The Government’s Budget returned to surplus in August, posting a cumulative surplus of Rs. 35.4 billion for the first eight months of 2026, after deficits in June and July had pushed the balance into the red, the Finance Ministry’s latest Fiscal Review Report showed.
The turnaround implies a surplus of around Rs. 145 billion for August alone, against a cumulative deficit of Rs. 109.72 billion at end-July. Monthly revenue rose and expenditure fell in August from the levels of June and July.
The August surplus follows deficits of around Rs. 188 billion in June and Rs. 119 billion in July, which had wiped out a cumulative surplus of Rs. 197 billion at end-May.
The Ministry’s data show a surplus of a similar size in August 2025.
The eight-month surplus compares with a deficit of Rs. 411 billion in the same period of 2025.
Total revenue and grants rose 21.2% year-on-year (YoY) to Rs. 4,002.3 billion from Rs. 3,301.5 billion, while total expenditure rose a slower 6.9% YoY to Rs. 3,966.9 billion from Rs. 3,712.5 billion. The Ministry attributed the improvement mainly to revenue growth, along with what it described as the rationalisation of Government expenditure.
The primary balance, which excludes interest payments and is a key indicator under Sri Lanka’s International Monetary Fund (IMF)-supported program, posted a surplus of Rs. 1,644.6 billion, up 28.8% YoY from Rs. 1,276.5 billion. This is more than four times the Rs. 360 billion primary surplus estimated for the full year in the 2026 Budget, which projects an annual overall deficit of Rs. 2,257 billion.
Tax revenue rose 20% YoY to Rs. 3,684 billion and non-tax revenue 39.1% to Rs. 315 billion, while grants fell 40.1% to Rs. 4 billion. Revenue excluding grants rose 21% to Rs. 3,998.3 billion, which the Ministry attributed mainly to collections from motor vehicles.
Revenue from Value Added Tax (VAT) rose 22% YoY to Rs. 1,322.7 billion from Rs. 1,084.2 billion, with VAT on imports up 16% to Rs. 599 billion and VAT on domestic activities up 28%. Income tax revenue rose 18% to Rs. 825.6 billion from Rs. 702.4 billion.
Excise duty collected by Sri Lanka Customs rose 23% YoY to Rs. 565.6 billion from Rs. 461.4 billion. Excise duty on motor vehicles, which made up 61% of that amount, increased by Rs. 76.5 billion to Rs. 347 billion. Excise duty on liquor collected by the Excise Department rose 24% to Rs. 181.1 billion from Rs. 145.7 billion.
Total revenue and grants reached 75.5% of the annual estimate of Rs. 5,300 billion by end-August, with tax revenue at 75% of its Rs. 4,910 billion target. Sri Lanka Customs achieved 78.3% of its annual estimate, the Excise Department 74.5%, and the Inland Revenue Department (IRD) 71.9%. Customs and the IRD each accounted for 47% of tax revenue.
On the spending side, recurrent expenditure rose 4.4% YoY to Rs. 3,531 billion from Rs. 3,381.3 billion. Interest payments, which made up 46% of recurrent spending, fell 4.6% to Rs. 1,609.2 billion from Rs. 1,687.6 billion.
Capital expenditure and net lending rose 31.6% YoY to Rs. 435.9 billion from Rs. 331.2 billion, but reached only 25.4% of the annual allocation of Rs. 1,719 billion, against 60.5% for recurrent expenditure. Total expenditure stood at 52.5% of the Rs. 7,557 billion annual estimate.
The IMF has urged the Government to accelerate public spending execution, including disaster-related support, and has said the Government remains committed to restoring the primary surplus target to 2.3% of GDP in 2027, following temporary fiscal easing this year.
The economy expanded by 4.2% YoY in the second quarter of 2026, slower than the 5% growth recorded a year earlier.