Sri Lanka's first-half budget returns to surplus as debt ratio eases

Sri Lanka's first-half budget performance marked a significant turnaround, shifting from deficit to surplus as revenue collection improved and expenditure controls took effect. The swing underscores the government's progress in stabilizing public finances following the severe economic downturn that gripped the nation in recent years.

The debt-to-GDP ratio of 88.8% reflects a gradual decline from the peak levels experienced during the worst of the crisis, when the country faced unprecedented currency depreciation and depleted foreign reserves. While the ratio remains elevated, the trajectory suggests the government's fiscal consolidation measures are beginning to yield results.

The improved first-half performance comes as Sri Lanka continues implementing its International Monetary Fund programme, which has guided the nation's economic stabilization strategy. Enhanced revenue measures and stringent expenditure management have been critical pillars of this approach.

The budget surplus is expected to ease pressure on domestic borrowing and create additional fiscal space for development spending. Analysts will be watching closely to see whether the government can sustain this momentum through the remainder of the year amid ongoing global economic headwinds and domestic pressures.