Impressive budgetary gains

LIVING beyond means has been a salient feature of Sri Lanka's post-independent economy. Except for two years (in 1954 and 1955 under the premiership of Late Sir John Kotelawala), all Budgets in the island have ended up in deficits. Fiscal discipline is perceived by lawmakers as a political liability while Governments that strived hard to achieve fiscal prudence have often been defeated by voters at elections.

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The recent announcement by the Treasury that Sri Lanka's budget deficit declined by 55% or Rs. 411 billion in August 2025 from a year earlier is a noteworthy development in the backdrop of revenue-based fiscal consolidation having been recognised as a key benchmark of the IMF-mandated economic reforms. According to the latest figures, tax revenue expanded to Rs. 3,068.5 billion over the first eight months of the year from Rs. 2,348.5 billion during last year. The increase in Government revenue has been ably assisted by the increase in import volumes as a result of the economic recovery in addition to gradual relaxation of import restrictions.