Rs. 162,500, Not Rs. 200,000: The 2027 Budget Offers Modest Relief, Record Promises and Questions the Government Must Now Answer

On the afternoon of 12 November 2026, President Anura Kumara Dissanayake, who is also the Minister of Finance, rose in Parliament to present the 2027 Budget. According to Parliament’s own record, he arrived at around 1.30 p.m. and spoke until about 6.30 p.m. Ada Derana noted that it was the third Budget of the National People’s Power (NPP) government and the 81st in Sri Lanka’s history.

It was an important speech for reasons beyond its length. It is the last Budget to be presented while the current International Monetary Fund programme is still running; EconomyNext reported that the four-year Extended Fund Facility ends in March 2027. In October, the Daily FT reported that the IMF’s approval of its seventh review, and the release of about US$345 million, depended on the 2027 Budget being presented in line with the programme’s targets. And it was the Budget in which the government had raised expectations of tax relief for salaried workers who have carried much of the burden of recovery.

Lanka Witness has read the reporting on the Budget closely. Our conclusion is that it contains real, if modest, relief, and some sensible priorities. But the relief is smaller than the government’s own ministers had signalled, the biggest promises depend on a spending record that has been weak, and the public has not yet been given a clear, single set of numbers to judge it by.

The income tax promise: closer, but not there

The headline change for working people is to personal income tax. EconomyNext reported that the annual tax-free threshold will rise from Rs. 1.8 million to Rs. 1.95 million, or about Rs. 162,500 a month. The tax bands will also be widened, so that the top 36 per cent rate will apply from Rs. 5.2 million a year instead of Rs. 4.3 million. EconomyNext estimated the cost of the income tax change at about Rs. 16 billion.

Any relief is welcome to families whose salaries have not kept pace with prices. But it is worth setting this against what had been said before. Newswire reported on 11 November, the day before the Budget, that the monthly tax-free threshold had already been raised from Rs. 100,000 to Rs. 150,000 in April 2025. It also reported that in September 2026, Deputy Minister of Economic Development Nishantha Jayaweera had said the government remained committed to a threshold of Rs. 200,000 a month, and that Minister Bimal Ratnayake had said PAYE tax remained too high for professionals, while adding that any relief depended on the fiscal position and IMF commitments.

The result is a monthly threshold of about Rs. 162,500. That is an increase of Rs. 12,500 a month on the current level, and still Rs. 37,500 short of the figure a deputy minister described as the government’s commitment only two months ago. The government may argue, reasonably, that the IMF programme limits what it can do, and that the remaining gap can be closed later. But if that is the case, ministers should say so plainly, with a timetable, rather than allowing a commitment to drift.

VAT: books yes, the main rate no

Value Added Tax matters more to poorer households than income tax, because almost everyone pays it on what they buy. Newswire reported before the Budget that the President had spoken of gradual VAT reductions over two to three years, but that it was unclear whether the standard 18 per cent rate would change.

The Budget delivered one targeted change. EconomyNext reported that books and exercise books will be exempted from VAT. This follows the Prime Minister’s announcement at the Colombo International Book Fair on 25 September, as reported by Newswire, that the President had asked her to announce a significant VAT change on books. It is a good measure for students and parents, and Lanka Witness welcomes it.

None of the Budget reports Lanka Witness reviewed recorded a cut to the standard 18 per cent VAT rate. EconomyNext also reported that the Tourism Development Levy will be abolished from 1 April 2027, and estimated the total cost of the Budget’s tax concessions at about Rs. 29 billion in revenue forgone. In a Budget of several trillion rupees, that is a small sum. It tells readers how much relief the government believes it can afford: not very much.

Welfare, wages and pensions

On welfare, EconomyNext reported that Rs. 230 billion is allocated to the Aswesuma benefits scheme, and that the monthly allowances for kidney patients and people with disabilities will each rise by Rs. 2,500 to Rs. 12,500. The Daily Mirror reported that Rs. 110 billion is set aside for the final phase of the public sector salary revision that began in 2025, along with higher allowances for doctors, nurses, police officers, prison officers and Grama Niladharis, most of them taking effect in April or July 2027.

For pensioners, the picture is less generous. Ada Derana reported that public servants who retired between 2020 and 2024 will receive an interim allowance of Rs. 2,500 a month, but only from 1 July 2027, while a full revision of their pensions waits for the 2028 Budget. Lanka Witness examines that decision separately today.

Small businesses get help through interest subsidies. EconomyNext reported that Rs. 67.7 billion will be spent on subsidies to support about Rs. 174 billion in concessional loans at interest rates of 3 to 5 per cent. The Daily Mirror reported Rs. 44 billion for paddy fertiliser support, at Rs. 30,000 per hectare.

