated from 5.1 percent in the first 
quarter to 4.2 percent in the second 
quarter. The Industry sector grew by 7.2 
percent, mainly driven by construction, 
mining and quarrying, and the manufacture 
of food, beverages and tobacco products, 
while the Services sector expanded by 3.1 
percent, supported by financial services, 
transportation and IT services. However, 
the Agriculture sector contracted by 0.6 
percent, mainly due to lower output in 
marine fishing and rice cultivation. Strong 
domestic demand, reflected in rapid private 
sector credit growth and higher imports of 
consumer and investment goods, together 
with expansionary readings of leading 
indicators, points to continued economic 
momentum.
The unemployment rate increased to 4.0 
percent in the second quarter of 2026 from 
3.7 percent in the first quarter, while the 
labour force participation rate rose to 50.0 
percent from 49.2 percent, respectively.
Headline inflation, as measured by the 
Colombo Consumer Price Index (CCPI, 
2021=100), increased from 2.3 percent in 
January 2026 to 8.3 percent in October 
2026, mainly due to higher domestic 
FIGURE 3.1 | From Crisis to Recovery - Key Indicators: 2022 and 2025
Real GDP growth
Inflation
Government revenue
Percent
Percent (CCPI, end year)
Percent of GDP
2022
2025
2022
2025
2022
2025
−7.3
→
5.0
57.2
(2013=100)
→
2.1
(2021=100)
8.2
→
16.6
Contraction to growth
Price stability restored 
More than doubled
Primary balance
Central government debt
Gross official reserves
Percent of GDP
Percent of GDP
USD billion
2022
2025
2022
2025
2022
2025
−3.7
→
5.4
114.2
→
91.6
1.9
→
6.8
Deficit to surplus
Down 22.6 percentage points
Up 3.6 times
Sources: Department of Census and Statistics, Central Bank of Sri Lanka, Department of Fiscal Policy

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56                                                                      Budget Economic and Fiscal Position Report - 2027
Agriculture,
Forestry and 
Fishing
7%
Industries
29%
Services
57%
Taxes less 
Subsidies on 
Products
7%
energy and food prices following the pass-
through of elevated global energy prices. 
Core inflation also increased to 5.6 percent, 
reflecting the second-round effects of 
higher energy prices and strengthening 
demand conditions. The Central Bank of Sri 
Lanka (CBSL) expects headline inflation to 
remain above the 5 percent target through 
the first quarter of 2027, before gradually 
easing towards the target, while medium-
term inflation expectations remain broadly 
anchored.
In view of the elevated inflation outlook, 
the potential second-round effects of 
energy 
price 
adjustments, 
continued 
expansion in private sector credit fuelling 
import demand and pressures on the 
external sector, the CBSL increased the 
Overnight Policy Rate by 100 basis points 
to 8.75 percent in May 2026, and has since 
maintained it at that level.
The external sector came under pressure, 
as the escalation of the conflict in the 
Middle East raised global fuel prices and 
the country’s import bill, compounded 
by higher vehicle imports. Merchandise 
imports increased by 21.3 percent to USD 
18.7 billion in the first nine months of 2026, 
while exports increased by 5.3 percent to 
USD 10.8 billion, widening the trade deficit 
to USD 7.9 billion from USD 5.2 billion in the 
corresponding period of 2025. Workers’ 
remittances increased by 18.1 percent to 
USD 6.9 billion in the first nine months of 
2026, partly reflecting inflows for relief 
and rebuilding following Cyclone 'Ditwah', 
while earnings from tourism declined by 9.2 
percent to USD 2.2 billion, partly reflecting 
the revised methodology adopted by the 
Sri Lanka Tourism Development Authority 
for estimating tourism earnings and fewer 
arrivals 
from 
longer-staying 
European 
markets. 
Consequently, 
the 
current 
account recorded a deficit of USD 420.4 
million in the first nine months of 2026, 
compared to a surplus of USD 1,853.2 
million in the corresponding period of 
2025. The Sri Lankan rupee depreciated by 
6.8 percent against the US dollar on a year-
to-date basis by end-October 2026.
The stock market remained volatile, with 
the All-Share Price Index decreasing by 
FIGURE  3.2 | GDP Growth 
Percent
Source : Department of Census & Statistics
-2.2
2.0
4.3
5.0
4.0
5.3
5.5
4.7
5.0
5.3
4.8
5.1
4.2
-3
-2
-1
0
1
2
3
4
5
6
2023
Q2
2023
Q3
2023
Q4
2024
Q1
2024
Q2
2024
Q3
2024
Q4
2025
Q1
2025
Q2
2025
Q3
2025
Q4
2026
Q1
2026
Q2
FIGURE 3.3 | Composition of GDP - First Half of 
2026(a)
Source : Department of Census and Statistics
(a) Constant Prices
4.4 percent year-on-year to 20,813 points 
at end-September 2026, remaining 8.0 
percent below its end-2025 level, amid net 
foreign sales of Rs. 56.8 billion during the 
first nine months of the year.
Sri 
Lanka’s 
improved 
macroeconomic 
fundamentals 
were 
recognized 
internationally. Fitch Ratings upgraded 
Sri Lanka’s Long-Term Foreign-Currency 
Issuer Default Rating to ‘B-’ from ‘CCC+’ 
with a Stable Outlook on September 22, 
2026. On October 04, 2026, Sri Lanka and 
the International Monetary Fund reached 
a staff-level agreement on the Seventh 
Review under the Extended Fund Facility 
arrangement, together with the conclusion 
of the 2026 Article IV Consultation, which, 
subject to approval by the IMF Executive 
Board, would provide access to around 
USD 345 million.

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Budget Economic and Fiscal Position Report - 2027	
57   
3.2 Economic Growth
The economy grew by 4.7 percent in the first 
half of 2026, compared to the 4.8 percent 
growth in the same period of 2025. Growth 
was led by the Industry sector, which 
expanded by 7.2 percent, compared to the 
growth of 7.9 percent in the same period 
of 2025, and accounted for 43.4 percent of 
overall growth. The Services sector grew by 
3.1 percent, compared to the growth of 3.3 
percent in the same period of 2025. Taxes 
less subsidies on products increased by 
13.5 percent, compared to the increase of 
10.7 percent in the same period of 2025. In 
contrast, the Agriculture sector contracted 
by 0.6 percent, compared to the growth 
of 0.6 percent in the same period of 2025. 
Accordingly, the Services sector and Taxes 
less subsidies on products contributed 
38.2 percent and 19.5 percent to overall 
growth, respectively, while the Agriculture 
sector made a negative contribution of 1.0 
percent.
Agriculture
The Agriculture sector, accounting for 
7.8 percent of GDP at current prices, 
contracted by 0.6 percent in the first half 
of 2026, compared to the growth of 0.6 
percent in the same period of 2025. This 
was mainly due to the contractions in 
marine fishing and marine aquaculture (19.1 
percent), growing of rice (11.2 percent), 
and freshwater fishing and freshwater 
aquaculture (50.8 percent), together with 
declines in growing of rubber (8.5 percent), 
growing of tea (2.6 percent) and animal 
production (1.3 percent). However, the 
growing of oleaginous fruits (coconut, king 
coconut and oil palm) subsector expanded 
significantly 
by 
30.8 
percent, 
partly 
offsetting the overall contraction. Forestry 
and logging (12.5 percent), growing of 
spices, aromatic, drug and pharmaceutical 
crops (3.9 percent), growing of vegetables 
(2.2 percent) and growing of fruits (2.1 
percent) subsectors also expanded.
Rs. Million
Sector
2022
2023(b)
2024(b)
2025(b)
First half 
Growth (%)
2025(b)
2026(a)
2025(b)
2026(a)
Agriculture, Forestry and Fishing
911,252    911,839    916,971   929,668 
465,380
462,422 
0.6
-0.6
1
Growing of Cereals (except rice)
 16,507      15,971     16,635     16,676 
8,313
8,356
5.0
0.5
2
Growing of Rice
94,730    110,946    115,438    121,533 
61,409
54,511
9.6
-11.2
3
Growing of Vegetables
103,161     97,959 
    97,173     90,317 
45,663
46,652
-7.6
2.2
4
Growing of Sugar Cane, Tobacco 
and Other Non-perennial Crops
  3,803       3,742       3,697      3,850 
1,928
1,717
2.6
-11.0
5
Growing of Fruits
 73,310     73,995     75,472     76,927 
39,458
40,284
3.8
2.1
6
Growing of Oleaginous Fruits 
(Coconut, King Coconut, Oil Palm)
 111,196   104,758     92,716   100,334 
44,813
58,613
-12.5
30.8
7
Growing of Tea (Green Leaves)
 62,867      61,912    63,080     63,966 
32,831
31,961
7.0
-2.6
8
Growing of Other Beverage Crops 
(Coffee, Cocoa etc,.)
   1,229 
 1,141        1,169        1,051 
526
523
-10.1
-0.5
9
Growing of Spices, Aromatic, Drug 
and Pharmaceutical Crops
101,653     99,982    101,492    101,792 
52,723
54,769
-0.4
3.9
10
Growing of Rubber
 23,871    22,024     22,910      21,541 
11,055
10,119
-9.1
-8.5
11
Growing of Other Perennial Crops
 27,533    28,086    25,005     23,729 
11,974
11,799
-4.7
-1.5
12
Animal Production
83,307     83,645 
    97,155   107,309 
53,407
52,417
15.8
-1.3
13
Plant Propagation
      965 
  728 
  596 
  763 
324
333
15.0
2.6
14
Agriculture supporting activities
33,062     32,888     28,966    30,552 
17,137
17,104
4.3
-0.2
15
Forestry and Logging
 50,931 
    47,221     46,227       51,191 
23,037
25,925
2.9
12.5
16
Marine Fishing and Marine 
Aquaculture
 95,447  100,099   104,949   104,850 
54,043
43,728
5.2
-19.1
17
Fresh Water Fishing and Fresh 
Water Aquaculture
 27,682     26,739    24,290     13,288 
6,740
3,314
-46.8
-50.8
Industries
3,308,573 3,002,981 3,337,231 3,597,326 1,784,136 1,912,985 
7.9
7.2
18
Mining and Quarrying
198,613    154,313   184,430   215,568 
101,799
120,668
14.3
18.5
19
Manufacture of Food, Beverages 
and Tobacco Products
869,371   899,739   954,559 
      
1,004,413 
491,177
515,332
4.2
4.9
20
Manufacture of Textile, Wearing 
Apparel and Leather Related 
products
511,860  450,438  500,445  540,558 
282,837
274,688
13.4
-2.9
TABLE 3.1 | Sectoral Composition of GDP at Constant (2015) Prices

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58                                                                      Budget Economic and Fiscal Position Report - 2027
Rs. Million
Sector
2022
2023(b)
2024(b)
2025(b)
First half 
Growth (%)
2025(b)
2026(a)
2025(b)
2026(a)
21
Manufacture of Wood and Products 
of Wood and Cork, except Furniture
 29,758    23,807     24,975     26,232 
11,805
12,727
1.4
7.8
22
Manufacture of Paper Products, 
Printing and Reproduction of Media 
Products
       
52,069 
    47,259     48,734     53,846 
30,885
31,668
14.7
2.5
23
Manufacture of Coke and Refined 
Petroleum Products
   6,474     21,895     19,690    23,026 
12,485
11,438
10.0
-8.4
24
Manufacture of Chemical Products 
and Basic Pharmaceutical Products
 82,349     82,949    90,995     93,549 
49,408
54,003
-1.7
9.3
25
Manufacture of Rubber and Plastic 
Products
67,505     56,157 
   60,973     62,587 
32,190
29,217
3.5
-9.2
26
Manufacture of Other Non-metallic 
Mineral Products
 85,182    84,670     86,816  100,890 
54,783
61,898
20.3
13.0
27
Manufacture of Basic Metals and 
Fabricated Metal Products
       
58,780 
   60,303 
   70,963     82,144 
34,167
39,078
9.9
14.4
28
Manufacture of Machinery and 
Equipment
  59,181    50,229     53,372     54,145 
23,679
24,729
7.3
4.4
29
Manufacture of Furniture
  60,837    56,089     61,740     63,528 
40,272
43,454
9.9
7.9
30
Other Manufacturing and Repair 
and Installation of Machinery and 
Equipment
  79,088     66,747     72,427     68,239 
39,205
37,416
-7.5
-4.6
31
Electricity, Gas, Steam and Air 
Conditioning Supply
178,059    174,017   184,480   201,472 
99,754
106,867
7.0
7.1
32
Water Collection, Treatment and 
Supply
 14,059      11,590     11,900     12,584 
6,824
7,306
2.3
7.1
33
Sewerage, Waste, Treatment and 
Disposal Activities
  28,070     27,955     28,319     30,612 
13,955
14,258
6.2
2.2
34
Construction
927,319   734,823    882,411   963,935 
458,911
528,238
9.0
15.1
Services
7,217,485 7,256,690   7,431,130 7,676,443 3,706,256 3,819,622 
3.3
3.1
35
Wholesale and Retail Trade
1,675,528   1,677,941   1,697,914 1,722,223 
865,521
878,458
1.4 
1.5
36
Transport of Goods and Passenger 
including Warehousing
1,364,677   1,428,381  1,461,417   1,505,214 
738,577
763,808
3.6
3.4
37
Postal Courier Activities
 19,780    20,349      21,416    23,320 
11,585
12,144
10.5
4.8
38
Accommodation, Food and 
Beverage Service Activities
166,030   209,106   276,975    311,444 
147,677
154,387
14.2
4.5
39
Programming and Broadcasting 
Activities and Audio Video 
Productions
  37,350     36,551 
   37,760    38,502 
19,629
19,969
1.6
1.7
40
Telecommunication
140,524 
  137,078   142,540 
  146,976 
72,160
75,547
3.0
4.7
41
IT Programming Consultancy and 
Related Activities
238,455   232,331   246,185   277,594 
136,313
153,808
12.5
12.8
42
Financial Service Activities and 
Auxiliary Financial Services
529,744   475,201   491,206   543,449 
263,987
290,922
11.1
10.2
43
Insurance, Reinsurance and Pension 
Funding
 78,187    103,519     88,934    101,901 
47,456
54,394
4.5
14.6
44
Real Estate Activities, Including 
Ownership of Dwelling
554,456   521,463   543,273    562,911 
285,695
295,459
3.8
3.4
45
Professional Services
248,467  254,360   263,382   269,829 
120,504
122,344
2.7
1.5
46
Public Administration and Defence; 
Compulsory Social Security
629,031   618,542   600,314   592,529 
274,576
269,540
-2.5
-1.8
47
Education
302,435 
  307,712   314,759   318,736 
163,462
165,157
1.2
1.0
48
Human Health Activities, Residential 
Care and Social Work Activities
237,677  236,087   234,361   241,337 
102,979
104,221
2.7
1.2
49
Other Personal Service Activities
995,147  998,069 1,010,693 1,020,480 
456,137
459,467
0.9
0.7
Gross Value Added (GVA), at basic 
prices
11,437,311 11,171,510 11,685,332 12,203,438 5,955,772 6,195,030 
4.4
4.0
(+) Taxes less Subsidies on 
Products
723,576  742,640   823,623   925,140 
429,461
487,289
10.7
13.5
Gross Domestic Product(GDP) at 
market prices
12,160,886 11,914,150 12,508,954 13,128,577 6,385,234 6,682,319 
4.8
4.7
Source : Department of Census and Statistics
(a)  Provisional 
(b)  Revised
TABLE 3.1 | Sectoral Composition of GDP at Constant (2015) Prices (Contd..)

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Budget Economic and Fiscal Position Report - 2027	
59   
FIGURE  3.4 | Composition of Agriculture Sector -  First Half of 2026(a)
Source : Department of Census and Statistics
(a) Constant Prices
Rice
The growing of rice subsector contracted 
by 11.2 percent in the first half of 2026, 
compared to a growth of 9.6 percent 
in the corresponding period of 2025. 
Nevertheless, based on a gross sown extent 
of 831,105 hectares and after accounting 
for crop losses, paddy production in the 
2025/26 Maha season is estimated at 2.82 
million metric tonnes, an increase of 2.7 
percent compared to 2.75 million metric 
tonnes in the 2024/25 Maha season, despite 
the severe impact of Cyclone Ditwah, which 
struck at the beginning of the season. For 
the 2026 Yala season, based on a gross 
sown extent of 508,793 hectares reported 
as at end-June 2026, paddy production is 
forecast at 2.01 million metric tonnes, 12.9 
percent lower than the 2.31 million metric 
tonnes produced in the 2025 Yala season. 
To ease the burden on farmers from the rise 
in input costs arising from the conflict in 
the Middle East, the Government provided 
an additional fertilizer subsidy of Rs. 5.5 
billion for the 2026 Yala season, as part of a 
temporary relief package.
Reflecting the shortage of Samba and 
Keeri Samba varieties, the average retail 
price of Keeri Samba rice increased by 
38.4 percent year-on-year to Rs. 370.21 per 
kilogram in January 2026 and rose further 
to Rs. 375.11 per kilogram in April 2026. 
In view of an anticipated severe shortage 
by May 2026, the Government permitted 
the importation of GR 11 rice and similar 
substitute varieties during April 2026 to 
meet consumer demand and stabilise 
prices. Subsequently, the average retail 
price of Keeri Samba declined by 22.5 
percent from its April level to Rs. 290.69 
per kilogram in August 2026.
Growing of Cereals 
(except rice)
1.8%
Growing of Rice
11.8%
Growing of Vegetables
10.1%
Growing of Sugar 
Cane, Tobacco and 
Other Non-perennial 
Crops
0.4%
Growing of Fruits
8.7%
Growing of Oleaginous 
Fruits ( Coconut, King 
Coconut, Oil Palm)
12.7%
Growing of Tea 
(Green Leaves)
6.9%
Growing of Other 
Beverage Crops 
(Coffee, Cocoa etc,.)
0.1%
Growing of Spices, 
Aromatic, Drug and 
Pharmaceutical Crops
11.8%
Growing of Rubber
2.2%
Growing of Other 
Perennial Crops
2.6%
Animal Production
11.4%
Plant Propagation 
0.1%
Agriculture supporting 
activities
3.7%
Forestry and Logging
5.6%
Marine Fishing and 
Marine Aquaculture
9.5%
Fresh Water Fishing 
and Fresh Water 
Aquaculture
0.7%

