Sri Lanka’s government finances continue to face significant strain despite a robust rise in tax revenue in the first half of 2025. Official data shows tax collections grew 25% to 2.2 trillion Sri Lankan rupees, while non-tax revenue rose 12% to 169.6 billion rupees. However, current spending reached 2.5 trillion rupees, up 13% from last year, driven by state salary increases and swelling interest costs.

Although the current account deficit – a key measure of fiscal health – fell 48% to 185 billion rupees, Sri Lanka remains unable to achieve the “golden rule” of budgeting, generating a surplus in current spending. This fiscal discipline has eluded the nation since the late 1980s, leading to structural deficits and repeated debt crises.

Sri Lanka had faced its worst-ever economic crisis in 2022 when it suspended its external debt commitments and has been making efforts to revive the economy ever since.