Sri Lanka’s budget deficit is projected to increase by 1.4 percent, reaching 6.5 percent of the gross domestic product (GDP) in 2026. This rise is attributed to additional expenditures for Cyclone Ditwah relief and recovery, according to a document from the Finance Ministry.

Capital expenditure is expected to increase by 1 percent of GDP, moving from 4.0 percent to 5.0 percent compared to the original budget approved by parliament. Meanwhile, recurrent spending is anticipated to grow to 16.9 percent of GDP, up from the initially planned 16.5 percent.

The Sri Lankan government plans to allocate an additional 500 billion rupees specifically for Cyclone Ditwah relief efforts.

Under International Monetary Fund programs, Sri Lanka’s budget and debt metrics have shown improvement, supported by the central bank’s broadly deflationary monetary policy, which has contributed to monetary stability. However, there are ongoing concerns regarding recent policies on exchange rates.