Sri Lanka Set to Present Reform-Focused National Budget Amid IMF Commitments

Sri Lankan President and Finance Minister Anura Kumara Dissanayake will present the national budget on Friday, prioritising economic reforms aimed at meeting International Monetary Fund (IMF) targets that are key for securing additional financial support and boosting investor confidence.

Dissanayake came to power late last year promising to tackle corruption and rebuild the economy, which suffered a severe foreign currency crisis in 2022 that triggered its worst financial collapse in decades.

Analysts expect the budget to avoid introducing major new taxes, as government revenue has stabilised and is expected to continue improving alongside the economic recovery.

Sri Lanka is currently working toward IMF commitments that include reaching a primary budget surplus of 2.3% and increasing public revenue to 15% of GDP in 2025. The economy expanded by 5% last year, signalling a gradual rebound from soaring inflation, currency depreciation, and a $22.5 billion sovereign debt default in 2022.

The IMF has encouraged Sri Lanka to broaden its tax base, strengthen tax administration, streamline exemptions, and improve public financial management. Meeting the programme’s targets is key to restoring the country’s credit rating and regaining access to international capital markets by 2028.

The government is currently drafting new tax laws aimed at attracting foreign investment — a requirement linked to unlocking a sixth IMF funding tranche worth $347 million by the end of the year. This would bring the total disbursement under the nearly $3 billion IMF programme to about $2.04 billion.

Reforms also include restructuring loss-making state enterprises and introducing land and labour market changes to support long-term growth.

“With structural reforms and more strategic investment policies, Sri Lanka could reach medium-term growth of 5% to 6%,” said Arvind Nair, Senior Economist for Sri Lanka, Nepal, and the Maldives at the World Bank. The institution forecasts a 4.6% growth rate for Sri Lanka in 2025 and 3.5% in 2026.