A stronger than expected tax surge has pushed Sri Lanka well beyond IMF revenue targets, but concerns grow as capital spending remains unusually low despite record tax inflows.
The government has exceeded the International Monetary Fund’s quarterly tax revenue targets, marking a significant fiscal milestone ahead of the 2026 budget cycle. The State Finance Committee revealed that the administration achieved higher than projected revenue, largely driven by taxes on vehicle imports and other high-yield channels. However, committee members also noted that capital expenditure remained uncharacteristically low despite these inflows.
The findings were published in the State Finance Committee report on the Appropriation Bill for 2026. The document, tabled in Parliament this week, reviews fiscal assumptions used to estimate government spending and revenue for the coming year.
The report stated that the government will maintain tax revenue at the expected percentage of GDP throughout the year. As a result, estimated tax collections of Rs. 4,725 billion are projected to surpass the IMF’s target of Rs. 4,350 billion with ease. Last year’s tax target of Rs. 3,700 billion was also successfully met.
The Public Finance Committee highlighted that the July 2025 IMF review set quarterly benchmarks of Rs. 850 billion for March 2026 and Rs. 1,850 billion for June 2026. Meeting these targets would lift tax revenue to 14.2 percent of GDP for the full year.
The report further noted: “Considering the collection of Rs. 4,910 billion, Rs. 985 billion and Rs. 2,152 billion in tax collections by March and June 2025, respectively, the targets should be easily achieved in 2026.”
Committee Chairman Dr. Harsha de Silva tabled the detailed report on Friday (14), ahead of the second reading vote on the Appropriation Bill. During the vote, the second reading of the budget received 169 votes in favor and 42 votes against, while eight members of parliament abstained.
Despite surpassing IMF tax expectations, the committee emphasized the need for stronger oversight on government spending patterns, particularly the sharp reduction in capital investment even as revenue continues to climb.
