State of the Budget 2026

Abstract

This 5th edition of the State of the Budget by Verité Research provides an independent analysis of the National Budget for 2026 presented to the Parliament of Sri Lanka on 7 November 2025. It evaluates the budget’s financial, economic, and fiscal assumptions; the accuracy and basis of its estimates; its compliance with the Public Financial Management (PFM) Act; and progress on previously raised concerns. The state of the Budget is set out in five main sections. Section 1 introduces the report’s objectives and the context of Sri Lanka’s budget formulation process. Section 2 assesses the quality and coherence of budget information, and identifies any inconsistencies across documents, missing estimates for new proposals, and gaps in adherence to the PFM Act. Section 3 evaluates the budget’s macroeconomic assumptions for key indicators and examines their implications for fiscal sustainability and debt dynamics. Section 4 analyses the government’s revenue estimates, with a detailed focus on several tax categories. Section 5 reviews selected expenditure components that have posed challenges in previous years.