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60                                                                      Budget Economic and Fiscal Position Report - 2027
Tea, Rubber and Coconut
The growing of tea subsector contracted 
by 2.6 percent in the first half of 2026, 
compared to the growth of 7.0 percent 
in the corresponding period of 2025. 
Tea production declined by 3.3 percent 
to 131.2 million kg, compared to 135.8 
million kg in the corresponding period of 
2025. This was mainly due to dry weather 
conditions in March and April 2026 and 
reduced fertilizer application. The growing 
of rubber subsector contracted by 8.5 
percent in the first half of 2026, compared 
to the contraction of 9.1 percent in the 
corresponding period of 2025. Rubber 
production declined by 4.7 percent to 32.6 
million kg, compared to 34.2 million kg in the 
corresponding period of 2025, mainly due 
to adverse weather conditions, as the dry 
weather that prevailed in the early months 
of the year affected latex yields, while the 
increase in rainy days during May 2026 
reduced tapping operations. However, the 
growing of oleaginous fruits (coconut, king 
coconut and oil palm) subsector expanded 
significantly by 30.8 percent in the first half 
of 2026, compared to the contraction of 
12.5 percent in the corresponding period 
of 2025. Accordingly, coconut production 
increased by 30.1 percent to 1,747 million 
nuts, compared to 1,343 million nuts in the 
corresponding period of 2025, reflecting 
the recovery from the relatively low 
production recorded in 2025.
Cereals, Vegetables, Fruits, Spices and 
Pharmaceutical Crops
The growing of cereals (except rice) 
subsector recorded a marginal growth 
of 0.5 percent in the first half of 2026, 
compared to the growth of 5.0 percent 
in the corresponding period of 2025. 
The growing of vegetables subsector 
expanded by 2.2 percent, compared 
to the contraction of 7.6 percent in the 
corresponding period of 2025, while the 
growing of fruits subsector expanded by 
2.1 percent, compared to the growth of 
3.8 percent in the corresponding period 
of 2025. The growing of spices, aromatic, 
drug and pharmaceutical crops subsector 
expanded by 3.9 percent, compared 
to the contraction of 0.4 percent in the 
corresponding period of 2025.
Fisheries and Livestock
The marine fishing and marine aquaculture 
subsector contracted by 19.1 percent in the 
first half of 2026, compared to the growth 
of 5.2 percent in the corresponding 
period of 2025. Marine fish production 
declined by 19.0 percent to 128.6 million 
kg, compared to 158.8 million kg in the 
corresponding period of 2025. This reflects 
rising 
sea 
surface 
temperatures 
and 
higher fuel prices. The freshwater fishing 
and freshwater aquaculture subsector 
contracted significantly by 50.8 percent, 
compared to the contraction of 46.8 
percent in the corresponding period of 
2025, partly reflecting the depletion of 
fish stocks in reservoirs. Meanwhile, the 
animal production subsector contracted 
by 1.3 percent in the first half of 2026, 
compared to the growth of 15.8 percent in 
the corresponding period of 2025, partly 
reflecting the loss of poultry and livestock 
caused by Cyclone Ditwah.
Industry and Manufacturing
The Industry sector, which accounts for 
26.6 percent of GDP at current prices, 
grew by 7.2 percent in the first half of 2026, 
compared to the growth of  7.9 percent in the 
corresponding period of 2025. This was 
mainly supported by the expansion in 
construction (15.1 percent), mining and 
quarrying (18.5 percent), manufacture of 
food, beverages and tobacco products 
(4.9 percent), manufacture of other non-
metallic mineral products (13.0 percent), 
manufacture of basic metals and fabricated 
metal products (14.4 percent), manufacture 
of 
chemical 
products 
and 
basic 
pharmaceutical products (9.3 percent), and 
electricity, gas, steam and air conditioning 
supply (7.1 percent) subsectors.
The manufacture of wood and products 
of wood and cork, except furniture (7.8 
percent), the manufacture of furniture (7.9 
percent), the manufacture of machinery 
and 
equipment 
(4.4 
percent), 
the 
manufacture of paper products, printing 
and reproduction of media products (2.5

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Budget Economic and Fiscal Position Report - 2027	
61   
Mining and 
Quarrying
6.3%
Manufacturing
59.4%
Electricity, Gas, 
Steam and Air 
Conditioning 
Supply
5.6%
Water Collection, 
Treatment and 
Supply
0.4%
Sewerage, Waste, 
Treatment and 
Disposal Activities
0.7%
Construction
27.6%
percent), water collection, treatment and 
supply (7.1 percent), and sewerage, waste 
treatment and disposal activities (2.2 
percent) also expanded in the first half of 
2026.
However, some subsectors contracted 
in the first half of 2026. The manufacture 
of textiles, wearing apparel and leather 
related products contracted by 2.9 percent, 
compared to the growth of 13.4 percent 
in the corresponding period of 2025, 
reflecting the decline in export earnings 
from textiles and garments amid subdued 
external demand. The manufacture of coke 
and refined petroleum products contracted 
by 8.4 percent, reflecting lower crude oil 
import volumes for refining amid supply 
disruptions associated with the conflict 
in the Middle East. The manufacture of 
rubber and plastic products contracted by 
9.2 percent, and other manufacturing, and 
repair and installation of machinery and 
equipment contracted by 4.6 percent.
Total power generation increased by 
7.1 percent to 9,304 GWh in the first half 
of 2026, compared to 8,688 GWh in the 
corresponding period of 2025. Electricity 
generation through hydropower declined 
by 22.9 percent to 2,294 GWh, compared 
to 2,975 GWh in the corresponding period 
of 2025, while generation from wind 
declined by 16.3 percent to 139 GWh. 
However, generation from fuel oil increased 
significantly by 62.3 percent to 1,004 GWh 
and coal-based generation increased by 
4.7 percent to 2,809 GWh. Electricity 
generation by the private sector increased 
significantly by 36.2 percent to 3,058 
GWh in the first half of 2026, compared to 
2,245 GWh in the corresponding period of 
2025, with electricity generation from non-
conventional renewable energy sources 
increasing by 16.6 percent to 2,158 GWh. 
The sale of electricity to industries increased 
by 4.7 percent to 2,426 GWh, compared 
to 2,316 GWh in the corresponding period 
of 2025, consistent with the expansion in 
industrial activities.
FIGURE  3.5 | Composition of Industry Sector - First Half of 2026(a)
Source : Department of Census and Statistics
(a) Constant Prices

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62                                                                      Budget Economic and Fiscal Position Report - 2027
Services
The Services sector, which accounts for 53.5 
percent of GDP at current prices, grew by 3.1 
percent in the first half of 2026, compared 
to the growth of   3.3 percent in the 
corresponding period of 2025. The growth 
was mainly driven by the expansion in 
financial service activities and auxiliary 
financial services (10.2 percent), insurance, 
reinsurance and pension funding (14.6 
percent), transportation of goods and 
passengers, including warehousing (3.4 
percent) and IT programming, consultancy 
and related activities (12.8 percent). 
The telecommunication (4.7 percent), 
postal and courier activities (4.8 percent), 
accommodation, 
food 
and 
beverage 
service activities (4.5 percent) and real 
estate 
activities, 
including 
ownership 
of dwellings (3.4 percent), subsectors 
also expanded in the first half of 2026. 
Wholesale and retail trade (1.5 percent), 
professional 
services 
(1.5 
percent), 
programming and broadcasting activities 
and audio video productions (1.7 percent), 
human health activities, residential care 
and social work activities (1.2 percent), 
education (1.0 percent) and other personal 
service activities (0.7 percent) recorded 
marginal growth. However, the public 
administration and defence; compulsory 
social security subsector contracted by 1.8 
percent in the first half of 2026.
FIGURE 3.6 | Composition of Manufacturing Sector: First Half of 2026(a)
Source : Department of Census and Statistics
(a) Constant Prices
Food, Beverages and 
Tobacco Products
45.4%
Textile, Wearing Apperal 
and Leather Related 
products
24.2%
Chemical Products and 
Basic Pharmaceutical 
Products
4.8%
Rubber and Plastic 
Products
2.6%
Other Non-metallic 
Mineral Products
5.5%
Machinery and 
Equipment
2.2%
Furniture
3.0 %
Other
11.7%
 3.8

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Budget Economic and Fiscal Position Report - 2027	
63   
TABLE 3.2 | Selected Indicators of Service Sector 
Indicator
2021
2022
2023
2024
2025
2025
2026(a)
Port Services
Jan-Aug
Jan- Aug
Vessels Arrived (No) 
 4,180 
 4,073 
  4,809 
   4,562 
   5,120 
   3,334 
  3,527 
Total Cargo Handled (MT ‘000)
 109,356 
 100,376 
103,794 
120,203 
125,383 
  84,580 
 90,110 
Total Container Handled (TEU 
‘000)
 7,249 
 6,862 
  6,950 
 7,792 
 8,301 
  5,435 
  5,995 
Transshipment (TEU ‘000)(c)
 6,050 
 5,832 
  5,754 
   6,623 
   6,587 
  4,353 
  4,828 
Telecommunication Sector
  End June   End June 
Fixed Telephone Lines (No.'000)
 2,852 
 2,651 
  2,308 
 2,122 
   2,627    3,473 
  2,708 
Cellular Phones (No.‘000)
   29,959 
  28,838 
 28,986    28,820 
 29,490    29,027    29,419 
Wireless Phones (No.‘000)
  1,587 
  1,388 
 1,163 
 1,046 
   1,564   2,393 
  1,660 
Internet and E-mail Subscribers 
(No. ‘000)
  22,106 
  21,668 
 22,864 
  23,149    23,855    23,686    23,882 
Health Sector
Private Hospitals
243
250
n.a.
n.a.
n.a.
n.a.
 n.a. 
Public Hospitals
618
617
n.a.
n.a.
688
n.a.
 n.a. 
No. of Beds (Government)
78,228
78,228
n.a.
n.a.
91,551
n.a.
 n.a. 
No. of Doctors (Government) 
20,209
21,045
n.a.
n.a.
25,055
n.a.
 n.a. 
No. of Nurses (Government)
39,091
40,775
n.a.
n.a.
51,067
n.a.
 n.a. 
Financial Sector
   End June   End June 
Bank Branches and  Other Outlets 
 7,369 
  7,378 
  7,522 
 7,613 
   7,968   7,652(b) 
  7,570 
Credit Cards in Use 
2,054,985 2,054,896  1,987,857 1,990,271  2,165,600 2,093,738 2,274,221 
   End June   End June 
Licensed Finance Companies(g)
   39 
   37 
     33 
 32 
 32 
  32 
  30 
Specialised Leasing Companies
   3 
   1 
  1 
   1 
  1 
    1 
  - 
Tourism Sector
 Jan - Aug  Jan - Aug 
Tourist Arrivals
 194,495 
 719,978 1,487,303 2,053,465 2,362,521 1,566,523 1,535,122 
Tourist Earnings (USD Million)
    507 
  1,136 
  2,068 
 3,169 
 3,219   2,290 
  2,061 
Room Occupancy Rate 
    18.6 
   30.4 
  39.0 
 n.a. 
 n.a. 
 n.a. 
 n.a. 
Transport Services (New Registration)
 Jan-Aug  Jan- Aug 
Buses
     281 
    404 
  685 
    146 
   2,096      853 
   3,105 
Cars
 3,495 
 1,489 
   1,816 
 1,644    68,047   26,894 
 81,801 
Goods Transport Vehicles(d)
 2,593 
    940 
   523 
 1,284 
   3,792    1,700 
  5,728 
Motor Cycles
  8,011 
 9,060 
 20,200    65,289 
254,817    127,745  308,292 
Three Wheelers
 2,093 
   36 
     60 
 94 
  17,332   5,967 
   31,925 
Tractors and Trailers(e)
   12,616 
 5,285 
  4,020 
   5,070 
   9,079 
   5,139 
  6,790 
Other (f)
  586 
    883 
   6,937 
  3,283 
  7,694 
Sources : Central Bank of Sri Lanka, Department of Motor Traffic, Telecommunications Regulatory Commission 
of Sri Lanka, Sri Lanka Ports Authority, Ministry of Health,Sri Lanka Tourism Development Authority 
(a)  Provisional
(b)  Revised
(c)  Including re-stowing (2021-2024)
(d)  Includes special purpose vehicles, motor lorry and lorry others
(e)  Includes land vehicles and Lorry Trailers
(f)    Includes Vans, double cabs, single cabs,quadricycles and motor homes
(g)  Excluding ETI Finance Limited (2021-2024)

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64                                                                      Budget Economic and Fiscal Position Report - 2027
Wholesale and Retail 
Trade,Transportation 
and Storage, 
Accommodation and 
Food Service 
Activities 
47.0%
Information and 
Communication
6.5%
Financial and 
Insurance Activies
9.0%
Real Estate Activities
7.7%
Professional Services
3.2%
Public 
Administration, 
Defence,Education,H
uman Health and 
Social Work Activies
14.1%
Other Services
12.3%
Transportation and Port Services
The 
transportation 
of 
goods 
and 
passengers, 
including 
warehousing 
subsector expanded by 3.4 percent in the 
first half of 2026. New registrations of motor 
vehicles increased significantly by 256.1 
percent to 342,029 in the first half of 2026, 
compared to 96,056 in the corresponding 
period of 2025, reflecting the high 
volume of vehicle imports following the 
relaxation of import restrictions on motor 
vehicles with effect from February 2025. 
Registrations of motor cycles, which 
accounted for 68.5 percent of total new 
registrations, increased by 223.6 percent to 
234,354, while registrations of motor cars 
increased by 383.4 percent to 66,344 and 
three wheelers by 718.8 percent to 23,523. 
Registrations of buses, dual purpose 
vehicles and goods transport vehicles also 
increased by 380.1 percent, 256.2 percent 
and 299.8 percent, respectively.
Port activities expanded in the first half of 
2026. Total container handling at the Port 
of Colombo increased by 11.9 percent to 
4.44 million Twenty-foot Equivalent Units 
(TEUs) in the first half of 2026, compared 
to 3.97 million TEUs in the corresponding 
period of 2025. Transshipment container 
handling, which accounted for 80.1 percent 
of total container handling, increased by 
11.9 percent to 3.56 million TEUs. Domestic 
container 
handling 
increased 
by 
8.3 
percent to 0.68 million TEUs and re-stowing 
container handling by 24.6 percent to 0.20 
million TEUs. Total cargo handled at the 
Ports of Colombo, Galle, Trincomalee and 
Hambantota International Port increased 
by 6.8 percent to 67.4 million metric tonnes, 
compared to 63.0 million metric tonnes in 
the corresponding period of 2025. Within 
this, cargo discharged increased by 8.7 
percent to 37.9 million metric tonnes and 
cargo loaded by 4.6 percent to 29.4 million 
metric tonnes. Meanwhile, ship traffic 
increased by 6.1 percent to 2,605 vessels.
Telecommunication
The telecommunication subsector grew 
by 4.7 percent in the first half of 2026. The 
number of cellular mobile subscriptions 
increased by 1.4 percent to 29.4 million as 
at the end of the second quarter of 2026, 
compared to 29.0 million as at the end 
of the second quarter of 2025, while the 
number of internet subscribers, including 
FIGURE  3.7 | Composition of Services Sector: First Half of 2026(a)
Source : Department of Census and Statistics
(a) Constant Prices

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Budget Economic and Fiscal Position Report - 2027	
65   
TABLE 3.3 | Performance of Tourism Sector
Month
Tourism Arrivals
Tourism Earning (USD Million)
2022
2023
2024
2025(b)
2026 (a)
2022
2023
2024
2025(b)
2026 (a)
January
82,327
102,545
208,253
252,761
277,327
151.7
153.5
341.8
400.7
413.8
February
96,507
107,639
218,350
240,217
279,328
169.4
161.6
345.7
367.6
381.4
March
106,500
125,495
209,181
229,298
183,979
161.2
188.8
338.4
354.0
244.8
April
62,980   105,498    148,867 
174,608    135,643 
108.7
148.2
225.7
256.7
164.3
May
30,207    83,309     112,128 
132,919    145,745 
43.5
100.0
154.0
164.1
155.7
June
32,856   100,388     113,470 
138,241     124,551 
45.0
122.9
151.1
169.5
151.1
July
47,293   143,039    187,810 
200,244    196,845 
85.0
219.0
328.3
318.5
285.5
August
37,760   136,405    164,609 
198,235     191,704 
67.9
210.5
282.1
258.9
264.4
September
29,802    111,938     122,140 
158,971
158,557
40.5
152.2
181.0
182.9
185.6
October
42,026    109,199    135,907 
165,193
54.9
136.7
185.6
186.1
November
59,759    151,496     184,158 
212,906
81.0
205.3
272.9
251.6
December
91,961
210,352   248,592 
258,928
127.4
269.3
362.1
308.6
Total
719,978 1,487,303 2,053,465 2,362,521 1,693,679
1,136.3
2,068.0
3,168.6
3,219.2
2,246.6
Source : Sri Lanka Tourism Development Authority
(a)  Provisional
(b) Revised
mobile internet subscriptions, increased by 
0.8 percent to 23.9 million. However, the 
number of fixed telephone lines declined 
by 22.0 percent to 2.7 million, mainly 
due to the decline in Wireless Local Loop 
connections by 30.6 percent to 1.7 million, 
while wireline connections declined by 
3.0 percent to 1.0 million. Accordingly, 
telephone penetration, including cellular 
mobile subscriptions, declined to 146.2 per 
100 persons as at the end of the second 
quarter of 2026, from 149.4 per 100 persons 
as at the end of the second quarter of 2025.
Unemployment
In the second quarter of 2026, the 
unemployment rate increased marginally 
to 4.0 percent, compared to 3.8 percent 
recorded in the second quarter of 2025. 
The unemployment rate among females 
and males was 6.1 percent and 2.8 percent, 
respectively. The youth unemployment 
rate (ages 15–24 years) was 17.8 percent, 
the highest across all age groups, with 
rates of 22.4 percent for females and 15.5 
percent for males. The unemployment 
rate among those with GCE (A/L) and 
higher qualifications was 6.7 percent, with 
a significantly higher rate among females 
(9.6 percent) than among males (3.9 
percent). Female unemployment remained 
higher than male unemployment among all 
age groups and levels of education.
Meanwhile, the labour force participation 
rate also increased slightly to 50.0 percent 
in the second quarter of 2026, compared to 
49.3 percent in the second quarter of 2025. 
The rate among males and females was 70.3 
percent and 32.7 percent, respectively. 
The total number of employed persons 
was estimated at 8.2 million, of which 49.2 
percent were engaged in the Services 
sector, 27.3 percent in the Industry sector 
and 23.4 percent in the Agriculture sector.

