Colombo, June 6, 2025 — Sri Lanka’s tax revenue surged by 20.7% in the first four months of 2025, reaching 1,349 billion rupees, according to preliminary data from the Ministry of Finance. However, current spending also saw a notable rise, climbing 13% to 1,603.3 billion rupees—surpassing the government’s annual budget projection of 10%.
A significant portion of the additional tax collected—184 billion rupees out of the 234 billion rupee increase—was absorbed by higher current expenditures. The uptick in taxes comes partly from resumed vehicle imports, which were opened earlier this year, contributing to increased consumer and business levies.
Public sector costs continue to weigh heavily on government finances. April saw the implementation of a public sector salary hike, while new graduate recruits have further swelled an already extensive government workforce. Over 100,000 “development officers” remain on the state payroll, many of whom are criticized for adding limited economic value, unlike those in productive sectors or critical services like healthcare, law enforcement, and agriculture.
In contrast to growing recurrent expenses, capital expenditure took a sharp downturn, falling 29% to just 112.9 billion rupees. Following the country’s 2022 sovereign default, many infrastructure and development projects lost access to foreign funding. While some bilateral restructuring deals are underway, delays in restarting old projects and awarding new contracts continue to stall capital spending.
Concerns have also been raised about bureaucratic hesitancy slowing public procurement. Officials are reportedly wary of making swift decisions amid increased scrutiny and reform efforts.