Sri Lanka’s 2026 Budget Aims for Economic Recovery Amid Debt Restructuring

COLOMBO, Sri Lanka — President Anura Kumara Dissanayake presented the 2026 budget on November 7, 2025, stating that the country is nearing the completion of its debt restructuring efforts.

Dissanayake, who also serves as the Finance Minister, told lawmakers that Sri Lanka’s economy is stabilizing and has regained investor confidence following the 2022 financial crisis.

“For a long time, Sri Lanka was under severe debt,” he explained. “But debt to GDP, which was around 114%, will reduce to 96% this year, with a target of 87% by 2030.”

The president highlighted that by the end of 2025, Sri Lanka will recover the economic output lost during the crisis and aims for a 7% growth rate in the medium term.

For 2026, the government aims for a primary surplus of 2.5% of GDP, total revenue of 15.4% of GDP, and a deficit of 5.1%. These figures align with a $2.9 billion International Monetary Fund (IMF) program.

Anjali Hewapathage, Deputy Head of Macroeconomic Research at Frontier Research, commented, “Overall, the budget seems to be a continuation of the government’s fiscal consolidation while balancing economic growth incentives.”

In his speech, Dissanayake reiterated the commitment to ending corruption and stabilizing the economy after a severe dollar shortage led to the financial meltdown in 2022.

The government is also drafting new tax laws aimed at attracting foreign investment and protecting investors, essential for securing an IMF tranche of $347 million by the end of the year.

The World Bank anticipates a growth rate of 4.6% for Sri Lanka in 2025, followed by 3.5% in 2026.