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66                                                                      Budget Economic and Fiscal Position Report - 2027
3.3 Monetary Sector Developments
During 2026, monetary conditions evolved 
from an accommodative stance towards a 
tighter monetary policy stance in response 
to 
the 
re-emergence 
of 
inflationary 
pressures. The Central Bank of Sri Lanka 
(CBSL) maintained the Overnight Policy 
Rate (OPR) at 7.75 percent during the 
first part of 2026. In May 2026, the OPR 
was increased by 100 basis points to 8.75 
percent, reflecting concerns over higher 
global energy prices, upward adjustments 
in domestic energy prices, continued 
expansion in private sector credit and the 
associated risks to inflation expectations. 
The OPR was subsequently maintained 
at 8.75 percent at the Monetary Policy 
Review of September 2026, with the 
Monetary Policy Board expecting the 
earlier tightening to transmit to the 
economy in the period ahead. The Standing 
Deposit Facility Rate (SDFR) and Standing 
Lending Facility Rate (SLFR) consequently 
stood at 8.25 percent and 9.25 percent, 
respectively. The Statutory Reserve Ratio 
(SRR) remained at 2.00 percent.
Following the monetary policy tightening, 
market interest rates adjusted upwards 
from the low levels observed during the 
preceding period. The Weekly Average 
Weighted Prime Lending Rate (AWPR) 
was 11.23 percent for the week ending 30 
October 2026, compared with 9.86 percent 
at end-March 2026. The Average Weighted 
New Lending Rate stood to 12.65 percent 
in September 2026 compared with 11.33 
percent in March, while the rate applicable 
to new SME lending was 13.17 percent. 
These developments indicate a gradual 
transmission of the tighter monetary policy 
stance to lending conditions.
Monetary expansion continued during 
2026, although the pace of expansion 
reflected both credit conditions and 
external-sector developments. By end-
September 2026, broad money (M2b) had 
increased to approximately Rs. 17,189.2 
billion, recording year-on-year growth 
of 11.1 percent. Outstanding credit to the 
private sector increased to approximately 
Rs. 11,768.7 billion by end-September 2026, 
with year-on-year growth easing to 23.6 
percent. Net foreign assets of the banking 
system also strengthened during this 
period. The continued expansion of private 
sector credit remained an important 
source of monetary expansion, while the 
tightening measures introduced in May 
2026 were expected to moderate credit 
growth over time.
FIGURE 3.8 | Labor Force Participation Rate and Unemployment Rate
Source : Department of Census and Statistics
0
2
4
6
8
40
44
48
52
56
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
2020 Q1
2020 Q2
2020 Q3
2020 Q4
2021 Q1
2021 Q2
2021 Q3
2021 Q4
2022 Q1
2022 Q2
2022 Q3
2022 Q4
2023 Q1
2023 Q2
2023 Q3
2023 Q4
2024 Q1
2024 Q2
2024 Q3
2024 Q4
2025 Q1
2025 Q2
2025 Q3
2025 Q4
2026 Q1
2026 Q2
Unemployment Rate (%)
Labour Force Participation Rate( %)
Labour Force Participation Rate %
Unemployment Rate %
Labour Force Participation Rate (%)
           Unemployment Rate (%)

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Budget Economic and Fiscal Position Report - 2027	
67   
TABLE 3.4  | Sectoral Distribution of GDP Growth (%)
Sector
2022
2023
2024(b)
2025(b)
First Half
2025(b)
2026(a)
Agriculture
-4.1
1.6
1.2
1.4
0.6
-0.6
Growing of Tea
-15.7
-1.5
1.7
1.4
5.9
-2.6
Growing of Rice
-11.8
17.1
3.1
5.3
2.4
-11.2
Growing of Rubber
-9.8
-7.7
2.2
-6.0
-17.1
-8.5
Growing of Cereal
-24.8
2.5
10.9
0.2
5.5
0.5
Growing of  Vegetables
-5.5
2.9
2.8
-7.1
-0.8
2.2
Animal Production
-11.4
0.3
14.1
10.5
16.3
-1.3
Forestry and Logging
14.8
-7.3
-2.1
10.7
6.8
12.5
Fishing
-10.5
3.0
1.9
-0.1
5.1
-19.1
Industry
-16.0
-9.2
11.0
7.8
7.9
7.2
Mining and Quarrying
-31.0
-22.3
19.4
16.9
14.5
18.5
Manufacturing Activities
-12.2
-3.2
7.6
6.2
7.0
33.3
Other Industries
-4.3
-3.0
5.9
8.9
4.8
6.6
Construction
-20.9
-20.8
19.4
9.2
9.6
15.1
Services
-2.6
-0.2
2.4
3.3
3.3
3.1
Wholesale and Retail Trade
0.0
0.1
1.3
1.4
1.5
1.5
Transportation and Storage
3.0
4.3
2.9
3.0
3.2
3.4
Accomodation and Food Service 
Activities
27.0
26.0
31.4
12.4
12.7
4.5
Information and Communication
6.5
-2.2
4.2
8.6
3.0
9.3
Financial and Insurance Activities
-11.1
-10.3
-1.2
11.2
13.5
10.9
Real Estate Activities
-12.1
-6.0
4.2
3.6
3.2
3.4
Professional Services
-17.7
2.4
3.5
2.4
2.7
1.5
Education, Human Health and Social 
Work Activities
-2.0
0.7
1.0
2.0
1.4
1.0
Public Administration and Defence
1.2
-1.7
-2.9
-1.3
-2.5
-1.8
Other Services (Excluding Own-services)
0.3
0.3
1.5
1.0
0.9
0.7
GDP
-7.3
-2.3
5.0
5.0
4.8
4.7
Source : Department of Census and Statistics
(a) Provisional
(b) Revised
FIGURE 3.9  | Yield Rates, Monetary Aggregates, Money Supply and Private Sector Credit Growth 
Percent
Source : Central Bank of Sri Lanka
4
12
20
28
36
2022 Jan
2022 Mar
2022 May
2022 Jul
2022 Sep
2022 Nov
2023 Jan
2023 Mar
2023 May
2023 Jul
2023 Sep
2023 Nov
2024 Jan
2024 Mar
2024 May
2024 Jul
2024 Sep
2024 Nov
2025 Jan
2025 Mar
2025 May
2025 Jul
2025 Sep
2025 Nov
2026 Jan
2026 Mar
2026 May
2026 Jul
2026 Sep
Treasury Bill Yield 91 days
Monthly AWPR
 Monthly  AWDR

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68                                                                      Budget Economic and Fiscal Position Report - 2027
Inflation
Inflationary 
conditions 
changed 
significantly 
during 
2026. 
Colombo 
Consumer Price Index (CCPI, 2021=100) 
based 
headline 
inflation, 
which 
had 
remained at low levels during the earlier 
part of the year, accelerated to 8.3 percent 
in October 2026 from 8.0 percent in 
September 2026, primarily due to the 
statistical base effect in food inflation. 
According to the Department of Census 
and Statistics (DCS), the CCPI for October 
2026 was 209.9. The increase in inflation 
during 2026 was mainly associated with 
the pass-through of higher energy prices 
-6
-4
-2
0
2
4
6
8
10
2024 Jan
Mar
May
Jul
Sep
Nov
2025 Jan
Mar
May
Jul
Sep
Nov
2026 Jan
Mar
May
Jul
Sep
Headline Inflation (CCPI)
Food Inflation (CCPI)
Core Inflation (CCPI)
FIGURE  3.10 | Movements in Headline, Core and Food Inflation (Base : 2021=100)
Percent
Source : Department of Census And Statistics
and related second-round effects, together 
with base effects and developments in 
food prices.
Food inflation under the CCPI increased 
to 8.8 percent in October 2026 from 
8.7 percent in September, while non-
food inflation increased to 8.0 percent in 
October from 7.7 percent in September. 
Core inflation also increased, reaching 5.6 
percent in October 2026 from 5.4 percent in 
September, indicating that the inflationary 
pressures were increasingly broad-based. 
The DCS reported National Consumer Price 
Index (NCPI, 2021=100) based inflation of 
8.1 percent in September 2026, the latest 
available month, with the NCPI at 224.2.
Source : Central Bank of Sri Lanka
-15
-10
-5
0
5
10
15
20
25
30
2024 Jan
2024 Mar
2024 May
2024 July
2024 Sep
2024 Nov
2025 Jan
2025 Mar
2025 May
2025 July
2025 Sep
2025 Nov
2026 Jan
2026 Mar
2026 May
2026 July
2026 Sep
YOY % Change
Reserve Money
Broad Money
Credit to Private Sector

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Budget Economic and Fiscal Position Report - 2027	
69   
TABLE 3.5 | Inflation  (Base : 2021=100) 
Month
2025 (base year 2021=100)
2026 (base year 2021=100)
Headline Inflation 
(YoY)
Core Inflation  
(YoY)
Headline Inflation 
(YoY)
Core Inflation  
(YoY)
CCPI
NCPI
CCPI
NCPI
CCPI
NCPI
CCPI
NCPI
January
-4.0
-4.0
1.2
-0.2
2.3
2.4
2.3
2.2
February
-4.2
-3.9
0.7
-0.6
1.6
1.6
2.1
2.2
March
-2.6
-1.9
0.7
-0.6
2.2
2.4
2.5
2.7
April
-2.0
-0.8
0.8
-0.1
5.4
4.7
3.8
4.4
May
-0.7
0.6
1.2
0.3
5.5
5.4
3.9
4.5
June
-0.6
0.3
1.5
0.6
6.8
6.5
4.0
5.0
July
-0.3
0.7
1.6
0.9
7.3
7.2
4.4
6.0
August
1.2
1.5
2.0
1.5
8.0
8.1
5.1
6.3
September
1.5
2.1
2.0
1.9
8.0
8.1
5.4
6.4
October
2.1
2.7
2.2
2.1
8.3
-
5.6
-
November
2.1
2.4
2.4
2.2
December
2.1
2.9
2.7
       2.6 
Source : Department of Census and Statistics
Based on the projections made at the July 
2026 monetary policy round, the CBSL 
expects headline inflation to remain above 
the 5 percent target in the near term 
before easing and stabilizing around the 
target over the medium term, conditional 
on the effects of the Middle East tensions 
and their spillovers proving temporary. The 
Monetary Policy Report of August 2026 
also noted that medium-term inflation 
expectations remained broadly anchored, 
although risks to the outlook are skewed 
to the upside owing to global volatility. 
Monetary policy is therefore expected 
to remain data-dependent, with the 
CBSL continuing to assess inflationary 
pressures, credit conditions and external-
sector developments in determining the 
appropriate policy stance.
3.4 Stock Market
The Colombo Stock Exchange (CSE) 
remained at elevated levels during 2026, 
although the market traded in a relatively 
narrow range during August. As at 30 
September 2026, the All Share Price Index 
(ASPI) stood at 20,812.9 points, while 
the S&P Sri Lanka 20 (S&P SL20) stood at 
5,894.2 points. The market capitalisation 
as at end October was Rs. 7,548.2 billion. 
On 30 October 2026, daily market turnover 
amounted to approximately Rs. 958.6 
million.
The stock market performance during 
2026 
reflected 
changing 
investor 
sentiment in response to monetary policy 
developments, corporate performance, 
the domestic economic recovery and 
global and geopolitical developments. 
Market activity remained measured during 
October 2026, with the ASPI recording a 
marginal decline of about 3.5 percent over 
the month. Foreign investor participation 
decreased, with a net foreign outflow 
of about Rs. 72.3 million recorded on 30 
October 2026.
The performance of the CSE will continue to 
be influenced by the trajectory of economic 
growth, 
corporate 
earnings, 
interest 
rates, inflation expectations, sovereign 
risk perceptions and foreign investor 
participation. Continued macroeconomic 
stabilisation 
and 
improvements 
in 
investor confidence are expected to 
remain important factors in supporting 
the development of the domestic capital 
market.

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70                                                                      Budget Economic and Fiscal Position Report - 2027
3.5 External Sector Developments 
Sri Lanka's external sector came under 
renewed pressure in the first nine months 
of 2026, mainly as the heightened conflict 
in the Middle East pushed up global 
crude oil prices and the fuel import bill, 
compounded by a resurgence in vehicle 
imports, despite support from higher 
export earnings and increased inflows 
from workers' remittances. Export earnings 
increased by 5.3 percent to USD 10,754.2 
million, while expenditure on imports rose 
by 21.3 percent to USD 18,665.7 million, 
resulting in a wider trade deficit of USD 
Source : Central Bank of Sri Lanka
7,911.5 million in the first nine months of 
2026, compared to USD 5,174.4 million 
in the corresponding period of 2025. 
Workers' remittances increased by 18.1 
percent to USD 6,865.4 million in the first 
nine months of 2026, from USD 5,811.7 
million in the corresponding period of 
2025. Meanwhile, earnings from tourism 
decreased by 9.2 percent to USD 2,245.2 
million in the first nine months of 2026 from 
USD 2,472.9 million in the corresponding 
period of 2025, owing to a decrease in 
tourist arrivals amid travel disruptions 
caused by the conflict in the Middle East.
TABLE 3.6 | Movements in Capital Markets
Indicators
2020
2021
2022
2023
2024
2025
End Sep.
2025
2026(a)
All Share Price Index (1985 = 100)
6,774
12,226
8,490
10,654
15,945
22,624
21,779
20,813
S&P SL 20 Index
2,638
4,233
2,636
3,068
4,862
6,157
6,127
5,894
Market Capitalization (Rs. Billion)
2,961
5,489
3,847
4,249
5,696
8,069
7,752
7,548
No. of Listed Companies in Trading
283
296
290
290
284
288
289
289 
Annual Average Turnover (Rs.Billion)
397
1173
687
     411 
    538 
1867
904 
672 
Foreign Sales (Rs. Million)
104,165
86,689
36,863
37,088
58,492
95,560
73,847
87,258
Foreign Purchases (Rs. Million)
52,889
39,410
67,488
41,451
48,013
56,931
46,755
30,416
Net Purchases (Rs. Million)
-51,276
-47,279
30,625
4,363
-10,479
-38,629
-27,092
-56,842
Sources : Colombo Stock Exchange and Central Bank of Sri Lanka
(a) Provisional
-10
-5
0
5
10
15
20
25
2020
2021
2022
2023
2024
2025
2025 Jan-Sep
2026 Jan-Sep
Exports
Imports
Trade Balance
FIGURE 3.11 | Trade Balance and Movements in Exchange Rates
(USD Billion)

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Budget Economic and Fiscal Position Report - 2027	
71   
Source : Central Bank of Sri Lanka
100
150
200
250
300
350
400
2013 Jan
May
Sept
2014 Jan
May
Sept
2015 Jan
May
Sept
2016 Jan
May
Sept
2017 Jan
May
Sept
2018 Jan
May
Sept
2019 jan
May
Sep
2020 Jan
May
Sep
2021 Jan
May
Sep
2022 Jan
May
Sep
2023 Jan
May
Sep
2024 Jan
May
Sep
2025 Jan
May
Sep
2026 Jan
May
Sep
Rs./USD
The current account recorded a deficit of 
USD 420.4 million in the first nine months 
of 2026, compared to a surplus of USD 
1,853.2 million in the corresponding period 
of 2025. This was mainly due to the wider 
trade deficit and the lower surplus in the 
services account. The overall Balance of 
Payments (BoP) recorded a surplus of 
USD 136 million in the first half of 2026, 
compared to a surplus of USD 522 million 
in the corresponding period of 2025. The 
Colombo Stock Exchange (CSE) recorded 
a net outflow of USD 170.2 million in the 
first nine months of 2026, compared to 
a net outflow of USD 84.6 million in the 
corresponding period of 2025. Net flows 
to the government securities market were 
recorded as an inflow of USD 167.8 million 
in the first nine months of 2026, compared 
to a net inflow of USD 178.0 million in the 
corresponding period of 2025. Gross 
Official Reserves (GOR) stood at USD 6.9 
billion by end September 2026, including 
the swap facility from the People's Bank 
of China, providing an import cover of 3.3 
months. Meanwhile, the Sri Lankan rupee 
depreciated by 6.8 percent against the 
USD on a year to date basis by end October 
2026.
Exports
Earnings 
from 
merchandise 
exports 
increased by 5.3 percent to USD 10,754.2 
million in the first nine months of 2026, 
compared to USD 10,215.1 million in the 
corresponding period of 2025, mainly due 
to the increase in earnings from industrial 
exports, particularly petroleum products, 
Rubber products and machinery and 
mechanical appliances. Industrial exports 
continued to account for the largest share 
of export earnings, representing 78.1 
percent of the total, while agricultural and 
mineral exports contributed 21.5 percent 
and 0.2 percent, respectively. 
Earnings from industrial exports increased 
by 6.9 percent to USD 8,398.3 million in 
the first nine months of 2026, from USD 
7,854.2 million in the corresponding period 
of 2025, mainly due to increased export 
earnings from petroleum products, rubber 
products, food, beverages and tobacco 
products and machinery and mechanical 
appliances. Export earnings increased 
from petroleum products by 52.1 percent 
to USD 1,094.8 million, rubber products 
by 9.2 percent to USD 752.9 million, food, 
beverages and tobacco products by 6.1 
percent to USD 702.6 million and machinery 
and mechanical appliances by 45.8 percent 
to USD 516.0 million in the first nine months 
of 2026. However, export earnings from 
textiles and garments, the main contributor 
to industrial export earnings, decreased by 
5.6 percent to USD 3,797.0 million in the 
first nine months of 2026, from USD 4,021.4 
million in the corresponding period of 
2025.
Earnings 
from 
agricultural 
exports 
decreased marginally by 0.3 percent to 
USD 2,317.4 million in the first nine months 
of 2026, from USD 2,323.6 million in the 
corresponding period of 2025, with lower 
earnings from tea, minor agricultural 
products, seafood, vegetables and rubber. 
Earnings from tea exports decreased by 
6.8 percent to USD 1,083.6 million in the 
first nine months of 2026, from USD 1,163.0 
million in the corresponding period of

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72                                                                      Budget Economic and Fiscal Position Report - 2027
2025. In addition, export earnings declined 
from seafood by 2.0 percent to USD 180.8 
million, minor agricultural products by 19.4 
percent to USD 126.2 million, vegetables 
by 20.4 percent to USD 21.1 million and 
rubber by 12.0 percent to USD 21.0 million. 
However, export earnings increased from 
coconut by 3.6 percent to USD 441.0 
million, spices by 30.4 percent to USD 423.2 
million and unmanufactured tobacco by 9.7 
percent to USD 20.6 million in the first nine 
months of 2026. Meanwhile, mineral export 
earnings increased by 35.1 percent to USD 
24.5 million in the first nine months of 2026 
from USD 18.1 million in the corresponding 
period of 2025.
million in the first nine months of 2026, 
compared to USD 3,816.4 million in the 
corresponding period of 2025, mainly 
due to higher import expenditure on non-
food consumer goods. Import expenditure 
on food and beverages increased by 3.4 
percent to USD 1,617.7 million in the first nine 
months of 2026, from USD 1,565.1 million in 
the corresponding period of 2025, with the 
increased import expenditure recorded 
mainly from dairy products, seafood, and 
cereals and milling industry products. 
Expenditure 
on 
non 
food 
consumer 
goods imports increased notably by 
27.3 percent to USD 2,866.9 million from 
USD 2,251.3 million due to the increase in 
import expenditure mainly on personal 
vehicles, medical and pharmaceuticals, 
home appliances and telecommunication 
devices.
Import expenditure on intermediate goods 
increased by 21.3 percent to USD 10,456.2 
million in the first nine months of 2026, from 
USD 8,617.2 million in the corresponding 
period of 2025, mainly due to higher 
expenditure on fuel. Imports expenditure 
on fuel increased by 51.5 percent to USD 
4,487.2 million in the first nine months 
of 2026, with an increase in import 
expenditure on refined petroleum by 60.4 
percent to USD 3,483.7 million, crude oil 
by 27.1 percent to USD 817.4 million and 
coal by 26.9 percent to USD 186.1 million. 
Import expenditure on textiles and textile 
articles decreased by 3.7 percent to USD 
1,961.7 million in the first nine months 
of 2026, from USD 2,037.3 million in the 
corresponding period of 2025. Meanwhile, 
import expenditure on investment goods 
increased by 26.0 percent to USD 3,709.8 
million in the first nine months of 2026, from 
USD 2,943.9 million in the corresponding 
period of 2025. This was mainly due to 
the increase in import expenditure on 
machinery and equipment by 26.3 percent 
to USD 2,332.9 million, building materials 
by 8.7 percent to USD 803.4 million and 
transport equipment by 60.8 percent 
to USD 569.8 million. The increase in 
transport equipment was largely driven by 
commercial vehicles, which rose by 60.7 
percent to USD 435.8 million.
Imports
Expenditure on imports increased by 21.3 
percent to USD 18,665.7 million in the 
first nine months of 2026, compared to 
USD 15,389.5 million in the corresponding 
period of 2025, due to the increase 
in import expenditure on consumer, 
intermediate and investment goods, driven 
mainly by higher fuel import expenditure 
amid elevated import prices following 
the Middle East conflict, and increased 
vehicle imports. Consumer, intermediate 
and investment goods accounted for 24.0 
percent, 56.0 percent and 19.9 percent of 
total import expenditure in the first nine 
months of 2026, respectively. 
Import expenditure on consumer goods 
increased by 17.5 percent to USD 4,484.6 
Source : Central Bank of Sri Lanka
FIGURE 3.12 | Composition of Exports
(USD Billion)
 -
 2
 4
 6
 8
 10
 12
 14
 16
2020
2021
2022
2023
2024
2025
2025 Jan-Sep
2026 Jan-Sep
Agriculture
Industrial
Mineral

