Sri Lanka targets growth beyond crisis recovery in budget, on course for IMF exit

President Anura Kumara Dissanayake presented a budget that aims to transition Sri Lanka's economy from crisis recovery to growth, projecting the country will exit the $2.9-billion International Monetary Fund program in March. The nation has built up liquidity to meet debt obligations and is on track to finish its IMF program by March, according to the World Bank, which forecasts 4.4% growth for the year.

Foreign exchange reserves have also been restored to $6.9 billion, and Fitch Ratings upgraded Sri Lanka's credit rating to B-minus from CCC-plus in September. Dissanayake emphasized the budget's focus on anchoring Sri Lanka's exit from the IMF program, sustaining growth amid high energy prices, controlling inflation, and paving the way for a return to bond markets.

The government estimates it will lower the debt-to-GDP ratio to 87% by 2032 under the IMF program. The budget maintains a medium-term revenue strategy with policies from 2027 to 2031 to keep the primary surplus at 2.3%, total revenue at roughly 15.5% of GDP, and tax revenue at 14.2% of GDP. Sri Lanka anticipates spending $4.4 billion on fuel purchases this year due to the US war on Iran, which is equivalent to its entire 2025 expenditure.

The budget seeks to improve investor confidence by positioning Sri Lanka for an upgrade in credit ratings before resuming international debt repayments in 2028. Analysts noted that this budget marks a shift from crisis management to promoting growth-enhancing initiatives while maintaining fiscal prudence.