Sri Lanka to unveil 2027 budget as IMF bailout nears end

What the budget will try to do

President Anura Kumara Dissanayake will lay out the 2027 spending plan with a clear balancing act: support the recovery without undoing the fiscal guardrails put in place under the IMF program. The government faces calls for more public spending, but the budget will also be a test of whether it can sustain the gains made since the 2022 economic crisis.

Expect emphasis on growth engines. Tourism, garment exports and worker remittances are likely to get attention as the administration tries to keep momentum going while the IMF bailout approaches its finish line.

The pressures on the recovery

Sri Lanka's rebound from its default, bolstered by IMF-driven reforms, is meeting new headwinds. Growth for the June quarter was 4.2%, easing from 5.1% in the previous quarter, with oil prices pushed up by the US-Iran conflict; global trade tensions and El Niño continue to exert wider pressure.

Monetary policy has offered some support. The central bank left its benchmark rate unchanged on Sept. 30, avoiding an increase in borrowing costs even as inflation has stayed above the 5% target since April because energy and food have become more expensive.

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Financing, ratings and international support

Colombo is discussing a follow-on IMF program geared toward growth, according to Dissanayake in October. Last month, the IMF struck a staff-level deal that could free roughly $345 million, and a budget consistent with program goals would help secure board approval for that tranche.

Improving public finances have lifted confidence. In September, Fitch Ratings upgraded Sri Lanka to B- and assigned a stable outlook, citing stronger government finances, improved external accounts, and rebuilding foreign exchange reserves. Since the 2022 default, the country has reworked billions of dollars of debt with private creditors and other governments, a core condition of the IMF bailout. Fitch also said that reentering international bond markets next year would represent a major milestone toward regaining standard financing access.

What this means for your portfolio

The budget will telegraph how Sri Lanka balances growth priorities with fiscal rules as IMF support winds down. Watch for measures tied to tourism, garments and remittances, and for signals on debt management, ratings and external funding, because those shape market access and the country's investment case over the next year.

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