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Budget Economic and Fiscal Position Report - 2027	
73   
TABLE 3.7 | External Trade
USD Million 
Category
2022
2023
2024
2025(b)
Jan-Sep
2025(b)
2026(a)
Exports
  13,106 
   11,911 
 12,772 
  13,581 
10,215
10,754
Agricultural Exports
   2,568 
   2,567 
   2,775 
  3,072 
2,324
2,317
Tea
    1,259 
    1,310 
   1,436 
   1,507 
1,163
1,084 
Other Agricultural Products
    1,309 
   1,257 
   1,339 
   1,565 
1,161
1,234
Industrial Exports
  10,465 
  9,278 
   9,947   10,461 
7,854
8,398
Textile and Garments
   5,952 
   4,879 
   5,061 
   5,314 
4,021
3,797
Food, Beverages and Tobacco
      520 
      539 
      652 
     896 
662
703
Rubber Products
      977 
     902 
      976 
      915 
690
753
Machinery and Mechanical Appliances
      581 
     598 
     486 
      492 
354
516
Petroleum Products
      568 
      539 
   1,064 
      971 
720
1,095
Other Industrial Exports
   1,868 
   1,820 
    1,710 
   1,874 
1,407
1,535
Mineral Exports
        50 
       39 
       25 
       24 
18
25
Unclassified Exports
        23 
       28 
       26 
       24 
19
14
Imports
  18,291 
  16,811 
 18,841 
21,480
15,390
18,666
Consumer Goods
   2,813 
  3,044    3,466 
5,518
3,816
4,485
Food and Beverages
   1,608 
   1,693 
    1,914 
2,116
1,565
1,618
Other Consumer Goods
    1,205 
    1,351 
    1,551    3,402 
2,251
2,867
Intermediate Goods
  12,439   11,007    11,915 
11,859
8,617
10,456
Petroleum
   4,897 
   4,703 
   4,354 
4,043
2,961
4,487
Textiles and  Garments
   3,065 
   2,371 
   2,847 
2,749
2,037
1,962
Wheat and Maize
      303 
     338 
     383 
398
253
257
Other        
    4,174 
   3,595 
   4,331 
   4,669 
3,366
3,750
Investment Goods
   3,030 
  2,745 
  3,448 
4,090
2,944
3,710
Machinery and  Equipment
    1,969 
   1,868 
   2,363 
2,513
1,848
2,333
Building Materials
      926 
      775 
      927 
1017
739
803
Transport Equipments
       132 
       99 
       57 
556
354
570
Other
          3 
         3 
         3 
         4 
3
4
Unclassified Imports 
          9 
       28 
        13 
        13 
12
15
Trade Balance
-5,185
-4,900
-6,069
-7,899
-5,174
-7,912
Source : Central Bank of Sri Lanka
(a) Provisional
(b) Revised
Tourism and Workers’ Remittances
Tourist arrivals decreased by 1.8 percent to 
1,693,679 persons in the first nine months 
of 2026, from 1,725,494 persons in the 
corresponding period of 2025. Accordingly, 
earnings from tourism decreased by 9.2 
percent to USD 2,245.2 million in the first 
nine months of 2026, compared to USD 
2,472.9 million in the corresponding period 
of 2025. This decline was mainly due to a 
decrease in tourist arrivals following the 
escalation of the conflict in the Middle East, 
and partly reflects a downward revision to 
average daily tourist spending under the 
revised methodology introduced by the 
FIGURE 3.13 | Composition of Imports
(USD Billion)
Source : Central Bank of Sri Lanka
 -
 5
 10
 15
 20
 25
2020
2021
2022
2023
2024
2025
2025 Jan-Sep
2026 Jan-Sep
Consumer Goods
Intermediate Goods
Investment Goods

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74                                                                      Budget Economic and Fiscal Position Report - 2027
Sri Lanka Tourism Development Authority 
(SLTDA) for estimating tourism earnings. 
India remained the largest source market 
for tourist arrivals, recording 437,414 
arrivals in the first nine months of 2026, 
followed by the United Kingdom, China, 
Germany, Australia, Russia and France. 
Meanwhile, workers' remittances grew by 
18.1 percent to USD 6,865.4 million in the 
first nine months of 2026, compared to 
USD 5,811.7 million in the corresponding 
period of 2025, particularly with the 
increased inflows of remittances for relief 
and recovery following Cyclone Ditwah.
3.6 World Economic Outlook1
After expanding by 3.5 percent in 2025, 
the global economy has performed better 
than initially anticipated in 2026, despite 
the Middle East conflict that erupted at the 
end of February 2026, the resulting closure 
of the Strait of Hormuz (which disrupted 
energy markets and key shipping routes), 
and continued trade tensions. Activity has 
also been supported by strong demand 
from the technology cycle, driven mainly 
by artificial intelligence (AI). The global 
economy 
continues 
to 
demonstrate 
resilience amid persistent uncertainty. 
However, growth remains uneven across 
countries, and there is limited room to 
respond to additional shocks. Countries 
with favorable terms of trade or strong 
participation in technology value chains 
have a cushion, while energy-importing 
economies 
face 
higher 
import 
bills 
and weaker demand. According to the 
International 
Monetary 
Fund’s 
(IMF) 
October 2026 World Economic Outlook 
(WEO), 
global 
real 
GDP 
growth 
is 
projected to moderate to 3.1 percent in 
2026, unchanged from the April projection, 
before recovering to 3.4 percent in 2027, 
an upward revision of 0.2 percentage 
points from the April 2026 WEO. Global 
headline inflation, which eased to 4.1 
percent in 2025, is projected to rise to 4.7 
percent in 2026, mainly reflecting higher 
energy and food prices, before easing to 
1	
 Based on the World Economic Outlook October 
2026, International Monetary Fund and World Bank 
Pink Sheet
4.1 percent in 2027, with notable variation 
across countries.
Global 
financial 
conditions 
tightened 
sharply earlier in 2026 before easing, and 
they remain relatively accommodative 
by historical standards, largely reflecting 
strong investor sentiment, particularly 
toward 
technology 
stocks. 
However, 
concerns 
about 
renewed 
inflation, 
expectations about the future path of 
policy rates, and fiscal sustainability 
have pushed up sovereign bond yields in 
many jurisdictions. Yields on long-term 
government bonds in advanced economies 
have climbed to multidecade highs, 
which in turn has raised borrowing costs 
for emerging markets. Exchange rates, 
especially in Asia, have been highly volatile, 
prompting intervention by authorities. 
Central banks remain cautious in their 
monetary policy decisions, weighing the 
strength of domestic economic activity 
against the risk of persistent war-related 
inflation. Meanwhile, fiscal policy remains 
expansionary in several major economies, 
where public debt continues to rise 
and budget deficits remain elevated by 
historical standards.
Global Trade and Commodity Markets
Global trade volume grew by 5.0 percent 
in 2025 and is projected to slow to 4.6 
percent in 2026 before edging up to 
4.7 percent in 2027. The October WEO 
projections reflect the drag from tariffs, 
the gradual adjustment of trade linkages 
and production chains through trade 
reconfiguration and supplier substitution, 
and brisk growth in technology-related 
trade flows.
The Strait of Hormuz, through which nearly 
35 percent of global seaborne crude oil 
trade and about 20 percent of global LNG 
trade passes, remained mostly closed to 
Gulf oil exports until the end of August 
2026, and a short-lived ceasefire has since 
been replaced by a low-intensity conflict 
that has expanded to the Red Sea.

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Budget Economic and Fiscal Position Report - 2027	
75   
Consequently, several key commodity 
prices, which were subdued in 2025, 
increased sharply in 2026. According to the 
World Bank, the energy price index rose 
from an average of 89.1 in the third quarter of 
2025 to 125.4 in the corresponding period 
of 2026, and stood at 148.9 in September, 
well above the 2025 average. Brent crude 
oil averaged USD 97.1 per barrel in the third 
quarter, peaking at USD 120.4 in April, before 
easing to USD 83.4 in July and rising again 
to USD 116.8 in September, compared with 
an average of USD 69.0 in 2025. According 
to the IMF, refined petroleum product 
prices remain between 70 percent and 95 
percent above pre-war levels. European 
natural gas prices increased to USD 25.42 
per MMBtu in September from an average 
of USD 11.96 in 2025, while US natural gas 
prices remained comparatively subdued 
at USD 2.95 per MMBtu. Following a sharp 
increase to 188.2 in the second quarter of 
2026, the fertilizer price index decline to 
147.0 in the third quarter, below the 153.4 
recorded in the corresponding period of 
2025. In September; the index stood at 
147.6.  Food prices increased, led by grains, 
with the food price index reaching  124.1 
in September compared to an average of 
109.2 in 2025. Metal prices continued to 
rise, with the metals and minerals index at 
147.5 in September compared with 112.2 in 
2025, while gold averaged USD 4,319 per 
troy ounce in September, compared with 
USD 3,442 in 2025, having eased from USD 
4,876 in the first quarter of 2026. Looking 
ahead, the IMF assumes an average oil 
price of USD 95.74 per barrel in 2026, 41.3 
percent higher than in 2025, easing to USD 
87.39 in 2027, while fertilizer prices are 
projected to rise by 10 percent and food 
prices by 5 percent in 2026.
Regional Developments
Growth 
in 
advanced 
economies 
is 
projected at 2.1 percent in 2026, up from 
2.0 percent in 2025 and 0.3 percentage 
points higher than projected in April, 
before decelerating to 1.8 percent in 
2027. However, economic performance 
is expected to vary across countries, 
with 
net 
energy-exporting 
countries 
benefiting partly from favorable terms-of-
trade effects, while net energy-importing 
economies 
face 
greater 
economic 
pressures from elevated energy prices, 
unless offset by strong technology-related 
activity. The US economy is projected to 
grow by 2.3 percent in both 2026 and 2027, 
supported by robust private consumption, 
productivity strength and technology-
related investment, with limited direct 
impact from the war given its net energy 
exporter status. Meanwhile, growth in 
the euro area, which is more exposed to 
energy market disruptions, is projected at 
1.1 percent in 2026 and 1.2 percent in 2027. 
Growth in emerging market and developing 
economies (EMDEs) is projected to slow 
to 3.7 percent in 2026 from 4.5 percent 
in 2025, before recovering to 4.4 percent 
in 2027, with the outlook varying across 
countries according to their commodity 
dependence, exposure to the Middle 
East conflict, reliance on remittances and 
tourism receipts, and position in global 
technology value chains. Emerging and 
developing Asia is expected to remain 
the most resilient region, growing by 5.1 
percent in 2026 and 4.9 percent in 2027, 
with India remaining the fastest-growing 
major economy at 7.0 percent in both years 
(on a fiscal year basis). Meanwhile, China’s 
growth is projected to slow to 4.5 percent 
in 2026 and 4.0 percent in 2027. Growth in 
the Middle East and Central Asia region is 
projected to contract by 0.3 percent in 2026, 
a downward revision of 2.2 percentage 
points from April, before rebounding to 
6.3 percent in 2027 as production, exports 
and logistics normalize following an easing 
of disruptions to shipping through the 
Strait, with Bahrain, Iraq, Kuwait and Qatar 
projected 
to 
experience 
double-digit 
contractions in 2026. Sub-Saharan Africa is 
projected to grow by 4.5 percent in both 
2026 and 2027, while Latin America and the 
Caribbean are expected to grow by 2.3 
percent in 2026 and 2.5 percent in 2027.

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76                                                                      Budget Economic and Fiscal Position Report - 2027
Global Economic Risks
Risks to the outlook remain tilted to the 
downside. A prolonged stalemate or further 
escalation of the Middle East conflict, or 
of the conflict in Ukraine, together with 
further disruptions to the Strait of Hormuz 
and Red Sea routes, could keep energy 
and food prices elevated and volatile for 
longer, as global oil inventories are being 
drawn down toward stress levels that could 
trigger nonlinear price adjustments and 
natural gas stocks in parts of Europe remain 
below seasonal norms ahead of winter. 
Persistently higher commodity prices could 
widen current account deficits, intensify 
exchange rate pressures and heighten food 
insecurity in energy-importing emerging 
market and developing economies with 
limited fiscal space and external buffers, 
while more persistent inflation could keep 
monetary policy restrictive for longer. 
Extreme weather events, including the 
ongoing El Niño episode, cyberattacks and 
renewed trade tensions could add further 
pressure. A reassessment of AI-related 
profitability and productivity prospects 
could also sharply reduce investment, 
trigger equity market corrections and 
tighten financial conditions, with spillovers 
to economies integrated into technology 
supply chains. On the upside, AI-related 
investment could prove more persistent, 
new trade arrangements could improve 
predictability and strengthen supply chain 
resilience, and a durable de-escalation and 
the resumption of normal shipping through 
the Strait of Hormuz would ease energy 
prices and inflationary pressures.
Impact of Global Outlook on the Sri 
Lankan Economy
As a small open economy, Sri Lanka is 
exposed to the global outlook through 
higher energy import costs, weaker tourist 
arrivals, and softer external demand in 
key export markets. Amid the Middle East 
conflict and related supply disruptions, as 
well as the surge in oil and fertilizer prices, 
Sri Lanka recorded growth of 4.2 percent in 
the second quarter of 2026, compared to 
growth of 5.0 percent in the corresponding 
period of 2025. October 2026 WEO 
projects Sri Lanka’s growth at 4.0 percent 
in 2026 and 3.7 percent in 2027, compared 
with 5.0 percent in 2025, while inflation 
is projected to rise to 5.3 percent in 2026 
and 5.4 percent in 2027 from -0.5 percent 
in 2025, mainly reflecting higher energy 
prices. In addition, Fitch Ratings upgraded 
Sri Lanka’s Long-Term Issuer Default Rating 
(IDR) to ‘B-’ from ‘CCC+’, with a Stable 
Outlook, according to its latest rating 
action issued on September 22, 2026, 
which is expected to support investor 
confidence and help ease external financing 
pressures. However, elevated energy and 
fertilizer prices, and continued geopolitical 
uncertainty could exert pressure on the 
balance of payments, domestic prices and 
export competitiveness, particularly in 
the apparel sector. Accordingly, sustained 
prudent macroeconomic management, 
export and market diversification, and 
continued accumulation of external buffers 
will remain important to safeguard stability 
in an uncertain global environment

BEFPR 2027 · file page 91 printed page 77

Cited in:

Budget Economic and Fiscal Position Report - 2027	
77   
TABLE 3.8 | Key Economic Indicators of Selected Countries - 2026 (Projection)
Country
GDP Growth 
(Annual percent 
change)(a)
Inflation 
(Percent)(a)
Unemployment 
(Percent)(a)
Fiscal Deficit 
(Percent of 
GDP)(b)
Gross Debt 
(Percent of 
GDP)(b)
Argentina
2.1
32.5
7.6
0.5
70.4
Australia
1.9
3.9
4.4
-2.4
50.6
Brazil
2.2
4.4
6.2
-7.7
96.5
Canada
1.1
2.8
6.5
-2.7
110.7
Chile
0.6
3.7
9.5
-2.5
42.5
China
4.5
1.0
5.1
-8.2
106.9
France
0.4
2.4
8.4
-4.9
118.4
Germany
1.3
2.7
4.0
-3.8
64.6
Greece
1.8
4.2
8.0
0.6
136.9
India
7.0
5.0
5.0
-7.4
83.4
Indonesia
5.1
3.3
4.7
-2.9
41.5
Italy
0.8
3.3
5.6
-2.8
138.4
Japan
0.7
2.0
2.5
-2.0
204.4
Korea
3.3
2.7
2.8
-1.5
54.4
Malaysia
5.2
2.2
3.0
-3.3
69.5
Mexico
1.5
3.8
2.8
-4.4
62.7
Russia
0.9
6.1
2.2
-2.0
19.1
Singapore
5.0
2.3
2.1
3.3
171.9
South Africa
1.0
4.4
33.2
-4.9
78.9
Spain
2.5
3.7
9.8
-2.1
98.2
Thailand
2.1
2.1
1.0
-2.2
66.8
United Kingdom
1.3
3.3
5.3
-3.9
103.6
United States
2.3
3.6
4.2
-7.5
125.8
Vietnam
8.4
4.7
2.1
-2.0
29.8
Sources : (a)World Economic Outlook, IMF, October 2026, (b)Fiscal Monitor, IMF, April 2026.

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04
Performance of State 
Owned Enterprises

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4.1 Overview
State-Owned 
Enterprise 
(SOE) 
sector 
operated 
amid 
heightened 
external 
uncertainty during 2026, particularly due to 
the escalation of the conflict in the Middle 
East. The resulting volatility in global 
energy prices and disruptions to trade 
and supply chains increased import costs, 
put pressure on the balance of payments 
and the Sri Lankan rupee and contributed 
to domestic inflationary pressures. These 
developments 
affected 
SOEs 
through 
higher fuel, energy and other imported 
input costs, increased foreign-currency-
denominated obligations, and greater 
pressure on operating margins. 
Nevertheless, the SOE sector recorded 
an 
overall 
improvement 
in 
financial 
performance. During the first eight months 
of 2026, the main 51 SOEs reported an 
aggregate profit of Rs. 366.9 billion, 
compared with Rs. 307.5 billion in  the 
same period of 20251. This was mainly due 
to stronger revenue performance among 
key SOEs, continued cost management 
initiatives, and the Government’s ongoing 
efforts to enhance operational efficiency, 
governance, accountability and financial 
discipline across the sector. Meanwhile, 
revenue 
from 
levies 
and 
dividends 
collected from SOEs increased to Rs. 19.9 
billion, from Rs. 14.6 billion in the same 
period of 2025.
During the first ten months of 2026, several 
state-owned 
companies 
were 
added 
to the SOE portfolio. These included six 
companies established to assume the 
functions of the Ceylon Electricity Board: 
Electricity 
Generation 
Lanka 
(Private) 
Limited 
(EGL), 
National 
Transmission 
Network Service Provider (Private) Limited 
(NTNSP), Electricity Distribution Lanka 
(Private) Limited (EDL), National System 
Operator (Private) Limited (NSO), Energy 
Ventures Lanka (Private) Limited, and CEB 
Employees Funds (Private) Limited, and 
Sky Care Hospital Management Limited 
and Multi Modal Transport Limited were 
also added.
1	 With respect to Ceylon Electricity Board, Profit for 
the Period from 01.01.2026 to 09.03.2026 has been 
considered for 2026.	
Marking a significant transformation in 
the public transport sector, Lanka Metro 
Transit (Private) Limited, a subsidiary of 
the Sri Lanka Transport Board, commenced 
its operations in March 2026 with an initial 
fleet of 10 low-floor buses imported under 
the Clean Sri Lanka project. The  fleet has 
since expanded to 114 buses. 
In line with the Government’s policy on 
reforming the SOE sector, a dedicated 
unit was established under the Ministry 
of 
Finance, 
Planning 
and 
Economic 
Development in March 2026, following 
Cabinet approval. The unit is currently 
engaged in the liquidation of 33 selected 
SOEs. In the meantime, the final draft 
of the Public Commercial Enterprises 
Management Bill has been prepared 
and  submitted for the clearance of  the 
Hon. Attorney General. The objectives 
of the Bill include enhancing the quality, 
affordability, availability, competitiveness 
and accessibility of the goods and services 
provided by public commercial enterprises, 
as well as increasing the long-term value of 
the State’s commercial assets.
4.2 Review of the ten Major State-Owned 
Business Enterprises (SOBEs)
Bank of Ceylon
The asset base of the Bank of Ceylon 
(BoC) 
increased 
by 
3.8 
percent 
to 
Rs. 5,675 billion as at end August 2026, from 
Rs. 5,468 billion as at end 2025. During 
the first eight months of 2026, the bank’s 
deposit base increased by 4.3 percent to 
Rs. 4,576 billion, compared to Rs. 4,389 
billion as at end 2025. Loans and advances 
increased by 8.4 percent to Rs. 2,571 billion 
as at end August 2026, from Rs. 2,372 billion 
as at end 2025. The stage III Impaired loan 
ratio of the bank has improved to 4.91 
percent as at end August 2026, from 5.59 
percent as at end 2025. The BoC recorded 
a Profit before Tax (PBT) of Rs. 82.8 billion 
in the first eight months of 2026, compared 
to Rs. 78.7 billion PBT reported in the same 
period of 2025, mainly due to a 9 percent 
increase in net interest income to Rs. 149 
billion.

