Sri Lanka ushers New Year 2026 With Fiscal Gains amidst Cyclone Costs

Sri Lanka entered 2026 after recording its strongest fiscal performance in decades in 2025, but the outlook has been clouded by the economic impact of Cyclone Ditwah. A Rs. 500 billion supplementary allocation for recovery has widened the projected 2026 budget deficit to 6.5% of GDP and reduced the primary surplus to 1%.

Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando said 2025 saw State and tax revenue exceed “the highest target in history”, with total revenue surpassing Rs. 4.5 trillion. Economic Development Deputy Minister Nishantha Jayaweera noted that Sri Lanka Customs alone exceeded its target by Rs. 394 billion.

The IMF has warned that debt sustainability risks remain high, urging careful targeting of emergency spending as Sri Lanka begins the New Year.

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