By: Staff Writer
July 22, Colombo (LNW):In line with International Monetary Fund (IMF) directives, the Sri Lankan Government has intensified its efforts to enhance state revenue collection by restructuring and digitalizing key revenue authorities. These include the Inland Revenue Department (IRD), Sri Lanka Customs, the Excise Department, and the Department of Motor Traffic. The reform agenda aims to boost transparency, plug leakages, and improve efficiency to meet ambitious fiscal targets outlined in the 2025 budget.
This initiative is central to Sri Lanka’s economic recovery and debt restructuring program under the IMF’s Extended Fund Facility (EFF). While these reforms are expected to broaden the tax base, reduce evasion, and improve compliance, critics caution that over-reliance on indirect taxes and rapid enforcement could burden consumers and small businesses. Nonetheless, analysts view digitalization and institutional restructuring as critical tools for long-term fiscal stability and governance reform.
Recent data from the Central Bank of Sri Lanka (CBSL) indicates that these efforts are already bearing fruit. In May 2025 alone, government revenue collection peaked at Rs. 486 billion—the highest monthly total recorded this year. This figure contributed to a cumulative revenue haul of Rs. 1.94 trillion for the first five months, marking a 20% year-on-year increase from Rs. 1.62 trillion during the same period in 2024. Of this, Rs. 1.8 trillion was collected through taxes.
May’s collection outperformed previous months, surpassing Rs. 414 billion in February, Rs. 387 billion in April, and Rs. 306 billion in March. Analysts attribute the uptick to improved enforcement and an expanded tax base, including the inclusion of motor vehicles under new tax regimes beginning March.
This follows a steady revenue trajectory from 2023 to 2024, with total government income rising from Rs. 3 trillion to Rs. 4 trillion. The continued momentum suggests a strong start for 2025, bolstering hopes of meeting IMF-backed fiscal targets.
Despite the revenue surge, CBSL data shows that total government expenditure and net lending also increased to Rs. 2.18 trillion during the January–May period, up 9.7% from Rs. 1.99 trillion in the same timeframe last year. However, the budget deficit narrowed significantly to Rs. 236.6 billion, compared to Rs. 366.8 billion in 2024—an encouraging sign of improving fiscal discipline.
Additionally, net domestic financing dropped to Rs. 298.6 billion from Rs. 394.4 billion in 2024. Meanwhile, foreign financing recorded a net repayment of Rs. 62 billion, double the Rs. 27.6 billion paid back in the same period last year.
As Sri Lanka moves forward with structural reforms, the success of its revenue transformation will be vital not only for securing future IMF tranches but also for restoring economic sovereignty and long-term financial stability.