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82                                                                      Budget Economic and Fiscal Position Report - 2027
People’s Bank 
People's Bank’s (PB) asset base increased 
by 3.5 percent to Rs. 3,839 billion as at end 
August 2026, from Rs. 3,708 billion as at end 
2025. The Bank’s deposit base  stood at 
Rs. 3,230 billion as at end August 2026, 
broadly unchanged from Rs. 3,229.8 
billion as at end 2025. Loans and advances 
increased by 11.7 percent to Rs. 1,933 billion 
as at end August 2026, from Rs. 1,731 billion 
as at end 2025. The stage III impaired 
loans ratio of the bank has improved to 6.6 
percent as at end August 2026, from 7.66 
percent as at end 2025. PB recorded a PBT 
of Rs. 44.5 billion in the first eight months of 
2026, a significant increase of 17.7 percent, 
from Rs. 37.8 billion in the same period of 
2025. This increase was primarily driven 
by a 20 percent increase in net interest 
income to Rs. 110.9 billion. 
National Savings Bank
National 
Savings 
Bank’s 
(NSB) 
asset 
base recorded a marginal increase to 
Rs. 1,880 billion as at end August 2026, from 
Rs. 1,831 billion as at end 2025. The bank's 
deposit base increased by 2 percent to 
Rs. 1,640 billion as at end August 2026, from 
Rs. 1,608 billion as at end 2025. The loans 
and advances increased by 10.7 percent 
to Rs. 610 billion as at end August 2026, 
compared to Rs. 551 billion as at end 2025. 
The stage III impaired loans ratio of the 
bank has improved to 2.1 percent as at end 
August 2026, compared to 2.52 percent 
as at end 2025. NSB’s PBT decreased 
marginally to Rs. 30.1 billion in the first 
eight months of 2026, compared to 
Rs. 30.6 billion in the same period of 2025, 
mainly due to the increase in personnel 
expenses by 17.5 percent to Rs. 18.8 billion. 
Sri Lanka Insurance Corporation Limited
Sri Lanka Insurance Corporation Limited 
(SLIC) reported total revenue of Rs. 3.5 
billion in the first eight months of 2026, 
a decrease of 30 percent compared to 
Rs. 5 billion in the same period of 2025. 
The decline was mainly due to lower 
investment income and dividend income. 
SLIC recorded a PBT of Rs. 2.9 billion in the 
first eight months of 2026, compared to 
Rs. 4.4 billion in the same period of 2025. 
Total assets stood at Rs. 135.5 billion as at 
end August 2026, up from Rs. 133.4 billion 
at  end of 2025, reflecting a strong financial 
position. 
SLIC reported mixed performance across 
its two insurance subsidiaries for the first 
eight months of 2026. Sri Lanka Insurance 
Corporation 
Life 
Limited 
reported 
a 
marginal increase in PBT to Rs. 2.14 
billion, compared to Rs. 2.11 billion in the 
same period of 2025. Sri Lanka Insurance 
Corporation General Limited, however, 
saw its PBT decline by 7.1 percent to Rs. 2.6 
billion, from  Rs. 2.8 billion a year earlier. This 
was mainly due to a 41.7 percent  increase 
in net insurance claims and benefits to 
Rs. 10.2 billion.
Ceylon Electricity Board and the Successor 
Companies
As part of the structural reforms of the 
Ceylon Electricity Board (CEB), EGL, 
NTNSP, EDL, and the NSO continued to 
carry out their respective functions in the 
electricity industry, together with Energy 
Ventures Lanka (Private) Limited and CEB 
Employees Funds (Private) Limited. 
At the  third-quarter tariff review conducted 
in July 2026, the  Public Utilities Commission 
of Sri Lanka (PUCSL) decided to maintain 
the existing end-user electricity tariff until 
the next tariff revision, taking into  account 
the Government subsidy of Rs. 17,213 million 
provided to meet the vested liability of the 
NSO arising from the CEB. During the first 
eight months of 2026, the generation mix 
changed to 25:28:27:20 for hydro, thermal 
(coal), Non-conventional renewable energy 
(NCRE) including wind and rooftop solar, 
and thermal (fuel), respectively, compared 
with 35:29:25:11 during the same period of 
2025. Total electricity generation increased 
by 7.4 percent to 12,893 GWh, reflecting the 
growth in demand, compared with 12,004 
GWh a year earlier.Hydropower generation 
declined by 22.6 percent, from 4,169 GWh 
to 3,225 GWh. Rooftop solar generation 
rose substantially, by approximately 42 
percent, from 1,195 GWh to 1,700 GWh, but 
this  was not to offset the combined effect 
of higher  demand and lower hydropower

BEFPR 2027 · file page 97 printed page 83

Budget Economic and Fiscal Position Report - 2027	
83   
output. 
Consequently, 
thermal 
(fuel) 
generation increased by 89.6 percent, 
from 1,341 GWh to 2,543 GWh, to meet the 
supply requirement. 
The revenue from sale of electricity 
increased significantly, by 19.9 percent 
to Rs. 325.4 billion during the first eight 
months of 2026, compared to Rs. 271.5 
billion recorded by the CEB in the same 
period of 2025.  The 2026 figure comprises 
Rs. 80 billion earned by the CEB up to 
March 09, 2026, and Rs. 245.4 billion earned 
by EDL for the remainder period. The CEB 
recorded a net profit of Rs. 1.48 billion for 
the period from January 1 to March 9, 2026. 
Ceylon Petroleum Corporation
The net revenue of the Ceylon Petroleum 
Corporation (CPC) during the first eight 
months of 2026 increased by 43.1 percent 
to Rs. 796.7 billion, compared to Rs. 556.9 
billion in the same period of 2025. However, 
CPC’s cost of sales increased by 51.8 
percent to Rs. 780.7 billion, compared to 
Rs. 514.3 billion in the same period of 2025. 
As the increase in cost of sales exceeded 
the growth in net revenue, gross profit 
declined by 62.4 percent to Rs. 16.0 billion, 
from Rs. 42.6 billion in the same period of 
2025. 
Despite the decline in gross profit, CPC 
recorded an operating profit of Rs. 20.9 
billion in the first eight months of 2026, an 
increase of 56 percent from Rs. 13.4 billion 
in the same period of 2025. This was mainly 
due to the Rs. 41 billion subsidy received 
from the Government for the period from 
TABLE 4.1 | Composition of Electricity Generation and Capacity
2025 Jan. - Aug. Generation
2026 Jan. - Aug. Generation (Provisional)
Installed 
Capacity 
MW
%
on Total 
Generation
Net Gen - 
GWh
Installed 
Capacity 
MW
%
on Total 
Generation
Net Gen - 
GWh
CEB/EGL-Hydro
1,533
35
4,169
1,533
25
3,225
CEB/EGL -Thermal
801
7
849
801
11
1,326
Thermal - IPP
482
4
491
582
9
1,216
Thermal - Coal
900
29
3,466
900
28
3,635
NCRE & Wind 
945
15
1,834
1,286
14
1,791
Rooftop Solar
1684
10
1,195
2,529
13
1,700
Total
6,345
100
12,004
7,631
100
12,893
Sources: Ceylon Electricity Board and Electricity Generation Lanka (Pvt) Limited
April to June 2026 to mitigate the adverse 
impact of the conflict in the Middle East on 
the daily lives of the general public and on 
the overall economy. 
During the first eight months of 2026, 
CPC recorded a realized exchange loss 
of Rs. 5.2 billion, compared to a realized 
exchange gain of Rs. 91.3 million in the 
same period of 2025. This was partly 
offset by an unrealized exchange gain of 
Rs. 8.4 billion, compared to Rs. 4.8 billion 
in the same period of 2025. Consequently, 
PBT increased by 35.7 percent to Rs. 28.9 
billion in the first eight months of 2026, 
compared to Rs. 21.3 billion in the same 
period of 2025. The contribution of subsidy 
income and exchange rate movements 
should be considered when assessing 
the 
sustainability 
of 
CPC’s 
reported 
profitability. 
SriLankan Airlines Ltd.
SriLankan Airlines Ltd. (SLA) continued 
to face financial challenges during the 
period under review, despite ongoing 
Government initiatives to facilitate its 
financial 
restructuring 
and 
improve 
operational 
sustainability. 
During 
the 
first five months of the 2026/27 financial 
year, the SLA recorded total revenue of 
Rs. 154.6 billion, compared to Rs. 114.6 billion 
in the same period of 2025/26.  However, 
total expenditure rose by 35.2 percent to 
Rs. 160.4 billion, compared to Rs. 118.6 
billion in the same period of 2025/26, 
mainly due to a sharp increase of  78.2 
percent in aircraft fuel costs. Consequently, 
the company recorded an operating loss

BEFPR 2027 · file page 98 printed page 84

84                                                                      Budget Economic and Fiscal Position Report - 2027
of Rs. 5.8 billion. Financial performance 
was further affected by financing costs of 
Rs. 7.1 billion and foreign exchange losses of 
Rs. 11.9 billion. The Group recorded a 
net loss of Rs. 20.3 billion before one-off 
adjustments, which narrowed to Rs. 8.9 
billion after the reversal of Rolls-Royce 
withheld discounts and suspended credits 
amounting to Rs. 11.4 billion. 
The Government continued to facilitate the 
restructuring of the airline’s outstanding 
financial 
obligations, 
including 
the 
restructuring of the USD 175 million 
sovereign-guaranteed bond that matured 
in 2024. It also took measures to address the 
airline’s legacy debt through a settlement 
arrangement 
initiated 
in 
2025, 
and 
provided short-term financial assistance 
of USD 30 million to support its immediate 
operational and liquidity requirements. 
These interventions are intended to ease 
the airline’s financial constraints and 
support the continuation of its operations 
while longer-term restructuring measures 
are pursued. 
Furthermore, in June 2026 the Cabinet 
of Ministers approved the establishment 
of a high-level Committee to undertake 
a strategic review and formulate a 
restructuring framework for  SLA. The 
Committee 
is 
expected 
to 
identify 
measures to improve operational efficiency, 
strengthen financial sustainability and 
reduce 
the 
airline’s 
dependence 
on 
continued Government support. 
Meanwhile, heightened tensions in the 
Middle East in 2026 increased uncertainty 
in international aviation by disrupting flight 
operations, restricting airspace, forcing 
route diversions, and raising operating 
costs. Given SLA’s exposure to Middle 
Eastern routes, these developments placed 
further pressure on its operations and 
financial position. Sustained restructuring, 
prudent 
cash-flow 
management, 
and 
greater operational efficiency will be 
essential 
to 
strengthen 
the 
airline’s 
finances and minimize fiscal risks to the 
Government. 
National Water Supply and Drainage Board
National Water Supply and Drainage Board 
(NWS&DB) recorded revenue of Rs. 58.7 
billion in the first eight months of 2026, 
an increase of 4.6 percent compared to 
Rs. 56.1 billion in the same period of 2025. 
However, the cost of sales increased by 
11.3 percent to Rs. 22.7 billion in the first 
eight months of 2026, from Rs. 20.4 billion, 
mainly due to higher production costs, 
particularly the high pumping cost driven 
by electricity charges. Consequently, the 
gross profit increased marginally to Rs. 35.9 
billion, compared to Rs. 35.7 billion in the 
same period of 2025. Despite this marginal 
improvement, NWS&DB’s PBT decreased 
by 4.8 percent to Rs. 24 billion in the 
first eight months of 2026, compared to 
Rs. 25.2 billion in the same period of 2025.
During the first eight months of 2026, the 
NWS&DB added 77,243 new connections to 
the system, thereby increasing the total to 
3.33 million as at end August 2026. During 
the same period, the NWS&DB produced 
594 million m3 of water, compared to 568 
million m3 in the same period of 2025 and 
recorded a water sale of 448 million m3, 
compared to 429 million m3 in the same 
period of 2025. Further, Non-Revenue 
Water (NRW) deteriorated marginally to 
24.57 percent from 24.52 percent during 
the period under review. 
During the first eight months of 2026, 
the General Treasury contributed Rs. 10.8 
billion as equity to the NWS&DB to repay 
loans and  support the completion of the 
water supply projects.
Sri Lanka Ports Authority
The Port of Colombo continued its strong 
growth during 2026, handling 5.99 million 
twenty-foot equivalent units (TEUs) in the 
first eight months of 2026, an increase of 
10.3 percent compared to 5.43 million 
TEUs in the same period of 2025. Growth 
was primarily driven by transshipment 
operations, which increased by 10.9 
percent to 4.83 million TEUs.

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Budget Economic and Fiscal Position Report - 2027	
85   
Reflecting the growth in port activity, 
SLPA recorded an improved financial 
performance during the first eight months 
of 2026. Total revenue increased by 10.3 
percent to Rs. 61.0 billion, compared to 
Rs. 55.3 billion in the same period of 2025. 
Consequently, operating profit increased 
to Rs. 40.3 billion from Rs. 37.3 billion, while 
PBT rose to Rs. 43.2 billion from Rs. 39.2 
billion. 
SLPA 
continued 
to 
pursue 
initiatives 
to enhance port capacity, operational 
efficiency 
and 
international 
competitiveness. 
The 
expansion 
of 
container 
handling 
infrastructure, 
engagement with major shipping lines and 
ongoing port modernization initiatives are 
expected to support future throughput 
growth and strengthen Colombo’s position 
as a regional transshipment hub. Continued 
investment in infrastructure, digitalization 
and quality service will be important to 
accommodate rising volumes and sustain 
the Port’s competitiveness. Meanwhile, 
escalating tensions in the Middle East 
during the period under review increased 
uncertainty in international shipping and 
maritime trade. Disruptions to shipping 
routes, higher marine fuel costs, changes 
in vessel-routing decisions and increased 
maritime security risks could affect vessel 
movements, shipping costs and global 
trade flows. Such developments may 
also create opportunities for Colombo 
through changes in regional vessel routes 
and transshipment demand. Accordingly, 
monitoring 
geopolitical 
changes 
and 
their implications for shipping patterns, 
operating costs and cargo volumes remains 
important in managing emerging risks. 
Going forward, sustaining throughput 
growth, improving operational efficiency, 
advancing 
infrastructure 
development, 
and 
strengthening 
engagement 
with 
international 
shipping 
lines 
will 
be 
essential to maintaining SLPA’s financial 
performance. 
Airport and Aviation Services (Sri Lanka) 
(Private) Limited
Airport and Aviation Services (Sri Lanka) 
(Private) Limited (AASL) recorded strong 
financial performance during the first eight 
months of 2026. Total revenue remained 
broadly unchanged at Rs. 35.8 billion. 
Total operating expenditure amounted to 
Rs. 14.9 billion, resulting in an operating 
profit of Rs. 20.9 billion, which was also in 
line with the same period of 2025. Benefiting 
from the exchange rate movements, AASL 
recorded an exchange gain of Rs. 3.5 billion 
in the first eight months of 2026, compared 
to the exchange loss of Rs. 2.5 billion in the 
same period of 2025. Consequently, AASL 
recorded a profit before tax of Rs. 28.6 
billion in the first eight months of 2026, an 
increase of 30 percent compared to Rs. 22 
billion in the same period of 2025. 
During the period under review, AASL 
continued 
to 
pursue 
initiatives 
to 
strengthen 
Sri 
Lanka’s 
international 
air connectivity and enhance airport 
services. The introduction of an automated 
border-control e-gate at Bandaranaike 
International Airport (BIA) represented a 
further step towards improving passenger 
processing and operational efficiency. In 
addition, AASL floated an Expression of 
Interest (EOI) and conducted an investor-
engagement 
programme 
at 
Mattala 
Rajapaksa International Airport (MRIA) to 
attract investments in aviation, logistics, 
cargo and related commercial activities. 
Nevertheless, 
escalating 
tensions 
in 
the Middle East during 2026 created 
uncertainty for the global aviation industry, 
with potential implications for flight 
schedules, airspace availability, passenger 
movements and airline operating costs. 
These could affect airport traffic and 
the demand for aeronautical and non-
aeronautical services, including passenger-
related commercial activities. Accordingly, 
continued 
monitoring 
of 
international 
aviation trends and their implications for 
passenger and aircraft movements remains 
important in assessing AASL’s performance.
Xim ullate endit etur? Fuga. Itate nectesti 
opti corepratem fuga. Aquam, optaspi 
catendis sam accust,

BEFPR 2027 · file page 100 printed page 86

86                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 4.2 | Profit before Tax of 52 State Owned  Enterprises
Rs. Million
Enterprise
2024 
Actual
2025 
(Provisional)
2026 Jan.-Aug. 
(Provisional)
1
Bank of Ceylon 
106,904
120,827
82,805
2
People’s Bank 
41,584
64,409
44,531
3
National Savings Bank 
26,268
44,493
30,107
4
State Mortgage & Investment Bank  
158
737
585
5
HDFC Bank***
64
10
205
6
Pradeshiya Sanwardena Bank
3,210
5,830
4,677
7
Employees' Trust Fund Board 
63,177
68,510
49,468
8
Sri Lanka Insurance Corporation Limited
3,546
6,891
2,918
9
National Insurance Trust Fund
16,442
9,391
15,135
10
Sri Lanka Export Credit Insurance Corporation
560
592
723
11
Agriculture and Agrarian Insurance Board
-3,182
-1,907
536
12
Ceylon Electricity Board**
141,605
-38,740
1,479
13
Ceylon Petroleum Corporation
34,188
36,461
28,893
14
Sri Lanka Ports Authority
46,349
57,246
43,158
15
National Water Supply and Drainage Board
23,833
31,604
23,980
16
Airport and Aviation Services (SL )Ltd
28,671
33,658
28,648
17
Sri Lankan Airlines Ltd*
-7,595
-23,211
-12,640
18
Sri Lanka Transport Board
547
4,312
480
19
State Engineering Corporation
-773
-899
-182
20
Central Engineering Consultancy Bureau
607
395
60
21
State Development and Construction Corp.(a)
-1,217
-565
-259
22
Milco (Pvt) Ltd
-64
1,410
1,468
23
National Livestock Development Board
396
-143
380
24
Sri Lanka State Plantations Corporation
-69
-35
-73
25
Janatha Estates Development Board
-229
-222
-65
26
Kurunegala Plantations Ltd
415
635
332
27
Chilaw Plantations Ltd
219
650
301
28
Kalubovitiyana Tea Factory Ltd*
-7
84
30
29
Sri Lanka Cashew Corporation
14
17
2
30
Lanka Mineral Sands Ltd
-77
649
88
31
Lanka Phosphate Ltd*
465
459
121
32
Kahatagaha Graphite Lanka Ltd*  
-1
14
-18
33
Development Lotteries Board
4,197
7,487
7,149
34
National Lotteries Board
6,203
8,177
7,207
35
State Pharmaceuticals and Manufacturing Corp.
3,083
2,478
2,083
36
Sri Lanka Ayurvedic Drugs Corporation
183
276
99
37
State Pharmaceuticals Corporation
2,474
3,772
1,694
38
Sri Jayawardenepura General Hospital
552
363
1,028
39
Independent Television Network Ltd
3
62
-55
40
Sri Lanka Rupavahini Corporation
-247
-191
-199
41
Sri Lanka Broadcasting Corporation
-176
-203
-90
42
Sri Lanka Handicraft Board
25
35
4
43
State Timber Corporation
825
1,139
153
44
STC General Trading Company*
370
429
146
45
Lanka Sathosa Ltd
-776
-536
-71
46
State Printing Corporation
284
145
-218
47
Ceylon Fisheries Corporation(a)
-53
132
1
48
Ceylon Fishery Harbour Corporation
-101
-376
276
49
Hotel Developers Lanka PLC
-268
139
64
50
Lanka Sugar Company Ltd
-1,944
-3,193
-535
51
Ceylon Fertilizer Company Ltd(b)
118
-
-
52
Colombo Commercial Fertilizer Company Ltd(b) 
555
-
-
53
State Fertilizer Company Limited*
-
723
279
Total
   541,316 
444,421
          366,889 
Sources: SOEs and Department of Public Enterprises
(a)Provisional 
(b)State Fertilizer Co. was incorporated by amalgamating these two companies
*2026 April - August
**For 2026, PBT is for the period from 01.01.2026 to 09.03.2026
***2026 January - June

