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Sri Lanka’s budget has significantly improved in 2024, with higher tax revenues driving a robust economic recovery, narrowing the budget deficit, achieving a primary surplus, and reflecting prudent fiscal management supported by key reforms under the IMF programme.
Sri Lanka’s budget has shown significant improvement in 2024, with substantially higher revenues driven by increased taxes and a robust economic recovery. Total revenue for the first ten months amounted to Rs. 3,266.94 billion, a 34.2 percent increase compared to the same period in 2023. Tax revenues, which contributed Rs. 3,000.25 billion, grew by 35.6 percent, reflecting the impact of higher tax rates implemented under the IMF programme initiated in 2022. The adjustments included a 3 percent increase in Value Added Tax, effective from the start of 2024, marking the third hike in recent years. While the economy has regained momentum, the government introduced tax concessions, such as raising the personal income tax threshold to Rs. 150,000 per month, funded by doubling the withholding tax rate from 5 to 10 percent.
The improved fiscal performance has narrowed the overall budget deficit and resulted in a primary budget surplus of Rs. 830.70 billion in the first ten months of 2024, up from Rs. 225.37 billion in the same period last year. Total expenditure, including lending minus repayments, increased by a modest 8.7 percent to Rs. 4,327.69 billion, with recurrent expenditure rising 7.5 percent and capital expenditure increasing by 18.5 percent. As a result, the overall budget deficit dropped sharply to Rs. 1,060.75 billion from Rs. 1,547.02 billion in 2023. The government has projected a budget deficit of Rs. 2,401 billion for 2024, excluding Rs. 450 billion allocated for bank recapitalization, translating to a 7.6 percent deficit as a share of GDP.
