Unveiling the budget for 2027, Dissanayake said he was still considering whether to enter into a new arrangement with the IMF after the bailout ends in March. Sri Lanka secured a four-year, $2.9 billion loan from the Washington-based lender of last resort in March 2023, after the country defaulted on its $46 billion foreign debt in April 2022.
“We expect to successfully complete the 17th IMF programme,” Dissanayake told parliament. “We have appointed a committee to study whether we should enter into a new programme.”
He said the government’s foreign debt servicing in 2027 would be $2.98 billion, down from $3.59 billion this year and $3.70 billion last year. “We have the stability required for this debt servicing,” he added.
State revenue is forecast to moderate slightly next year to 15.8 percent of GDP, down from 16.6 percent in 2026 and 16.7 percent last year, according to official figures. The foreign loans Sri Lanka hopes to raise next year could help finance the budget.
Dissanayake’s government has also marginally increased the income tax threshold and widened the tax bands, with a slight reduction in tax rates for middle-income earners. The upper limit of income tax remains at 36 percent.
The overall budget deficit is forecast to widen marginally to 4.5 percent of GDP in 2027, compared with 3.7 percent this year and 2.3 percent last year. The government hopes to maintain in 2027 the 5.0 percent economic expansion recorded in 2025, the president said, adding that growth in the second quarter of this year slowed to 4.2 percent because of the impact of the Middle East war.
The IMF forecasts that Sri Lanka’s growth in 2026 will slow to 3.1 percent because of higher global energy costs. The IMF noted last month that Sri Lanka’s economy had proved “remarkably resilient to successive shocks”, as the country recorded 11 consecutive quarters of expansion after contracting by 7.3 percent in 2022.
However, the IMF has warned that Sri Lanka “continues to face downside risks from uncertainty over the duration and intensity of the Middle East war, global trade policy and the impact of El Nino”.
