Sri Lanka’s government revenue is projected to decline as a share of the economy in 2026, reflecting the fading impact of a temporary surge in tax collections linked to the resumption of vehicle imports, Ada Derana reported.

According to the Ministry of Finance’s Fiscal Strategy Statement 2027, total government revenue, including grants, is expected to fall to 15.8% of GDP in 2026 from an estimated 16.7% of GDP in 2025.

The ministry said the anticipated decline largely reflects a return to normal revenue trends after a one-off increase in tax receipts generated by renewed vehicle imports during 2025. The reopening of vehicle imports after years of restrictions boosted customs duties and related tax collections, providing a temporary lift to government finances.

Despite the projected moderation, Sri Lanka’s revenue position remains significantly stronger than during the country’s economic crisis. Government revenue had fallen to just 8.4% of GDP in 2022, among the lowest levels globally, according to the ministry.

Officials said a combination of tax policy reforms and improvements in revenue administration has helped expand the tax base while reducing tax evasion and leakages, supporting the recovery in public finances.

The ministry nevertheless warned that external risks could affect future revenue performance. Ongoing geopolitical tensions in the Middle East, disruptions to global trade flows and volatility in energy markets may create economic headwinds and complicate efforts to meet fiscal targets in the coming years.