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Sri Lanka has made strides in reducing its budget deficit, shrinking it to 8.3 percent of GDP in 2023 from 10.2 percent in 2022, despite controversial tax hikes. The deficit, amounting to Rs. 2,282.3 billion, reflects a notable improvement from the previous year's Rs. 2,459.9 billion. While the government has received a modest $2.9 billion bailout from the IMF spread over four years, its revenue surged by 52.8 percent to Rs. 3,074.3 billion in 2023, equivalent to 11.0 percent of GDP. Tax revenues climbed by 55.4 percent to Rs. 2,720.6 billion, contributing to a primary surplus of Rs. 173.3 billion, or 0.6 percent of GDP, compared to a deficit of Rs. 894.8 billion or 3.7 percent of GDP previously. To sustain this positive trajectory and unlock Sri Lanka's economic potential, fostering industries with lower tax burdens for global competitiveness and strategic government spending on subsidies, welfare, and infrastructure development remain imperative. With aims to increase tax revenue to 13.0 percent in 2024 and possibly further to 15.0 percent in 2025, Sri Lanka seeks a balanced approach to fiscal management to stimulate growth and stability.
