ECONOMYNEXT – Sri Lanka’s government revenues grew 20 percent to 1,940 billion rupees in the five months to May 2025, and the overall deficit fell from last year and the primary surplus went up, Director General Fiscal Policy, Kapila Senanayake said.
Based on provisional data, tax revenues were 1,804 billion rupees, up 21 percent.
Current spending was up 17 percent to 1,024 billion rupees, almost keeping pace with revenue growth with a higher salary bill taking effect.
While state workers have to be paid better, Sri Lanka has bloated the state with unemployed graduates being given jobs to take people’s taxes home.
There are about 100,000 ‘development officers’ as state workers, who are said not to have spaces to sit and many have been assigned to district secretariats vastly outnumbering doctors and nurses.
Capital expenditure was 175 billion rupees, a little lower than 193 billion rupees last year.
Sri Lanka had an interim budget for the first few months of 2025, after the election of a new administration, which had slowed capital projects, officials have said.
Sri Lanka is also just wrapped up in bilateral debt restructuring and projects have to resume or new tenders have to be called.
Sri Lanka however grew 4.8 percent in the first quarter of 2025, amid monetary stability provided by the central bank which missed its 5 percent inflation target which had triggered currency crises in the past.
The overall budget deficit fell to 237 billion rupees, down 35 percent from last year for the first five months of the year.
Sri Lanka’s private credit expanded by 133 billion rupees in May alone.
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There have been warnings that the central bank’s late cycle rate cut (as well as the single policy rate), could harm reserve collections and the government’s ability to repay debt.
Sri Lanka cuts rates claiming past inflation is low, based on IMF technical advice, but analysts have pointed out that a reserve collecting central bank cannot do that and it represents a rejection of economics which has led to currency crises without a war in recent years and eventual default.
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The current account deficit of the budget (total revenues less current spending) fell to only 56 billion rupees up to May down from 176 billion rupees last year.
(Colombo/July07/2025)
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