A record investment promise, and a weak record of spending

The government’s biggest claim is about public investment. Ada Derana reported that capital spending will reach Rs. 2 trillion, raising public investment from 4.1 per cent to 5.1 per cent of GDP. The Daily Mirror’s breakdown of the Budget documents showed this is made up of Rs. 1.75 trillion in the main Budget and Rs. 250 billion through the supplementary estimate for Cyclone Ditwah recovery. Its largest items include Rs. 251 billion for highways, expressways and railways, Rs. 131 billion for health capital spending, about Rs. 100 billion for rural roads and bridges, and Rs. 80 billion for the first phase of electrifying Colombo’s suburban railway.

Sri Lanka badly needs this investment, especially after the cyclone. But a promise to spend is not the same as spending. EconomyNext reported that the government’s use of its capital budget has ranged between 54 and 76 per cent in recent years. The Daily Mirror reported that part of the Rs. 500 billion supplementary estimate Parliament approved for Cyclone Ditwah recovery was not used, so Rs. 260 billion has had to be provided again for 2027. Lanka Witness has already reported on families still waiting for cyclone compensation nearly a year after the disaster.

If the government cannot spend the money it already has, a larger allocation does not by itself mean more roads, hospitals or homes. Parliament should insist on quarterly, public reports showing how much of each capital allocation has actually been spent, project by project.

Which numbers are the real numbers?

A Budget is, above all, a set of numbers. On Budget night, readers could not easily find one agreed set. Ada Derana reported total expenditure of Rs. 7.933 trillion, total revenue of Rs. 6.15 trillion and a deficit of Rs. 1.753 trillion, describing the deficit as 4.5 per cent of GDP in one place and 3.7 per cent in another. EconomyNext reported expenditure of Rs. 7.19 trillion, revenue of Rs. 4.99 trillion and a deficit of Rs. 2.2 trillion. The Daily Mirror reported that the deficit rises from 3.8 per cent to 4.5 per cent of GDP once the cyclone re-provision is included.

These differences may come from different ways of grouping the figures, such as whether the cyclone spending or certain transfers are included. Lanka Witness is not suggesting that anyone has misreported. But a government that promised transparency should not leave its citizens, and its lenders, to reconcile three versions of its own Budget. The Finance Ministry should publish a single plain-language summary table, in Sinhala, Tamil and English, showing total revenue, total spending, the deficit and how it will be financed.

One figure stands out whichever version is used. Ada Derana reported that interest payments in 2027 will be Rs. 2.643 trillion, against tax revenue of Rs. 5.667 trillion. On those figures, nearly half of every rupee collected in tax will go to paying interest on the public debt, before a single teacher, nurse or pensioner is paid. Ada Derana reported that the Budget is to be financed mostly at home, with Rs. 1.643 trillion of domestic borrowing and Rs. 110 billion from abroad. That is the hard reality behind the modest relief, and it is why voters should be told honestly what can and cannot be promised.

After the IMF

EconomyNext reported that the President announced a special Cabinet committee to consider a successor to the IMF programme, which ends in March 2027. It also reported that fuel imports passed US$4.4 billion in 2026. In October, the Daily FT reported that the IMF mission had urged Sri Lanka to let domestic fuel prices follow world prices while protecting vulnerable people, and to keep the integrity of the anti-corruption law.

The NPP came to power criticising the terms of the IMF programme negotiated by the previous government. It has since chosen to stay within it, and the economy has stabilised: EconomyNext reported reserves above US$7 billion, a Fitch rating upgrade to B minus and record remittances of about US$9 billion expected this year. Those are real gains, and the government deserves credit for them. But the decision on what comes after the IMF will shape household budgets for years. It should not be made by a Cabinet committee behind closed doors. Parliament, trade unions, business and the public should see the options and the trade-offs before a decision is made.

What the Opposition says

Opposition Leader Sajith Premadasa told the media after the speech that the Budget offered no clear answers on the cost of living, poverty or unemployment, according to Newswire. He described the speech as repetitive and lacking practical solutions. He also argued that the interest-subsidised loan schemes, routed through banks, would mainly benefit people who already have access to credit, and said there was no proper mechanism to give young entrepreneurs start-up capital.

Newswire reported that Mr Premadasa cited a youth unemployment figure of 43 per cent, which he attributed to the IMF, and poverty above 60 per cent, which he attributed to the World Bank. Newswire did not verify these figures, and Lanka Witness has not been able to confirm them in the form he stated. They should be treated as his claims. His underlying point, that a Budget should be judged by what it does for prices and jobs, is a fair one, and it is the test Lanka Witness will apply too.

What happens next

According to the timetable published by Parliament, the Second Reading debate runs from 13 to 20 November, with a vote at 6 p.m. on 20 November. The Committee Stage, in which each ministry’s spending is examined, runs from 21 November to 14 December, when the final Third Reading vote will be held. During the Committee Stage, the Opposition is given 60 per cent of the debating time.

That is the moment for detailed questions. How many of last year’s Budget proposals were actually carried out? When will the Rs. 200,000 tax-free threshold arrive, if ever? How much of each capital allocation was spent in 2026? What is the plan for the state enterprises still losing money? And will the government publish one clear set of figures that everyone can use? A government that asked voters for a new political culture should welcome those questions, and answer them in public.