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Budget Economic and Fiscal Position Report - 2027	
87   
Table 4.3 | Levy/ Dividend Income from SOEs
Rs. Million
Enterprise
Actuals
 Projections 
2024
2025
Up to 
31.08.2026
2027
2028
Levy 
    33,190 
     47,332 
16,002 
 50,286       50,505 
National Savings Bank
           - 
       6,088 
--
   6,000 
       6,000 
Bank of Ceylon
           - 
       5,000 
--
   5,000 
       5,000 
People’s Bank
           - 
       2,000 
1,550 
   3,500 
       3,500 
Regional Development Bank
--
--
--
      500 
          500 
Ceylon Petroleum Corporation
 - 
       6,000 
                - 
   7,000 
       7,000 
Telecommunication Regulatory Commission of Sri 
Lanka
     9,000 
       3,000 
5,000 
  10,000       10,000 
National Water Supply and Drainage Board
 - 
          200 
                - 
    1,000         1,000 
State Timber Corporation
 - 
          585 
100 
      250 
          250 
State Pharmaceuticals Manufacturing Corporation
        300 
          779 
200 
       535 
          588 
National Insurance Trust Fund
      2,919 
        4,973 
602 
   2,000 
       2,000 
Geological Survey and Mines Bureau
      1,468 
        1,688 
185 
       100            100 
National Gem and Jewellery Authority
          25 
           145                115 
        50 
            50 
Board of Investment of Sri Lanka
        928 
        1,150 
 - 
    1,269 
        1,396 
National Lotteries Board
      1,060 
        1,250              630 
      750 
          850 
Sri Lanka Standards Institution
           13 
          269                75 
       129 
           150 
Sri Lanka Export Credit Insurance  Corporation
        300 
           150                 -   
       342 
           377 
Central Engineering Consultancy Bureau
           - 
             15                  5 
         10 
             10 
Sri Lanka Tourism Promotion Bureau
        500 
       1,000           2,000 
       525            525 
Civil Aviation Authority
        750 
       1,000               100 
      350 
          350 
State Pharmaceutical Corporation
         100 
          487              400 
      890            699 
National Transport Medical Institute
        850 
          280               150 
       325 
          350 
Sri Lanka Bureau of Foreign Employment
           - 
       5,000                 -   
      825 
          825 
National Transport Commission 
        250 
          300              250 
      300 
          300 
Sri Lanka Tourism Development Authority
           - 
          275              250 
        45 
            45 
Sri Lanka Land Reclamation and Development 
Authority
           - 
          100                 -   
50
50
Sri Lanka Ports Authority
        607 
       2,000            3,607 
    6,967 
        6,967 
National Medicine Regulatory Authority
        880 
           751              300 
       475 
           475 
Road Development Authority
      1,749 
        2,128                 -   
-- 
--
Land Reforms Commission 
           15 
          100                 -   
           1 
               1 
Condominium Management Authority 
           - 
            10                 15 
10
10
National Institute of Business Management
          85 
            30                50 
         105              110 
Sri Lanka Ayurvedic Drugs Corporation
            5 
            76                 -   
        65 
            65 
Post Graduate Institute of Management
            4 
            30                28 
        28 
            30 
Other SOEs
     11,381 
          474               391 
890
932
Dividends 
     7,890 
        9,211            3,913 
  16,585 
      16,970 
Sri Lanka Insurance Corporation Ltd
       1,271 
        1,987                  4 
   2,000 
       2,200 
Airport and Aviation Services (Sri Lanka) (Pvt) Ltd
      1,286 
        2,931 
--
    6,622         6,622 
Lanka Mineral Sands Ltd
         158 
             -                 -   
      200 
          200 
Lanka Phosphate Ltd
          75 
           125                 -   
       100            100 
Lanka Leyland Ltd
           - 
             14                 -   
          9 
              9 
Rakna Arakshaka Lanka Ltd
          75 
             -                111 
       100            100 
Manthai Salt Ltd. (National Salt Ltd)
           - 
            30                40 
        75 
            75 
Ceylon Fertilizer Ltd 
           15 
             -                 -   
         - 
             - 
Colombo Commercial Fertilizer Ltd
          30 
             -                 -   
         - 
             - 
Paranthan Chemicals Company Ltd
          131 
            33                 -   
        90 
           126 
STC General Trading Company 
          50 
           116                 -   
        90 
           101 
Sri Lanka Telecom PLC
           - 
          227              680 
      230 
          230 
De La Rue Lanka (Pvt) Ltd
      1,324 
          494                 -   
       510 
           510 
Lanka Electricity Company Ltd
         436 
          436                 -   
      440 
          440 
Lanka Industrial Estates Ltd
          98 
           101                 -   
         - 
             - 
Ceylon Agro Industries
        202 
          226                131 
         - 
             - 
Plantation Companies
         559 
           214               264 
       421            433 
State Fertilizer Limited
           - 
            65               181 
        60 
           124 
Lanka Thriposha Ltd
         100 
           123                 -   
       100            100 
Other SOEs 
     2,080 
       2,090            2,503 
    5,538 
       5,600 
Total 
    41,080       56,543           19,916 
  66,871 
      67,475 
Sources: SOEs and Department of Public Enterprises

BEFPR 2027 · file page 102 printed page 88

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05
Basis Used for the 
Preparation of 2027 
Budget

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Cited in:

Budget Economic and Fiscal Position Report - 2027	
91   
5.1 Overview
The macroeconomic and fiscal estimates 
in Budget 2027 are based on assumptions, 
analyses and judgements made at the time 
the Budget was prepared. This section sets 
out the key macroeconomic indicators 
considered in preparing the revenue 
and 
expenditure 
estimates, 
including 
Gross Domestic Product (GDP), inflation, 
unemployment and the external sector. 
It also covers global, financial sector 
and labour market developments, and 
highlights the sensitivities in the estimates.
5.2 Gross Domestic Product
Sri Lanka’s economy grew by 5.0 percent in 
2025, the second consecutive year of such 
growth, with per capita GDP surpassing 
USD 5,000. Despite the twin shocks of 
Cyclone Ditwah in late 2025 and the 
Middle East conflict from February 2026, 
the economy grew by 5.1 percent in the 
first quarter and 4.2 percent in the second 
quarter of 2026, averaging about 4.7 
percent in the first half of the year. Growth 
moderated in the second quarter, mainly 
due to disruptions in fuel supply and a 2.3 
percent contraction in Agriculture, while 
Industry expanded by 7.3 percent, led by 
construction. Under the baseline scenario, 
the economy is expected to grow by 4.0 
percent in 2027, compared to an estimated 
3.8 percent in 2026, supported by post-
cyclone reconstruction, the recovery of 
domestic demand and the normalisation of 
energy supply.
Government policy for the Agriculture 
sector 
is 
to 
restore 
and 
enhance 
productivity, 
competitiveness 
and 
resilience following the damage caused 
by Cyclone Ditwah and the prolonged 
dry 
weather, 
while 
developing 
an 
export-driven, value-added sector. Key 
measures include rehabilitating irrigation 
infrastructure, supplying quality seeds, 
promoting the efficient use of water 
resources, 
and 
ensuring 
the 
timely 
availability 
of 
fertiliser 
at 
affordable 
prices amid elevated global prices. The 
Industry sector is projected to expand, 
particularly construction, supported by 
the reconstruction of damaged public 
infrastructure and public investment of 5.1 
percent of GDP. Manufacturing is expected 
to benefit from export diversification and 
value addition.
The Services sector, which accounts for 
the largest share of GDP, is expected to 
expand steadily, supported by growth in 
finance, transport, IT, trade and real estate. 
Growth is expected to strengthen further 
as the digital economy, a key pillar of the 
country’s development strategy, develops 
more rapidly. Meanwhile, the Government 
remains focused on sustaining tourism 
earnings amid regional uncertainty by 
improving 
infrastructure, 
diversifying 
source 
markets 
and 
strengthening 
measures to ensure the safety and 
satisfaction of tourists.
5.3 Consumer Prices
Headline inflation rose above the 5 percent 
target from mid-2026, reaching 8.3 percent 
in October 2026, compared to 2.2 percent 
at end-March 2026. The increase was driven 
by higher global oil prices following the 
Middle East conflict, successive revisions to 
domestic fuel prices and electricity tariffs, 
and supply disruptions in agriculture. 
By October 2026, food inflation stood 
at 8.8 percent, non-food inflation at 8.0 
percent, and core inflation at 5.6 percent. 
In response, the Central Bank raised the 
Overnight Policy Rate (OPR) by 100 basis 
points to 8.75 percent in May 2026.
Inflation is expected to remain above 
the target in the near term before easing 
gradually towards the 5 percent target 
in the second half of 2027, supported by 
the tight monetary policy stance, prudent 
fiscal policy and the dissipation of the 
effects of the Middle East conflict. The 
GDP deflator is projected to remain at 4.0 
percent in 2027. This outlook assumes a 
gradual normalisation of global energy and 
commodity prices, favourable agricultural 
production following recovery from the 
cyclone and dry weather, and continued 
exchange rate stability.

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92                                                                      Budget Economic and Fiscal Position Report - 2027
5.4 Employment and Unemployment
The unemployment rate declined to 3.9 
percent in 2025 from 4.4 percent in 2024. 
However, it rose slightly to 4.0 percent 
in the second quarter of 2026, compared 
to 3.8 percent in the same period of 
2025. The labour force participation rate 
increased marginally to 32.7 percent in the 
second quarter of 2026, compared to 31.7 
percent in the same period of 2025, but 
remained low, reflecting continued low 
female participation and outward labour 
migration.
With the recovery of economic activity, 
post-cyclone 
reconstruction 
and 
the 
envisaged expansion of the Industry and 
Services 
sectors, 
the 
unemployment 
rate is expected to remain low in 2027. 
The Government will introduce targeted 
policies 
to 
encourage 
labour 
force 
participation, particularly among women 
and youth.
5.5 External Sector
Sri Lanka’s external sector came under 
pressure in 2026 due to the Middle East 
conflict, following a current account 
surplus of USD 1.7 billion in 2025, the third 
consecutive annual surplus. The current 
account recorded a deficit of USD 290.6 
million in the first eight months of 2026, 
compared to a surplus of USD 2,047.0 
million in the same period of 2025, mainly 
due to higher fuel import expenditure. Fuel 
imports increased by 61.6 percent to USD 
4,072 million, widening the merchandise 
trade deficit to USD 7.2 billion from USD 
4.3 billion in the first eight months of 2025.
Tourism earnings declined by 10.0 percent 
to USD 2,061.1 million in January to August 
2026, compared to USD 2,290.0 million 
in the same period of 2025. Workers’ 
remittances continued to grow robustly, 
rising by 19.8 percent to USD 6,131.0 
million in the first eight months of 2026, 
while merchandise exports increased by 
3.3 percent to USD 9,376.9 million. Gross 
official reserves stood at USD 6.9 billion 
at end-August 2026, while the rupee 
depreciated by 6.3 percent against the 
US dollar on a year-to-date basis by end-
September 2026.
The external sector is expected to recover 
gradually in 2027 as global energy prices 
normalise 
and 
tourism 
earnings 
and 
workers’ remittances continue to support 
net inflows. Exports of goods and services 
are expected to expand in line with the 
National Export Development Plan (2025–
2029) and the National Tariff Policy, which 
aims to establish a simplified, transparent 
and predictable tariff framework. The 
exchange rate is expected to remain 
broadly stable in 2027, reflecting improved 
external balances, a continued build-
up of reserves and strengthened market 
confidence.
5.6 Monetary Aggregates
The money supply is expected to be 
maintained 
at 
an 
appropriate 
level, 
consistent with the Central Bank’s objective 
of bringing inflation back towards the 5 
percent target. With revenue and grants 
projected at 15.8 percent of GDP and the 
budget deficit at 3.8 percent of GDP in 
2027, the Government’s gross financing 
needs are expected to decline. This will 
ease pressure on domestic interest rates 
and create a more favourable environment 
for private sector credit and investment.
5.7 Revenue
Total revenue is estimated at 15.8 percent 
of GDP in 2027, with tax revenue at 14.6 
percent of GDP, reflecting the normalisation 
of revenue following the one-off gains from 
the resumption of motor vehicle imports. 
Revenue gains are expected to be driven 
mainly by revenue administration measures 
under the Medium-Term Revenue Strategy 
(2027–2031). The assumptions underlying 
the revenue estimates are detailed in 
Annex III.
5.8 Expenditure
The expenditure estimates in Budget 
2027 are prepared within the primary 
expenditure ceiling of 12.9 percent of 
GDP, or Rs. 5,030 billion. However, this 
ceiling is expected to be exceeded due

BEFPR 2027 · file page 107 printed page 93

Cited in: , Education and skills

Budget Economic and Fiscal Position Report - 2027	
93   
to the reallocation from 2026 to 2027 of 
unutilised allocations for reconstruction 
and 
rehabilitation 
following 
Cyclone 
Ditwah, which will be incorporated into the 
Supplementary Estimate for Budget 2027. 
The estimates are based on the following:
•	
Salaries and Wages: Estimates are 
based on a public sector workforce of 
approximately 1.3 million employees. 
The 
number 
of 
public 
sector 
employees is assumed not to increase 
considerably through new recruitment 
in 2027. Annual salary increments have 
been factored in, along with the final 
phase of the salary revision proposed 
in Budget 2025.
•	
Pension Payments: Estimates are based 
on an estimated 762,570 pensioners 
and the pension adjustments proposed 
in Budget 2025 and Budget 2026.
•	
Interest Payments: Interest expenditure 
is expected to decline to 6.8 percent of 
GDP in 2027 from 7.3 percent in 2026, 
reflecting the completion of debt 
restructuring and the declining debt 
stock. Higher domestic interest rates 
following the monetary tightening in 
2026 may partly offset this.
•	
Goods and Services: Expenditure on 
goods and services is estimated at Rs. 
409 billion.
•	
Subsidies to Households: Spending 
on social safety nets is expected to be 
rationalised, reflecting requirement-
based allocations under the Aswesuma 
programme 
and 
other 
targeted 
programmes supporting the elderly, 
persons with disabilities and chronic 
kidney patients, as well as continued 
support for households affected by 
Cyclone Ditwah and higher energy 
prices. 
Funding 
for 
other 
major 
welfare programmes is also expected 
to continue, including support for 
differently-abled 
soldiers, 
nutrition 
programmes for expectant mothers, 
the supply of free medicines and 
fertiliser subsidies to ensure food 
security.
•	
Transfers to Public Institutions and 
Corporations: Transfers are expected 
to remain contained, supported by 
cost-reflective pricing in the energy 
sector and the ongoing restructuring of 
major State-Owned Enterprises (SOEs).
•	
Public Investment: Public investment 
will be around 5.1 percent of GDP in 
2027, prioritising the reconstruction 
of 
infrastructure 
damaged 
by 
Cyclone Ditwah in line with the Post-
Disaster 
Needs 
Assessment 
2026, 
and investment in priority sectors, 
while reducing non-priority and non-
essential expenditure. Funding for any 
Ditwah reconstruction activities not 
completed in 2026 will be determined 
following an assessment at the end of 
2026.
•	
Public Financial Management Act, 
No. 44 of 2024: The Act is now 
largely in operation, and Budget 2027 
is prepared in line with the Fiscal 
Strategy Statement 2027 tabled in 
Parliament in June 2026. The fiscal 
responsibility framework under the Act 
will continue to enhance transparency, 
accountability, discipline and efficiency 
in 
public 
financial 
management, 
including expenditure management.
•	
IT and Digital Solutions: Efforts to 
transform the country into a digital 
society, including the expansion of the 
‘GovPay’ platform for the digitalisation 
of government payments, will enhance 
public service delivery and operational 
efficiency.
•	
Agency Coordination and Monitoring: 
Enhanced cooperation among public 
agencies and stronger oversight will 
ensure the effectiveness of budgetary 
allocations and avoid duplication.
•	
Commitment 
Control 
Mechanisms: 
The 
commitment 
control 
system 
established under the Public Financial 
Management Act, No. 44 of 2024 
will strengthen fiscal and cash flow 
management.

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94                                                                      Budget Economic and Fiscal Position Report - 2027
5.9 Borrowings
The 
Government’s 
gross 
borrowing 
requirement is projected at Rs. 3,800 billion 
in 2027. The budget deficit is expected to 
expand by 0.1 percentage points to 3.8 
percent of GDP in 2027, compared to the 
revised estimate of 3.7 percent in 2026. 
However, in view of the Supplementary 
Budget to be submitted alongside Budget 
2027, which will incorporate expenditure 
for the continuation of Cyclone Ditwah-
related reconstruction and rehabilitation, 
the budget deficit is expected to widen 
to 4.5 percent of GDP in 2027. Public 
debt is projected to decline in 2027, and 
the Government remains committed to 
keeping average annual gross financing 
needs below 13 percent of GDP and foreign 
currency debt service below 4.5 percent of 
GDP over 2027-2032.
The Public Debt Management Office 
(PDMO), established under the Public 
Debt Management Act, No. 33 of 2024, is 
now fully operational. It is responsible for 
managing Government debt, issuing and 
managing loan guarantees, managing on-
lending operations, and recording and 
reporting public debt. Borrowing in 2027 
will be guided by the Medium-Term Debt 
Management Strategy and the Annual 
Borrowing Plan, with a focus on lengthening 
the maturity profile and reducing reliance 
on foreign currency debt.
5.10 Sensitivities to the Estimates
Fiscal and economic projections could be 
influenced by several risks and challenges, 
including the following:
•	 Macroeconomic 
uncertainty: 
Economic conditions are a major 
determinant of fiscal outcomes and 
the primary source of uncertainty in 
forecasting the fiscal position. The 
duration and intensity of the Middle 
East conflict, volatility in global 
oil, food and fertiliser prices, and 
tightening global financial conditions 
may 
cause 
actual 
revenue 
and 
expenditure outcomes to deviate 
from the Budget 2027 projections. 
Variables such as inflation, interest 
rates and exchange rates directly 
affect the cost of borrowing and the 
overall fiscal position, and remain 
vulnerable to sudden shifts.
•	 External shocks: As a net oil importer, 
Sri Lanka remains highly exposed 
to disruptions in global energy 
supply, including those arising from 
the effective closure of the Strait of 
Hormuz. A prolonged conflict could 
further raise import costs, weaken 
tourism earnings and remittance 
inflows from the Middle East, and 
reduce demand in key export markets, 
placing pressure on the exchange 
rate, inflation and economic growth.
•	 Natural disasters and unfavourable 
weather conditions: Cyclone Ditwah 
demonstrated the scale of fiscal risk 
from natural disasters, requiring a 
Supplementary Budget of Rs. 500 
billion in 2026. The country remains 
exposed 
to 
floods, 
landslides, 
cyclones 
and 
droughts, 
any 
of 
which may occur within the coming 
year. Such events may necessitate 
unforeseen expenditure on relief, 
recovery and reconstruction, and 
adversely affect agricultural output, 
labour productivity and growth.
•	 Administrative 
and 
procurement 
delays: 
Bureaucratic 
hurdles, 
shortages of raw materials such as 
bitumen, and procurement delays 
could slow the implementation of 
public investment projects, including 
post-cyclone 
reconstruction, 
reducing their contribution to growth 
and employment. Delays can also 
increase project costs and create 
inefficiencies in public spending, 
placing additional pressure on the 
fiscal balance.
•	 Legislative delays: Delays in the 
approval 
of 
key 
fiscal-related 
legislation may create uncertainty 
in the timing and implementation 
of budgetary measures. Postponed

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Budget Economic and Fiscal Position Report - 2027	
95   
tax reforms or spending approvals 
can lead to revenue shortfalls and 
expenditure 
overruns, 
increase 
borrowing requirements and weaken 
the Government’s ability to meet its 
fiscal targets.
•	 State-Owned 
Enterprises 
(SOEs) 
performance: SOEs are subject to 
operational risks, foreign currency 
exposure and commodity price shocks 
that may affect their profitability and 
financial sustainability. Weak SOE 
performance, delays in restructuring, 
or any reversal of cost-reflective 
pricing in the energy sector could 
lead to the realisation of contingent 
liabilities 
and 
challenge 
fiscal 
consolidation objectives.
•	 Financial sector risks: Stress in the 
financial system, including through 
the sector’s exposure to sovereign 
debt and Government guarantees 
to state-owned financial institutions, 
could give rise to fiscal costs and 
affect the Government’s financing 
conditions.

