2027 Budget primary expenditure ceiling has been set at Rs. 5.064 trillion, with the Government outlining a fiscal roadmap aimed at reducing the budget deficit, maintaining disciplined public spending and strengthening long-term debt sustainability.
2027 Budget primary expenditure ceiling supports lower Budget deficit and fiscal discipline
According to the Fiscal Strategy Statement 2027, the statutory ceiling for primary expenditure has been fixed at 12.9% of Gross Domestic Product (GDP), making it the Government’s principal fiscal anchor under the medium-term fiscal framework. The measure is designed to keep recurrent spending under control while supporting continued fiscal consolidation and economic stability.
The 2027 Budget primary expenditure ceiling of Rs. 5.064 trillion aligns with a target of achieving a primary surplus of 2.6% of GDP and maintaining total revenue and grants at 15.5% of GDP. The Government also intends to retain the 12.9% expenditure ceiling through 2031, subject to annual reviews under future updates to the Fiscal Strategy Statement 2027.
The fiscal framework projects a gradual improvement in the country’s public finances following a temporary widening of the Budget deficit in 2026. The overall deficit is expected to narrow to 4.5% of GDP in 2027, down from an estimated 5.6% in 2026. The Government forecasts the deficit will continue declining to 4.3% in 2028, 4.0% in 2029, 3.8% in 2030, and 3.5% in 2031.
Officials noted that the unusually low 2.3% Budget deficit recorded in 2025 reflected stronger-than-expected Government revenue, restrained recurrent expenditure and lower execution of planned capital spending. The latest projections aim to maintain fiscal discipline while allowing continued investment in priority sectors.
Revenue and grants are projected to remain at 15.5% of GDP between 2027 and 2031. This includes 15.4% of GDP from Government revenue, comprising 14.2% tax revenue and 1.2% non-tax revenue, together with grants equivalent to 0.1% of GDP.
At the same time, total Government expenditure is expected to decline gradually from 20% of GDP in 2027 to 19% by 2031, reflecting continued expenditure rationalisation and tighter management of public finances.
Despite the emphasis on fiscal consolidation, the Government plans to maintain public investment at relatively high levels. Capital expenditure and net lending are projected at 4.4% of GDP throughout the period, exceeding the policy target of maintaining public investment above 4% of GDP to support infrastructure development, productivity improvements and long-term economic growth.
The Fiscal Strategy Statement 2027 also projects a sustained primary surplus of 2.6% of GDP from 2027 onwards, following an estimated 2.1% surplus in 2026. The Government cited the record 5.4% primary surplus achieved in 2025 as evidence that sustained fiscal surpluses are essential for reducing public debt, restoring fiscal sustainability and rebuilding fiscal buffers.
Economic projections accompanying the strategy indicate that nominal GDP will increase from Rs. 36 trillion in 2026 to Rs. 39.3 trillion in 2027, before reaching approximately Rs. 55.4 trillion by 2031. Real GDP growth is forecast at 4.2% in 2027, easing to around 4% annually over the remainder of the projection period, while nominal GDP growth is expected to remain close to 9% each year.
The Government also reaffirmed its objective of reducing public debt to below 95% of GDP by 2032. Under the baseline fiscal scenario, debt is projected to decline to around 91% of GDP by 2030, allowing the target to be achieved ahead of schedule.
The 2027 Budget primary expenditure ceiling remains a central element of Sri Lanka’s fiscal policy under the Public Financial Management Act and the country’s commitments under the IMF-supported Extended Fund Facility. Officials said maintaining revenue above 15% of GDP, limiting primary expenditure, sustaining primary surpluses and protecting productive public investment will remain the key pillars supporting fiscal stability and long-term economic resilience.