Sri Lanka’s 2027 and future budgets are to adhere to the 13% primary expenditure limit, whereby roughly 9% is to be allocated for recurrent expenses and 4% for capital expenditure, Treasury Deputy Secretary A K Seneviratne said recently (3).
“When we look at the IMF programme, which is to end next year, it is within this programme that we have also allocated expenditure for the 2026 Budget,” Seneviratne said, speaking in a recording released by the Ministry of Finance media unit.
Sri Lanka is meant to adhere to the primary expenditure limit of 13% of GDP, as part of the International Monetary Fund’s Extended Fund Facility (EFF). This target is reiterated in the Public Financial Management Act, No. 44 of 2024, Section 15 (1). The clause maintains that Sri Lanka must limit annual Government expenditure, excluding interest payments on debt, within 13% of GDP, regardless of revenue levels.
While the PFMA mandates a 13% cap on primary expenditure, the IMF programme tracks a related but distinct metric; the primary expenditure balance as a percentage of GDP. However, if required, the Government is capable of exceeding the limit, as stated in the PFMA’s Sections 14, 2 and 2(a).
Sri Lanka’s Deputy Minister of Finance and Planning Anil Jayantha Fernando, indicated in December 2025 that Sri Lanka’s primary expenditure balance limit of 13% of GDP is likely to be exceeded this year, owing to the expenditure allocation of Rs 500 billion for post-cyclone Ditwah reconstruction and recovery.
“When we remove the provision for Ditwah, the rest of the expenditure is in line with the IMF programme. The same way the 2026 budget expenditure was in line with the IMF programme’s parameters, so will the 2027 budget and future budgets be the same,” Seneviratne said.
“Under the Public Debt Management Act, it has been mandated that our primary expenditure limit should be 13%. As the Treasury, we have decided within that 13% to limit Government spending for recurrent expenditure at 9% and 4% for capital expenditure.”
He further added that since Sri Lanka was able to maintain sufficient buffers by adhering to the IMF EFF criteria, it was able to spend the Rs 500 billion in the aftermath of the disaster.
“Through this management of our revenues, we have accumulated a surplus within the Treasury, which we call the buffer. As we know, by maintaining that buffer, during Ditwah last year, we had to take on additional expenditure.”
“Through Parliament, a sum of Rs 500 billion had been allocated for that expenditure. That Rs 500 billion was available due to the rise in our revenues and management of our expenditure under the IMF programme.”
Based on available CBSL data, the Sri Lankan Government posted a Rs 1.78 trillion primary surplus in 2025, as the budget deficit narrowed by 64.5% year-on-year from Rs 2,039.9 billion in 2024 to Rs 724.4 billion in 2025, alongside maintaining a primary surplus which exceeded the budget estimate of Rs 757.4 billion by 134.5%.