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BEFPR 2027 · file page 111 printed page 97

Budget Economic and Fiscal Position Report - 2027	
97   
 ANNEX I 
The Outstanding List of Treasury Guarantees & Letters of comfort Issued by the General 
Treasury as at 31.08.2026
S. No. Name of the Bank or 
Institution
Name of Institution
 Issued Value Rs. Mn as at 
31.08.2026
Outstanding Value Rs. Mn 
as at 31.08.2026 
1
Asian Development 
Bank
Ceylon Electricity Board 
185,328.42 
218,129.91 
148,094.53 
180,896.02 
Lanka Electricity Company 
(Pvt) Ltd
16,400.75 
16,400.75 
Regional Development Bank
16,400.75 
16,400.75 
2
Asian Infrastructure 
Investment Bank 
(AIIB)
Bank of Ceylon & People's 
Bank
29,521.34 
29,521.34 
9,837.17 
9,837.17 
3
Bank of Ceylon
Building Materials 
Corporation Ltd
500.00 
470,685.48 
500.00 
260,465.42 
Ceylon Electricity Board 
4,540.00 
11.18 
Ceylon Petroleum 
Corporation
220,000.00 
105,851.72 
General Sir John Kotelawala 
Defence University
85.00 
2.31 
Janatha Estates 
Development Board
200.00 
19.27 
Lanka Coal Company (Pvt) 
Ltd
49,500.00 
33,807.21 
National School of Business 
Management Limited
8,600.00 
3,765.00 
National Water Supply & 
Drainage Board
64,863.64 
28,342.41 
Road Development 
Authority
118,970.03 
84,875.72 
State Development and 
Construction Corporation
1,126.81 
990.61 
State Engineering 
Corporation
2,300.00 
2,299.99 
4
China Development 
Bank
National Water Supply & 
Drainage Board
115,595.70 
115,595.70 
61,719.28 
61,719.28 
5
China National 
Chemical 
Engineering No.14 
Construction Co. Ltd
Ceylon Petroleum 
Corporation
14,358.85 
14,358.85 
5,825.54 
5,825.54 
6
Commercial Bank
National Water Supply & 
Drainage Board
968.36 
968.36 
298.53 
298.53 
7
DFCC Bank
National Water Supply & 
Drainage Board
6,026.24 
11,026.24 
2,381.81 
5,642.68 
Road Development 
Authority
5,000.00 
3,260.87 
8
Exim Bank of India
National Water Supply & 
Drainage Board
85,966.14 
85,966.14 
50,921.03 
50,921.03 
9
Hatton National Bank Airport & Aviation Services 
(Sri Lanka) (Private) Limited
4,000.00 
20,421.49 
4,000.00 
9,535.16 
National Water Supply & 
Drainage Board
16,421.49 
5,535.16 
10
Hongkong & 
Shanghai Banking 
Co.Ltd.
Airport & Aviation Services 
(Sri Lanka) (Private) Limited
14,477.91 
14,477.91 
9,673.16 
9,673.16 
11
Industrial And 
Commercial Bank of 
China Limited
Ceylon Electricity Board 
13,767.57 
13,767.57 
8,702.24 
8,702.24 
12
ING Bank, NV of 
Netherlands
National Water Supply & 
Drainage Board
31,541.21 
31,541.21 
30,323.73 
30,323.73 
13
International 
Air Transport 
Association(IATA)
SriLankan Airlines Limited
3,804.97 
3,804.97 
3,804.97 
3,804.97

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98                                                                      Budget Economic and Fiscal Position Report - 2027
S. No. Name of the Bank or 
Institution
Name of Institution
 Issued Value Rs. Mn as at 
31.08.2026
Outstanding Value Rs. Mn 
as at 31.08.2026 
14
Japan International 
Cooperation Agency 
(JICA)
Airport & Aviation Services 
(Sri Lanka) (Private) Limited
                 
152,751.92 
            
152,751.92 
                
55,421.41 
             
55,421.41 
15
National 
Development Bank 
PLC
National Water Supply & 
Drainage Board
                  
21,380.43 
            
21,380.43 
               
12,050.36 
            
12,050.36 
16
National Savings 
Bank
Ceylon Electricity Board 
5,000.00 
147,098.87 
2,500.00 
114,097.47 
General Sir John Kotelawala 
Defence University
33,896.09 
24,211.49 
National Water Supply & 
Drainage Board
32,710.61 
24,304.24 
Road Development 
Authority
75,492.17 
63,081.74 
17
People's Bank
Ceylon Electricity Board 
6,500.00 
113,533.63 
4,335.34 
75,624.83 
Ceylon Petroleum 
Corporation
2,533.92 
1,266.14 
Ceylon Shipping 
Corporation Ltd
23,587.70 
15,534.79 
National System Operator 
Private Limited
20,560.00 
20,523.18 
National Water Supply & 
Drainage Board
4,563.98 
2,144.98 
Road Development 
Authority
53,398.03 
31,256.25 
Sri Lanka State Plantation 
Corporation
100.00 
51.28 
State Printing Corporation
2,290.00 
512.87 
18
Sampath Bank
Road Development 
Authority
14,500.00 
14,500.00 
8,568.18 
8,568.18 
19
UniCredit Bank 
Austria AG
National Water Supply & 
Drainage Board
19,239.89 
19,239.89 
15,513.58 
15,513.58 
20
Paddy Marketing 
Board
Co-operative Wholesale 
Establishment
880.00 
880.00 
729.60 
729.60 
21
Export Development 
Board
Bank of Ceylon and Peoples 
Bank
60.00 
60.00 
60.00 
60.00 
Grand Total
1,499,709.91 1,499,709.91 
919,710.37 
919,710.37 
Note: The exchange rates published by the Central Bank of Sri Lanka (CBSL) as at 31 August 2026 were used to 
convert the amounts denominated in different currencies into Sri Lankan rupees (LKR).

BEFPR 2027 · file page 113 printed page 99

Budget Economic and Fiscal Position Report - 2027	
99   
 ANNEX II 
Macroeconomic Indicators
TABLE 1 | Key Sectoral Growth Rate (%): 2024-2026
2024
2025
2026
  Q1
(a)
  Q2
(a)
GDP
5.0
5.0
5.1
4.2
    Agriculture
1.2
1.4
1.1
-2.3
    Industry 
11.0
7.8
7.2
7.3
    Services
2.4
3.3
3.4
2.7
Inflation - GDP Deflator (2015=100)(%)
3.8
3.7
5.7
6.9
Unemployment Rate (%)
4.5
3.9
3.7
          4.0 
Source : Department of Census and Statistics
(a) Provisional
TABLE 2 | Quarterly Growth Rates of Key Sub-Sectors of Agriculture : 2024-2026
Sector
2024
2025(a)
2026(a)
Q1
Q2
Tea (Mn kg)
262.7
262.8
59.6
72.1
Growth %
2.6
0.0
-3.6
-1.9
Rubber (Mn kg)
69.2
66.5
16.2
14.7
Growth %
7.4
-3.9
-13.6
-2.2
Coconuts (Mn nuts)
2,790.1
3,040.3
944.8
834.3
Growth %
-12.0
9.0
64.8
6.2
Fish ('000 Mt) 
411.0
364.2
75.6
67.0
Growth %
1.1
11.3
-26.8
-17.3
2024/25
2025
2025/26
Maha
Yala
Maha
Paddy ('000 Mt) 
2,745.3
2,308.4
3,133.9
Source : Central Bank of Sri Lanka
(a) Provisional
TABLE 3 | Performance in Industrial Sector: 2024-2026                                          
Rs. Million
Description
2024
2025(a)
2026(a)
 Q1
 Q2
Food, Beverages and Tobacco Products 
954,409 
1,004,413
304,409
210,923
Growth Rate
6.1 
5.2
5.8
3.7
Textile, Wearing Apparel and Leather Related Products
500,210 
540,558
173,671
101,017
Growth Rate
11.0
8.0
-3.7
-1.4
Chemical Products and Basic Pharmaceutical Products
90,994 
93,549
21,887
32,116
Growth Rate
9.7 
2.8
22.8
1.7
Rubber and Plastic Products
60,972 
62,587
10,663
18,555
Growth Rate
8.6
2.6
-16.8
-4.2
Non-metallic Mineral Products
86,813 
100,890
33,154
28,744
Growth Rate
2.5
16.2
12.9
13.1
Total Industrial Sector
3,333,008 
3,597,326
1,049,104
863,881
Overall Industrial Growth
11.0
7.8
7.2
7.3
Source : Department of Census and Statistics
(a) Provisional

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100                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 4 | Performance in Electricity Generation and Services Sector: 2025-2026
Category 
2025
2026(a)
Q1
Q2
June
Jan-Jun
Q1
Q2
June
Jan-Jun
Electricity Generation
 Total Generation (GWh)(Excluding Self Generation) 
4,221
4,466
1,504
8,688
4,511
4,793
1,589
9,304
 Growth Rate 
2.4
7.3
9.6
4.9
6.9
7.3
5.6
7.1
 Hydro (excluding mini hydro) 
1,271
1,704
626
2,975
1,213
1,081
388
2,294
 Growth Rate 
1.0
37.0
33.7
18.9
-4.6
-36.6
-38.0
-22.9
 Fuel Oil 
754
259
46
1,014
954
950
213
1,904
 Growth Rate 
6.3
-56.3
-13.3
-22.2
26.4
266.2
360.4
87.8
 Coal 
1,383
1,299
359
2,682
1,362
1,447
484
2,809
 Growth Rate 
-6.2
-11.7
-23.3
-8.9
-1.5
11.4
34.6
4.7
 NCRE (Including mini hydro)(b) 
813
1,203
473
2,016
982
1,315
504
2,297
 Growth Rate 
19.9
40.6
23.6
31.4
20.8
9.2
6.5
13.9
 Hydro: Fuel Oil: Coal: NCRE Ratio 
30:18:33:19
38:6:29:27
42:3:24:31
34:12:31:23
27:21:30:22 23:20:30:27 24:13:30:32 25:20:30:25
 Reservoir Water Level % (End Period Average) 
75.5
65.3
72.7
70.4
68.4
44.5
51.2
56.4
Port Services
 Q1
Q2
 Aug
Jan-Aug
 Q1
Q2
Aug
Jan-Aug
 Total Cargo Handled ('000 MT) 
30,850
32,186
10,847
84,580
32,292
35,060
10,970
90,110
 Growth Rate 
1.1
10.9
-9.4
4.8
4.7
8.9
1.1
6.5
 Total Container Handled ('000 TEUs)(c)
1,936
2,036
741
5,435
2,154
2,290
776
5,995
 Growth Rate 
-3.6
8.2
16.8
5.7
11.2
12.5
4.7
10.3
Telecommunications Services (No. of Subscribers)(d)
 Q1
 Q2
 Q1
 Q2
 Fixed Lines ('000) 
3,543
3,473
2,732
2,708
 Growth Rate 
62.5
61.1
-22.9
-22.0
 Cellular ('000) 
28,784
29,027
29,679
29,419
 Growth Rate 
2.9
0.1
3.1
1.4
 Total Fixed Lines and  Cellular ('000) 
32,328
32,500
32,411
32,127
 Growth Rate 
7.2
4.3
0.3
-1.1
 Internet and email ('000) 
24,170
23,686
23,755
23,882
Source : Central Bank of Sri Lanka
(a) Provisional
(b) NCRE: Non Conventional Renewable Energy
(c) Port of Colombo only
(d) As at the end of the period

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Budget Economic and Fiscal Position Report - 2027	
101   
TABLE 5 | Export Performance in 2025-2026
USD Million
Item
2025
2026
Jan-Aug
Jan-Aug(a)
Agricultural Products
             2,030.2 
                     2,015.4 
Tea
              1,026.0 
                        948.5 
Rubber
                  20.8 
                          18.9 
Coconut Products
                 367.5 
                        389.6 
Other Agricultural Products
                  615.9 
                        658.5 
Industrial Products
              7,015.4 
                      7,327.1 
Textile and Garments
              3,595.3 
                     3,355.6 
Petroleum Products
                 654.7 
                        944.9 
Other Industrial Products
              2,765.4 
                     3,026.5 
Mineral Export
                   14.3 
                         22.2 
Other Exports
                   16.8 
                          12.3 
Total Exports
              9,076.6 
                     9,376.9 
Source : Central Bank of Sri Lanka
(a) Provisional 
TABLE 6 | Import Performance in  2025-2026
USD  Million
Item
2025
2026
Jan-Aug
Jan-Aug (a)
Consumer Goods
      3,294.7 
          4,004.5 
Cereals and Milling Industry Products
           90.9 
              120.6 
Sugar
         245.8 
             206.6 
Other Food Products 
      1,082.9 
            1,120.6 
Other Consumer  Goods 
      1,875.0 
           2,556.6 
Intermediate Goods 
      7,437.4 
          9,334.2 
Fuel 
      2,520.6 
           4,072.1 
Wheat and Maize
         205.1 
              239.5 
Fertilizer 
         164.8 
              129.5 
Textile & textile articles
       1,793.5 
            1,713.2 
Other Intermediate Goods 
      2,753.4 
           3,179.8 
Investment Goods 
      2,597.2 
          3,203.6 
Other Imports 
            11.6 
               14.8 
Total
     13,340.9 
          16,557.1 
Source : Central Bank of Sri Lanka
(a) Provisional

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102                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 7 | Balance of Payments - 2026
USD Millon
Item
2026
Q1(a)
Q2(a)
Current Account Balance
704
-986
Trade Balance
-2,310
-3,179
Exports 
3,461
3,442
Imports
5,771
6,621
Services (net)
1,125
507
Receipts
2,016
1,512
Payments
891
1,005
Primary Income (net)
-376
-586
Receipts
164
144
Payments
540
730
Secondary Income (net)
2,264
2,272
Secondary income: credit
2,295
2,311
Secondary income: debit
31
39
Capital Account (net)
-2
0
Capital account: credit
2
3
Capital account: debit
3
3
Current and Capital Account (net)         
702
-985
Financial Account (net)
646
-668
Direct Investment: Assets
28
25
Direct Investment: Liabilities
204
201
Portfolio Investment: Assets
-0.3
              26 
Debt securities
-0.3
              26 
Portfolio Investment: Liabilities
-74
-351
Equity and investment fund shares
-96
-39
Debt securities
22
-312
Financial Derivatives
              - 
               - 
Other Investment: Assets
435
111
Currency and deposits
195
-63
Trade credits and advances
-64
-86
Other accounts receivable
304
259
Other Investment: Liabilities
-98
436
Currency and deposits
21
-62
Loans
-196
407
Trade credits and advances
77
91
Other accounts payable
              - 
               - 
Special Drawing Rights (SDRs)
              - 
               - 
Reserve Assets
215
-542
Net Errors and Omissions
-56
318
Overall Balance
456
136
Source : Central Bank of Sri Lanka
(a) Provisional

BEFPR 2027 · file page 117 printed page 103

Budget Economic and Fiscal Position Report - 2027	
103   
TABLE 8 | International Reserves
USD Million
Item
End 2025
May 2026
Jun 2026
Jul 2026
Aug 2026
Total External Reserves
12,306
12,997
12,602
13,247
13,459
Months of Imports
6.9
6.5
6.3
6.5
6.5
Gross Official Reserves
6,838
6,881
6,458
6,600
6,929
Months of Imports
3.8
3.5
3.2
3.2
3.4
Source : Central Bank of Sri Lanka
TABLE 10 |  Movements in Selected Exchange Rates (Against the USD)
Currency
Appreciation(+)/ Depreciation(-)
End 2024 - End 2025
End 2025 - End Aug 2026
Sri Lanka Rupee
-5.6
-5.5
Indian Rupee
-4.7
-5.9
Bangladesh Taka
-2.2
-0.7
Pakistan Rupee
-0.6
0.9
Singapore Dollar
5.8
0.9
Thailand Baht
8.7
-5.2
Taiwan Dollar
4.3
-0.6
Indonesian Rupiah
-3.6
-5.7
Philippine Peso
-1.7
-5.7
Korean Won
2.1
4.9
Japanese Yen
0.0
-2.1
Source : Central Bank of Sri Lanka
TABLE 9 : Outstanding Debt of the Government
USD Million
Items
End August 2026 (Provisional)*
Central Government Foreign Debt and Domestic Debt
                                       96,948 
      Central Government Foreign Debt (a) (b)
                                        37,744 
      Central Government Domestic Debt  denominated in local currency (c) (d)
                                        56,925 
      Dollar Denominated Domestic Debt
                                         2,279 
            Sri Lanka Development Bonds (SLDBs) (a) (d)
                                              - 
            Domestic Dollar Bonds (DDBs) (e)
                                              51 
            Loans Foreign Currency Banking Units (FCBUs) 
                                              - 
            Domestic Term Loans denominated in foreign currency (e)
                                          2,184 
            Domestic project loans denominated in foreign currency (d) (e)
                                              44 
Source : Public Debt Management Office
(a) Only the Central Government outstanding Foreign Debt are depicted.Included unpaid Principal accumulated 
from the date of debt standstill policy was adopted. Non-resident holdings of T-bill / T-bonds are not included. 
Outstanding amounts of ISBs have not been classified on the current resident/ non-resident basis of their 
holdings.
(b) Foreign Project, Term and Syndicated Loan debt outstanding is compiled based on Meridian reports 
downloaded on [ 16.10.2026] (Cutoff - end August 2026).  
(c) Includes T- Bonds, T- Bills, Suhurupaya Loans and Gratuity Loans outstanding as of 31 August 2026, based on 
recorded debt data as of 6 October 2026.  Outstanding amounts of T-Bills & T- Bonds  have not been classified 
on the current resident/ non-resident basis of their holdings.
(d) Includes borrowings from Domestic Banks from 2011 to 2019 to finance for development projects implemented 
by Roads Development Authority, Ministry of Health and National Water Supply & Drainage Board
(e) Domestic Dollar Bonds (DDBs) are included under Dollar denominated Domestic Debt. CS-DRMS as of August 
21, 2026 (Cut-off date: June 30, 2026).
* Exchange rate used 1 US $ = 328.0149 (Date = 31 August 2026)

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104                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 11 | Central Bank Holdings of Government Securities
Rs. Billion
End Period
Gross (Face Value)
Net of Repos 
(Book Value)
2015
                           105                                      79 
2016
                           331                                    330 
2017
                             10                                      26 
2018
                            46                                    274 
2019
                            75                                     125 
2020
                           725                                    737 
2021
                         1,417                                  1,960 
2022
                        2,598                                  3,187 
2023
                        2,744                                  1,956 
2024
                        2,516                                   1,551 
2025
                        2,509                                  1,601 
End of Aug 2026
                        2,493                                  1,274 
Source : Central Bank of Sri Lanka
TABLE 12 | Commercial Banks' Loans and Advances to the Private Sector : January-August 2026 (a)(b)
 Rs. Million
Amount
as at % of Total
1. Agriculture & Fishing
7,844,224
9.0
of which…
   Tea
1,620,819
1.9
   Rubber
507,139
0.6
   Coconut
503,155
0.6
   Paddy
726,172
0.8
   Vegetable, Fruit Cultivation and Minor Food Crops
581,951
0.7
   Livestock and Dairy Farming
682,867
0.8
   Fisheries
470,160
0.5
2. Industry
32,144,568
37.0
of which…
   Construction
15,153,933
17.4
      of which…
  --- Personal Housing including Purchasing/Construction/Repairs
7,470,981
8.6
  --- Staff Housing
675,557
0.8
   Food and Beverages
2,120,268
2.4
   Textiles and Apparel
3,326,977
3.8
   Wood and Wood Products including Furniture
292,031
0.3
   Paper and Paper Products
510,631
0.6
   Chemical, Petroleum, Pharmaceutical, Healthcare and Rubber and 
Plastic 
   Products   
2,047,116
2.4
   Non-metallic Mineral Products
137,734
0.2
   Basic Metal  Products
640,093
0.7
   Fabricated Metal Products, Machinery and Transport Equipment
2,550,957
2.9
   Other Manufactured Products
401,935
0.5

BEFPR 2027 · file page 119 printed page 105

Budget Economic and Fiscal Position Report - 2027	
105   
 Rs. Million
Amount
as at % of Total
3. Services
26,549,331
30.5
of which…
   Wholesale and Retail Trade
8,965,716
10.3
   Tourism
2,465,485
2.8
   Financial and Business Services
7,258,760
8.4
   Transport
675,490
0.8
   Communication and Information Technology
1,061,295
1.2
   Printing and Publishing 
172,792
0.2
   Education
503,042
0.6
   Health
508,177
0.6
   Shipping, Aviation, Supply and Freight Forwarding
372,742
0.4
4. Personal Loans and Advances(c)
20,388,932
23.5
of which…
   Consumer Durables
974,226
1.1
   Pawning
8,438,093
9.7
   Credit Card(d)
1,623,323
1.9
   Personal Education
58,809
0.1
   Personal Healthcare
30,005
0.03
   Other
8,510,634
9.8
 Total(e)
86,927,054
100.0
Source: Central Bank of Sri Lanka
(a) Includes loans, overdrafts, bills discounted and purchased and excludes cash items in the process of collection
(b) Provisional
(c) Excludes personal housing loans, which have been included under ‘Construction’ classified under ‘Industry’ 
and includes Safety Net Scheme related loans.
(d) These balances may differ from the credit card outstanding balances reported in the Weekly and Monthly 
Economic Indicators of the Central Bank of Sri Lanka due to compilation and reporting differences.
(e) Total credit to the private sector as per the Monthly Survey differ from that in the Monetary Survey due to 
differences in the compilation methodologies.
Note: 
The Economic Research Department (ERD) of the Central Bank of Sri Lanka (CBSL) commenced the Monthly 
Survey on Loans and Advances by Licensed Commercial Banks (LCBs) to the private sector, with a detailed 
breakdown of credit extended to the key sectors of the economy from April 2025. Accordingly, the existing 
Quarterly Survey on the Commercial Banks’ Loans and Advances to the private sector (Quarterly Survey) was 
discontinued. The purpose of the new survey is to collect sector-wise credit data on a monthly basis, thereby 
enabling the monitoring and analysis of high-frequency movements in private sector credit. Accordingly, direct 
comparisons between the new Monthly Survey data and the earlier quarterly series are not appropriate, as 
variations in growth patterns across sub sectors during the transition period largely reflect reclassifications 
introduced at the bank level.

