By: Staff Writer
November 16, Colombo (LNW): The Committee on Public Finance (CoPF), chaired by Dr. Harsha de Silva, has completed its internal review of the draft report on the 2026 Appropriation Bill, concluding that the proposed Budget remains broadly consistent with Sri Lanka’s ongoing IMF reform program but not without emerging fiscal risks that could challenge next year’s stability.
The draft report, prepared under Standing Order 121(5)(i), was examined at this week’s CoPF meeting in Parliament. According to the committee’s technical assessment, the 2026 Budget complies with the requirements of the Public Financial Management (PFM) Act, the Public Debt Management (PDM) Act, and the fiscal benchmarks outlined in the IMF’s Extended Fund Facility (EFF) program.
IMF Review Looms as $347 Million Hangs in the Balance
The IMF announced this week that it is currently reviewing Sri Lanka’s 2026 Budget as part of the fifth EFF program review, completed recently at staff level. The Fund’s Executive Board will decide whether to release the next $347 million tranche based on whether the Budget maintains the agreed fiscal path, structural reforms, and debt sustainability commitments.
Adding to this, Fitch Ratings noted that the Budget signals continued commitment by President Anura Kumara Dissanayake’s administration to the fiscal discipline required under the international reform program.
Revenue Boom in 2025, but 2026 Outlook Weakens
One of the key findings highlighted by CoPF is the strong revenue performance in 2025, with total collections exceeding forecasts by Rs. 100 billion. The surge is attributed largely to higher-than-expected tax income from vehicle imports, an area that delivered a surprising boost to state finances this year.
This windfall has provided the Government with greater fiscal room when planning the 2026 expenditure framework. However, the committee cautioned that this favourable trend is temporary. A significant decline in vehicle imports expected next year could sharply reduce this revenue stream, posing challenges for maintaining the same momentum in 2026.
The report warns that unless alternative revenue channels are strengthened—notably through tax administration reforms, broadening the tax base, and improving compliance—the Budget may face pressure as early as mid-2026.
Civil Society Flags Transparency and Equity Concerns
After concluding its technical review, the CoPF met with representatives from civil society groups, who raised concerns on several fronts:
Transparency of allocations, especially in large spending ministries
Equitable distribution of funds across provinces and key social sectors
Weaknesses in the fiscal framework, including gaps in monitoring and evaluation
Need for more accountable spending, particularly in state-owned enterprises
Committee Chair Dr. de Silva assured that all recommendations and observations would be formally communicated to the Finance Ministry, noting that public engagement is an essential part of ensuring budget credibility and public trust.
Next Steps
The draft report will be submitted to Parliament in the coming days, ahead of the Budget debate. With the IMF’s upcoming Board decision dependent on the government’s fiscal direction, the 2026 Appropriation Bill has now become a crucial test of Sri Lanka’s commitment to economic reforms—and its ability to sustain revenue in the face of slowing import-driven income
