Sri Lanka fiscal goals are now poised to be exceeded for the first time in the nation’s history, according to the Central Bank. Higher tax revenue from rising vehicle imports is helping fuel this remarkable progress.
Sri Lanka fiscal goals expected to be exceeded in 2025 as stronger revenue drives a historic turnaround
The Central Bank of Sri Lanka (CBSL) has declared that the nation is set to outperform its fiscal targets for 2025, marking what authorities describe as a landmark achievement in the island’s economic history. After years of missed expectations, revenue shortfalls, and heightened public scrutiny, the country’s fiscal indicators are finally turning upward, driven in large part by the resumption of vehicle imports and strong associated tax revenue.
Governor Dr. Nandalal Weerasinghe announced the positive outlook while presenting the latest ‘Financial Stability Review 2025.’ He noted that government revenue has surpassed expectations since the easing of the long-standing vehicle import restrictions, offering a substantial boost to state finances. According to the Governor, Sri Lanka is firmly on track to exceed three critical fiscal benchmarks that play a defining role in economic reform efforts: the primary surplus as a share of GDP, revenue to GDP ratio, and the overall fiscal deficit.
This progress includes the crucial primary surplus, a core requirement under international debt restructuring agreements and a vital indicator of a government’s ability to meet expenses without relying excessively on borrowing. Revenue performance has been a focal point of reform, and surpassing targets signals renewed strength in domestic economic activity and tax administration.
For years, Sri Lanka faced relentless criticism over fiscal mismanagement. Economists, civil groups, and opposition voices pointed to expanding deficits and collapsing revenue collection that contributed significantly to the economic crisis that reached its peak in 2022. A major driver of the revenue decline was the halt in vehicle imports imposed in March 2020, a policy introduced to conserve scarce foreign currency reserves as the pandemic decimated tourism earnings and other external inflows.
Treasury officials had previously acknowledged that the ban removed a vital revenue stream at precisely the wrong moment. Taxes from vehicle imports historically played an outsized role in funding government expenditure, and the absence of that income accelerated the nation’s fiscal deterioration.
The policy shift earlier this year finally restored that revenue channel. Vehicle imports resumed after a five-year hiatus, first prompting a wave of pent-up demand. Consumers and businesses rushed to secure transport assets that had become scarce and significantly overpriced in the local market. Dr. Weerasinghe said this surge has already reached normalization, with the market stabilizing as supply expands and price pressures ease.
Looking ahead, the CBSL forecasts that Sri Lanka will spend around US$1.5 billion on vehicle imports in 2025, compared to the earlier projection of US$1.2 billion. Despite the higher figure, the Governor assured that external economic stability remains secure. The Central Bank expects moderated demand next year, avoiding undue pressure on foreign reserves, the balance of payments, or exchange rate stability.
President Anura Kumara Dissanayake echoed a similar stance in Parliament recently, asserting that vehicle imports no longer threaten external sector stability due to stronger reserve buffers and recovering inflows. Early trends within the import sector also suggest affordability improvements. Importers confirm that vehicle prices have begun to decline from the elevated levels seen when import restrictions were first lifted, helping unlock more normalized market conditions.
The CBSL’s message signals a turning point. Surpassing Sri Lanka fiscal goals is not merely symbolic — it reflects a broader restructuring progress that policymakers have pursued under difficult circumstances. Sustaining this momentum will be essential as the country continues its path out of crisis and works toward restoring market confidence both domestically and internationally.
If the current fiscal trajectory holds, Sri Lanka will no longer be defined by persistent deficits and revenue struggles. Instead, it may enter a new era focused on stability, growth, and more resilient economic fundamentals. The Central Bank remains cautiously optimistic, tracking the country’s progress closely, while stressing the need for disciplined public finance management and supportive policies.
For citizens and businesses, this moment offers a rare measure of optimism. Improved fiscal performance strengthens resilience, opens doors for investment, and forms the foundation for a healthier economic future. Whether the nation’s newly regained momentum can be safeguarded through future challenges will remain the key test of this historic turnaround.