Fitch gives positive signal about Sri Lanka's 2026 Budget

With $ 347 m IMF tranche on hold, Fitch gives positive message about 2026 Budget Says Govt. demonstrates continued commitment to fiscal consolidation, reducing debt/GDP over medium term Fiscal deficit seen widening to 5.1% of GDP; primary surplus easing to 2.5% Medium term risks remain; warns revenue slowdown, underspending on investment could test fiscal goals High debt levels and post-2027 repayments remain key credit vulnerabilities

- 

FITCH Ratings yesterday gave a positive signal that the 2026 Budget proposals presented by President Minister Anura Kumara Dissanayake keeps Sri Lanka on the path towards fiscal consolidation.

The global ratings agency's statement is an important development as the third $ 347 million tranche of the International Monetary Fund (IMF) Extended Fund Facility (EFF) is in the balance until Parliament approves a Budget that aligns with the ongoing program.

Fitch Ratings yesterday said Sri Lanka's 2026 Budget keeps the country on its fiscal reform trajectory, though slower revenue growth, underspending on investment, and post-IMF debt risks could weigh on the outlook.

It said that the Sri Lankan Government's latest Budget indicates that the authorities remain committed to reducing Government debt/GDP over the medium term after beating their targets in the 2025 Budget. Strong revenue performance will remain key to meeting the Government's fiscal goals.

Fitch Ratings'statement in full is as follows: The Budget, unveiled on 7 November, targets a deficit of 5.1% of GDP in 2026, wider than the 4.5% that the Government expects in 2025.

The original deficit target for 2025 in last year's Budget was 6.7% of GDP, but in March the IMF projected a lower figure of 5.4%.