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106                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 13 | Interest Rate Movements in 2025-2026
Interest Rate
End 
Dec 
2025
End 
May 
2026
End 
June 
2026
End 
July 
2026
End 
Aug 
2026
Policy Rates of the Central Bank
Overnight Policy Rate (a)
7.75
8.75
8.75
8.75
8.75
Standing Deposit Facility Rate (SDFR)(a)
7.25
8.25
8.25
8.25
8.25
Standing Lending Facility Rate (SLFR)(a)
8.25
9.25
9.25
9.25
9.25
Weighted Average Call Money Rate (AWCMR)
8.04
9.10
9.23
9.01
8.85
Weighted Average OMO Auction Rate (Reverse Repo)- 
Overnight (b)
 -     8.75 
  8.75 
  8.67 
8.75
Treasury Bill Rates
91-days
7.74
9.36
10.14
9.86
9.06
182-days
8.27
9.68
10.21
10.21
9.44
364 -days
8.45
9.83
10.17
10.20
9.89
Lending Rates
Average Weighted Prime  Lending Rate(AWPR) (weekly)
9.07
9.9
10.62
10.67
10.95
Average Weighted Prime  Lending Rate (AWPR) 
(monthly)
8.87
9.75
10.34
10.50
10.88
Average Weighted Lending Rate(AWLR)    
11.48
11.97
12.16
12.36
12.59
Deposit Rates
Average Weighted Deposit Rate (AWDR)
6.78
6.95
7.20
7.39
7.52
Average Weighted Fixed  Deposit Rate (AWFDR) 
8.41
8.66
8.98
9.2
9.34
Source : Central Bank of Sri Lanka 
(a) With effect from 27 November 2024, the OPR is defined as the policy interest rate of the Central Bank. SDFR 
and SLFR are linked to the OPR with a margin of ± 50 basis points
(b) Weighted average rate of the last overnight repo or reverse repo auction held during the month.

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Budget Economic and Fiscal Position Report - 2027	
107   
Assumptions for Revenue Estimates - 2027
The assumptions are made in line with Section 49 of the Public Financial Management Act, 
No. 44 of 2024 (PFMA). 
The revenue estimates for 2027 are based on key factors including trend or long-run 
averages for growth rates, the actual revenue collected in 2025 and revenue progress in 
first eight months of 2026, revenue impact expected from the new measures, developments 
of the macro-economic variables, and the staff’s best judgments on the performance of the 
revenue.  
The broad assumptions are detailed as follows:
•	
The economy is expected to grow by 4 - 5 percent in 2027 supported by both 
domestic and external fronts. The growth is expected to expand in all three sectors 
of the economy ie. Industry, Services and Agriculture. 
•	
The average inflation is expected to anchor the target of 5 percent by second quarter 
of 2027.
•	
Unemployment rate is expected to be below 5.0 percent in 2027.
•	
Exchange rate is expected to be relatively stable in 2027.
•	
Marginal decline in revenue from import taxes related to motor vehicles compared to 
2026 due to the possible reduction of demand for the vehicles in 2027. 
•	
Full implementation of the Public Financial Management (PFM) Act through the 
implementation of the PFM regulations to improve fiscal discipline for better 
macroeconomic management.
•	
Introduction of State-Owned Enterprises (SOE) Bill and Public Private Partnerships 
(PPPs) Bill and thereby ensure that PPPs are fully integrated into the public investment 
management process. 
•	
Enhancing revenue mobilization by strengthening the revenue administration of the 
Inland Revenue Department (IRD), Sri Lanka Customs (SLC), and the Excise Department 
through digitalization, minimizing corruption risks, and improving the effectiveness 
of revenue administration strategies.
•	
Strengthening tax compliance at the IRD through mandatory e-filing for individuals, 
streamlining the tax refund process for export suppliers, enforcing the use of Point-
of-Sale (POS) machines, and enhancing the efficiency of risk-based audits.
•	
Strengthening the effectiveness of the Gambling Regulatory Authority in regulating 
and monitoring the gambling industry, with a focus on enhancing revenue collection, 
transparency, accountability, and good governance.
•	
Establishment of the Medium-Term Revenue Strategy (2027–2031) in line with the 
identified medium-term revenue objectives, and implementation of targeted tax 
policy and revenue administration measures to mobilize the identified potential 
revenue gains.
ANNEX III

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108                                                                      Budget Economic and Fiscal Position Report - 2027
Item / Engine Capacity
Rate
(i) Cars - Petrol
Less than 1,000 cc                              
 Rs.1,992,000/-per unit or Rs.2,450/-per cm 3
1,001 cc -1,300 cc                                                  
  Rs.3,850/-per cm 3
1,301 cc -1,500 cc                                                  
  Rs.4,450/-per  cm 3
1,501 cc -1,600 cc                                                 
   Rs.5,150/-per cm 3
1,601 cc -1,800 cc                                                 
   Rs.6,400/-per cm 3
1,801 cc -2,000 cc                                                 
   Rs.7,700/-per cm 3
2,001 cc -2,500 cc                                                  
  Rs.8,450/-per cm 3
2,501 cc -2,750 cc                                                  
  Rs.9,650/-per cm 3
2,751 cc -3,000 cc                                                 
   Rs.10,850/-per cm 3
3,001 cc -4,000 cc                                                 
  Rs.12,050/-per cm 3
Exceeding 4,000 cc                                                   
Rs.13,300/-per cm 3
(ii) Cars - Diesel
Less than 1,500 cc                                                
     Rs.5,550/-per cm 3
1,501 cc -1,600 cc                                                    
Rs.6,950/-per cm 3
1,601 cc -1,800 cc                                                
    Rs.8,300/-per cm 3
1,801 cc -2,000 cc                                                    
Rs.9,650/-per cm 3
2,001 cc -2,500 cc                                                  
 Rs.9,650/-per cm 3
2,501 cc -2,750 cc                                                  
  Rs.10,850/-per cm 3
2,751 cc -3,000 cc                                             
      Rs.12,050/-per cm 3
3,001 cc -4,000 cc                                              
     Rs.13,300/-per cm 3
Exceeding 4,000 cc                                               
    Rs.14,500/-per cm 3
(iii) Cars - Hybrid / Petrol
Less than 1,000 cc                                               
  Rs.1,810,900/-per unit
1,001 cc -1,300 cc                                                 
   Rs.2,750/-per cm 3
1,301 cc -1,500 cc                                               
     Rs.3,450/-per cm 3
1,501 cc -1,600 cc                                                   
 Rs.4,800/-per cm 3
1,601 cc -1,800 cc                                                  
  Rs.6,300/-per cm 3
1,801 cc -2,000 cc                                                    
Rs.6,900/-per cm 3
2,001 cc -2,500cc                                                  
  Rs.7,250/-per cm 3
2,501 cc -2,750 cc                                                  
  Rs.8,450/-per cm 3
2,751 cc -3,000 cc                                                    
Rs.9,650/-per cm 3
3,001 cc -4,000 cc                                                  
 Rs.10,850/-per cm 3
Exceeding 4 000 cc                                                  
 Rs.12,050/-per cm 3
(iv) Cars - Hybrid / Diesel
Less than 1,000 cc                                                   
 Rs. 4,150/-per cm 3
1,001 cc -1,300 cc                                                    
Rs. 4,150/-per cm 3
1,301 cc -1,500 cc                                                   
 Rs. 4,150/-per cm 3
1,501 cc -1,600 cc                                                  
  Rs.5,550/-per cm 3
1,601 cc -1,800 cc                                                   
 Rs.6,900/-per cm 3
1,801 cc -2,000 cc                                                    
Rs.8,350/-per cm 3
2,001 cc -2,500 cc                                                   
 Rs.8,450/-per cm 3
2,501 cc -2,750 cc                                                   
 Rs.9,650/-per cm 3
2,751 cc -3,000 cc                                                  
  Rs.10,850/-per cm 3
3,001 cc -4,000 cc                                                   
Rs.12,050/-per cm 3
Exceeding 4,000 cc                                               
    Rs.13,300/-per cm 3
(v) Electric Cars
Car- Electric - Charged by External Electric Source
Less than 50kW                                                     
  Rs.18,100/-per kW
51kW -100kW                                                     
  Rs.24,100/-per kW
101kW -200kW                                                     
 Rs.36,200/-per kW
Exceeding 200kW                                                 
    Rs.96,600/-per kW
Car- Electric -  (ICE only for charging accumulator)
Less than 50kW                                                     
Rs.30,770/-per kW
51kW -100kW                                                     
Rs.40,970/-per kW
TABLE 1 | Excise (Special Provisions) Duty Structure for Motor Vehicles  (As at 31.10.2026)

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Budget Economic and Fiscal Position Report - 2027	
109   
TABLE 2 | Excise (Special Provisions) Duty Structure for Cigarettes (As at 31.10.2026)
Category 
Rs. per 1,000 Sticks
Cigarettes each not exceeding 60mm. in length
                              19,350 
Cigarettes each exceeding 60mm. but not exceeding 67mm in length
                              50,150 
Cigarettes each exceeding 67mm. but not exceeding 72mm in length
                              71,450 
Cigarettes each exceeding 72mm. but not exceeding 84mm in length
                             81,000 
Cigarettes each exceeding 84mm. in length
                             90,050 
Source : Department of Fiscal Policy
Item / Engine Capacity
Rate
101kW -200kW                                                     
Rs.41,630/-per kW
Exceeding 200kW                                                 
Rs.111,090/-per kW
(vi) Vans
13 -25 Persons/ Diesel                                             
Rs. 5,432,650/-per unit
13 -25 Persons/ Petrol                         
Rs.2,100/-per cm 3
Less than 13 Persons/ Diesel                 
200%
Less than 13 Persons/ Petrol                   
150%
Source : Department of Fiscal Policy
TABLE 3 | Excise (Special Provisions) Duty Structure for Petroleum Products (As at 31.10.2026)
Item
Rs. Per litre
Petrol
72.00 
Diesel - Auto
50.00 
Diesel - Super
57.00 
Source : Department of Fiscal Policy
Classifications 
Duty Rate per 
liter/kg (Rs.)
Liquor (per absolute liter)                
Special Arrack
             7,244 
Molasses, Palmyrah, Coconut and Processed Arrack
             7,752 
Locally Manufactured Foreign Liquor
             7,969 
Malt Liquor of Five Per centum (5%) and below of absolute strength
             5,735 
Malt Liquor of more than Five Per centum (5%) of absolute strength
             6,015 
Wine
             5,735 
Sake
             1,567 
Milk Punch
             3,982 
Cider
             4,347 
Raw materials used for production of Ethanol
Coconut Toddy (per bulk litre)
                   5 
Molasses (per bulk kg)
                  10 
Rice used for production of spirits by distillation (per bulk kg)                                       
                  10 
Maize used for production of spirits by distillation (per bulk kg)
                  10 
Fruit used for production of spirits by distillation (per bulk kg)
                  10 
Foreign liquor
Imported Malt Liquor (Beer) (per bulk liter)
                135 
Imported Wine (per bulk liter)
               230 
Any other imported Foreign Liquor (which does not come under malt liquor or 
wine) (per bulk liter)
               650 
Non-potable Spirits (per bulk kg) 
                   6 
Source : Department of Fiscal Policy
TABLE 4 | Excise Duty Structure under Excise Ordinance (As at 31.10.2026)

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110                                                                      Budget Economic and Fiscal Position Report - 2027
TABLE 5 | Ports and Airports Development Levy (As at 31.10.2026)
Category
Rate
General Rate
10.0%
Concessionary Rates
7.5%, 5.0%, 2.5%
Source : Department of Fiscal Policy
TABLE 6 | Value Added Tax (VAT) (As at 31.10.2026)
Description
Item
Zero Rate
Export Goods/Services
Standard Rate (18%)
General Items
Exemptions
Goods and Services which are listed in the Part III of the first schedule of 
the VAT Act.
Source : Department of Fiscal Policy
TABLE 7 | Social Security Contribution Levy  (SSCL) (As at 31.10.2026)
Description
Item
Rate ( 2.5%)
-
Exemptions
Articles and Services  which are listed in Part IA and Part II  of the SSCL 
Act
TABLE 8 | Customs Import Duty Tariff Structure (As at 31.10.2026)
Duty Rate
No of HS Codes
Free 
                   3,724 
15%
                      526 
20%
                   2,659 
Specific 
                     852 
Specific & Ad valorem (Mixed)
                      412 
Source : Department of Trade and Investment Policy
TABLE 9 | Rent Income
Rs. Million
Item
2025              
(Provisional)
2026    
Revised
2027   
Estimate
Rent on Government Buildings & Housing
2,213
2,399
2,645
Rent on Crown Forests
2,218
1,500
1,500
Rent from Land & Other
               272 
          220 
225
Lease Rental from Regional Plantation Companies
1,995
2,881
3,000
Others
1,146
       1,500 
1,630
Total Rent Income
7,843
8,500
9,000
Source : Department of Fiscal Policy
TABLE 10 | Fees and Charges
Rs. Million
2025 
Provisional
2026 
Revised
2027 
Estimate
 Service Charges by Government Press
1,575 
1,100
1,100
 Fees of Passport, Visas and Dual Citizenship
44,882
42,000
45,000
Embarkation Levy 
53,477
50,000
65,000
 Fees under the Motor Traffic Act & other Receipts
20,301
24,000
25,000
 Fees from other Various Sources 
77,350
88,880
90,324
Total
197,584
205,980
226,424
Source : Department of Fiscal Policy

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Budget Economic and Fiscal Position Report - 2027	
111   
Rs. per kg.
Item
End Sept. 2025
End Sep. 2026
1
Sprats
100
100
2
Potatoes
80
80
3
Red Onions
50
50
4
B’onions
50
50
5
Garlic
50
50
6
Watana - Whole
5
5
Watana - Split
10
10
7
Chickpeas - Whole
5
5
Chickpeas - Split
10
10
8
Green gram
300
300
9
Lentils- Whole
25 Cents
25 Cents
Lentils- Split
25 Cents
25 Cents
10
Chillies- Not Crushed or ground
100
100
Chillies-  Crushed or ground
125
125
11
Canned fish
200
200
12
Sugar
50
50
13
Black gram -Whole
300
300
Black gram –Skinned 
300
300
14
Cowpea
300
300
15
Kurakkan
300
300
Millet/ Other
300
300
16
Maldive fish
302
302
17
Dried fish
100
100
18
Orange – fresh 
600
600
19
Grapes – fresh 
600
600
20
Apples
600
600
21
Coriander-  Not Crushed or ground
26
26
Coriander-   Crushed or ground
52
52
22
Cumin
162
162
23
Fennel
162
162
24
Turmeric -  Not Crushed or ground
102
102
Turmeric -  Crushed or ground
360
360
25
Mathe seeds
50
50
26
Kurakkan flour
150
150
27
Black gram flour
325
325
28
Ground nuts
220
220
29
Mustard seed
62
62
30
Palm oil / Other Veg. oil - Crude
250
250
Palm olein
255
255
Palm stearin 
250
250
Refine Palm oil
275
275
Other Veg.oil Refine
275
275
Palm Kernel -  Crude
250
250
                          Refine
275
275
Coconut oil (Crude)
125
125
Coconut oil (Refine)
150
150
31
Fish
10% or Rs. 400
10% or Rs. 400
32
Mackerel fish (Jac /Horse Mackerel) 
6
6
33
Yogurt
2000
2000
TABLE 11 | Special Commodity Levy Rates

BEFPR 2027 · file page 126 printed page 112

112                                                                      Budget Economic and Fiscal Position Report - 2027
Rs. per kg.
Item
End Sept. 2025
End Sep. 2026
34
Butter
1500 (other 2000)
1500 (other 2000)
35
Margarine – Fat content 80%>
650
650
                 Margarine   – Fat content 80%<
650
650
36
Salt
40(Waiver-30)
40(Waiver-30)
37
Dates
200
200
38
Grapes - dried
600
600
39
Mangoesteen (fresh& dried)
200
200
40
Orange- dried
125
125
41
Pears
220
220
42
Cherries – Other 
315
315
43
Plums and sloes
250
250
44
Kiwifruit
175
175
45
Pomegranate (Other)
600
600
46
Grated /powdered Cheese
600
600
47
Clementines – fresh 
120
120
48
Clementines – dried 
250
250
49
Other (citrus) fruits   – fresh 
120
Normal Duty 
Structure applied on 
26.11.2025
50
Other( citrus) fruits – dried 
250
250
51
Grapefruit –fresh 
285
285
52
Grapefruit – dried 
300
300
53
Lemon- fresh 
350
350
54
Lemon- dried
400
400
55
Other citrus fruits - fresh
300
300
56
Other citrus fruits – dried 
375
375
57
Quinces 
350
350
58
Apricots
350
350
59
Cherries - Sour
330
330
60
Peaches and Nectarines 
310
310
61
Vegetable fats and oils 
160
160
62
Margarine – liquid 
200
200
63
 Rice
65
65
64
Maize
25
50
Source : Department of Trade and Investment Policy