Sri Lanka targets $9 billion in foreign reserves by 2026

Sri Lanka is showing signs of fiscal recovery, with the government aiming to reach a foreign reserve target of US$9 billion by the end of 2026. Deputy Finance Minister Anil Jayantha Fernando stated that the current trajectory is aligned with these projections, noting that sustained inflows from workers' remittances are expected to be a primary driver of this accumulation.

In the first half of 2026, the country's public finances shifted from a deficit to a nominal budget surplus of Rs. 9.5 billion, compared to a Rs. 405.6 billion deficit during the same period in 2025. This turnaround was fueled by a 27% increase in revenue and restrained expenditure growth. The primary surplus, which excludes interest payments, rose 45% to Rs. 1.2441 trillion.

Despite these improvements, challenges remain. Interest payments continue to place a heavy burden on the economy, consuming nearly half of the government's recurrent expenditure during the first six months of the year. Additionally, capital expenditure remains low, representing only 16.1% of the annual estimate, raising questions regarding the long-term quality of the nation's fiscal consolidation.