📈 Sri Lanka’s Budget Back in Surplus in August After 2-Month Deficit

Sri Lanka’s fiscal balance returned to a cumulative surplus of Rs. 35.4 Bn for Jan–Aug 2026, reversing a cumulative deficit of Rs. 109.72 Bn at end-July following an implied Rs. 145 Bn surplus in August. • Overall Fiscal Balance • 8-Month Balance: Rs. 35.4 Bn surplus (vs. Rs. 411 Bn deficit in Jan–Aug 2025). • Primary Surplus: Rs. 1,644.6 Bn, up 28.8% YoY (vs. Rs. 1,276.5 Bn), exceeding the full-year target of Rs. 360 Bn under the IMF-supported program. • Revenue Performance • Total Revenue & Grants: Rs. 4,002.3 Bn (+21.2% YoY), reaching 75.5% of the annual Rs. 5,300 Bn target. • Tax Revenue: Rs. 3,684 Bn (+20% YoY); Non-tax Revenue: Rs. 315 Bn (+39.1% YoY). • VAT Collections: Rs. 1,322.7 Bn (+22% YoY), driven by domestic VAT (+28%) and import VAT (+16%). • Income Tax: Rs. 825.6 Bn (+18% YoY). • Customs Excise Duty: Rs. 565.6 Bn (+23% YoY), led by motor vehicle excise duty surging by Rs. 76.5 Bn to Rs. 347 Bn. Liquor excise rose 24% to Rs. 181.1 Bn. • Revenue Collection Progress: Customs (78.3%), Excise Dept (74.5%), IRD (71.9%). • Expenditure & Economic Indicators • Total Spending: Rs. 3,966.9 Bn (+6.9% YoY), representing 52.5% of the annual allocation. • Recurrent Spending: Rs. 3,531 Bn (+4.4% YoY). Interest payments fell 4.6% YoY to Rs. 1,609.2 Bn (46% of recurrent costs). • Capital Spending: Up 31.6% YoY to Rs. 435.9 Bn, but execution remains low at 25.4% of the Rs. 1,719 Bn annual target. • Economic Growth: Q2 2026 GDP expanded by 4.2% YoY (vs. 5.0% a year earlier).