Despite 20% revenue boost, Sri Lanka's soaring expenditure and debt cast shadow on fiscal gains

Sri Lanka's fiscal performance in the first five months of 2025 has shown signs of improvement, with the overall budget deficit narrowing and a reduction in net domestic financing, according to the latest Central Bank data.

- BY SANATH NANAYAKKARE

From January to May 2025, the government's budget deficit stood at Rs. 236.6 billion, a notable decline from Rs. 366.8 billion recorded in the same period last year.

This improvement was supported by an increase in revenue and grants, which rose to Rs. 1,942.4 billion, up from Rs. 1,619.2 billion in 2024recording an increase of 20% in revenue.

However, expenditure also grew, reaching Rs. 2,179.0 billion, reflecting continued public spending pressures.

A key positive development was the reduction in net domestic financing, which fell to Rs. 298.6 billion compared to Rs. 394.4 billion in 2024.

This suggests that the government is relying less on local borrowing to bridge its fiscal gap, a move that could ease pressure on interest rates and private-sector credit in the long run.