Sri Lanka’s 2027 Budget Expenditure Set to Rise 12.6% to Rs. 4.99 Trillion
COLOMBO, October 19, 2026 — Sri Lanka’s total government expenditure is projected to increase by 12.6% to Rs. 4.993 trillion in 2027, from Rs. 4.434 trillion in 2026, with a sharp expansion in capital investment and an unchanged overall borrowing ceiling of Rs. 3.8 trillion.
An analysis of the Appropriation Bill 2027 published by tax consultancy Ernst & Young (EY) Sri Lanka highlights a significant shift towards development spending, with capital expenditure expected to grow substantially faster than recurrent expenditure.
Under the First Schedule of the Bill, capital expenditure is projected to rise by 24.7% to Rs. 1.753 trillion in 2027, compared with Rs. 1.406 trillion in 2026. Recurrent expenditure, which covers the government’s ongoing operational costs, is forecast to increase by 7.0% to Rs. 3.240 trillion from Rs. 3.029 trillion.
Despite the expansion in planned government spending, the overall borrowing limit remains unchanged at Rs. 3.8 trillion, matching the ceiling established for 2026. The combination of higher expenditure and a fixed borrowing limit will be a key feature of the government’s fiscal framework for the coming year.
The Ministry of Finance, Planning and Economic Development is set to receive the largest allocation among government portfolios, with its funding increasing by 35% to Rs. 856.9 billion in 2027, from Rs. 634.8 billion in the current year.
Among the sectors covered by the estimates, Rural Development and Social Security records the steepest percentage increase. Its allocation is projected to more than double, rising by 107% from Rs. 38.6 billion to Rs. 79.8 billion.
Funding for the Digital Economy is also set for a substantial increase, climbing by 63% to Rs. 26.0 billion from Rs. 16.0 billion in 2026, signalling a larger planned allocation for the country’s digital economy-related activities.
Other major portfolios are also expected to receive increased funding in 2027. Public Administration and Local Government is allocated Rs. 651.0 billion, up 9% from Rs. 596.0 billion, while Health and Mass Media funding is projected to rise by 6% to Rs. 590.5 billion from Rs. 555.0 billion.
The allocation for Transport, Highways and Urban Development is set to increase by 12% to Rs. 500.0 billion, compared with Rs. 446.0 billion in 2026. Education, Higher Education and Vocational Education is expected to receive Rs. 328.0 billion, representing a 9% increase from Rs. 301.0 billion.
The planned increase in capital expenditure will be a central feature of the 2027 fiscal programme, while higher allocations for social security, digital development, transport and education indicate the government’s spending priorities. However, the unchanged borrowing ceiling means the expansion in expenditure will take place without an increase in the stated overall borrowing limit.
The Appropriation Bill 2027 received its First Reading on October 7, 2026. The Budget Speech is scheduled for November 12, 2026, when further details of the government’s fiscal and policy priorities are expected to be presented.
