Strong Macroeconomic Direction
The government forecasts GDP growth of around 7% in 2026, supported by productivity gains, infrastructure expansion and a larger role for the private sector. Fiscal consolidation remains a priority: the budget deficit is targeted at 5.2% of GDP, while state revenue is expected to increase to 15.3% of GDP, a significant improvement compared to pre-reform years.
Public debt is projected to decline to 95% of GDP in 2026, with a longer-term goal of reducing it to 87% by 2030. Inflation is expected to remain below 5%, underpinned by prudent monetary policy and the continued implementation of the Public Financial Management Act (2024), which strengthens transparency and sets limits on primary expenditure.
Reforms and Governance Improvements
Governance reforms take center stage in the 2026 Budget. The rollout of the Proceeds of Crime Act, the National Anti-Corruption Action Plan (2025-2029) and strengthened asset-declaration rules demonstrate the government’s intention to curb corruption and improve accountability.
A new SOE Law mandates annual reporting of audited accounts and performance indicators, while energy-sector restructuring—particularly the unbundling of the Ceylon Electricity Board and adoption of cost-reflective pricing—is aimed at restoring financial sustainability. These efforts have already contributed to credit rating upgrades from global agencies.
Social Priorities and Public Investment
The budget balances reform with social welfare, increasing allocations for vulnerable groups by 16%. Investments in education, healthcare, new medical faculties and expanded ambulance services reinforce the government’s commitment to inclusive development. Infrastructure continues to be a cornerstone, with significant funding directed toward roads, expressways, irrigation systems and water management.
Digital transformation is another flagship priority:
The government is pushing to modernize public services, streamline payments and make administration more efficient and citizen friendly. New digital identification systems and initiatives to encourage innovation are expected to create a more agile business environment and position Sri Lanka as an emerging hub for tech-driven services.
The 2026 Budget highlights Sri Lanka’s drive to position itself as a regional hub for trade and digital services, underpinned by deeper economic ties with India, China, Japan, the UAE and Europe. A series of trade reforms – tariff rationalization, export diversification and customs modernization – aims to create a more efficient, transparent and globally competitive business environment.
For German and other European companies, the message is clear: Sri Lanka is entering a phase of greater predictability, transparency and rules-based governance. As post-crisis recovery strengthens, the country is opening new space for long-term partnerships, technology transfer and sustainable investment across energy, manufacturing, digital services and infrastructure.
AHK Sri Lanka is part of the global German Chamber Network, supported by the Federal Ministry for Economic Affairs and Energie (BMWE). With over 150 locations in 93 countries, the AHKs support German and local companies with their international business development, offering expertise, connections, and tailored services. As an essential partner of the Chambers of Commerce and Industry (IHKs) in Germany, AHKs operate in countries of strategic importance to German enterprises worldwide.
Sources:
Ministry of Finance, Planning and Economic Development. (2025). BUDGET, ECONOMIC AND FISCAL POSITION REPORT 2026. https://www.treasury.gov.lk/api/file/1aab9cb7-e765-444f-82a0-9e6159d4048f
Ministry of Finance, Planning and Economic Development, 2025 President Anura Kumara’s Budget Speech 2026: Summary. (2025, November 13). Daily Mirror Online. https://www.dailymirror.lk/breaking-news/The-Sri-Lankan-Budget-2026-Summary/108-324389
“President Anura Kumara’s Budget Speech 2026: Summary,” 2025 Sri Lanka chamber commends Budget 2026. (n.d.). EconomyNext. https://economynext.com/sri-lanka-chamber-commends-budget-2026-247879/
Sri Lanka Chamber Commends Budget 2026, n.d. PROCEEDS OF CRIME ACT, NO. 5 OF 2025. (2025). PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA. https://documents.gov.lk/view/acts/2025/4/05-2025_E.pdf
National Anti-Corruption Action Plan 2025-2029. (2025). Commission to Investigate Allegations of Bribery or Corruption. https://www.ciaboc.gov.lk/media/attachments/2025/04/08/english_action-plan-2025.pdf