Govt. signals tighter spending Binding expenditure ceilings leave ministries little room beyond ongoing commitments New projects face stricter scrutiny under Public Investment Program with priority for growth, exports and climate resilience President and Finance Minister Anura K…
Govt. signals tighter spending Binding expenditure ceilings leave ministries little room beyond ongoing commitments New projects face stricter scrutiny under Public Investment Program with priority for growth, exports and climate resilience
President and Finance Minister Anura Kumara Dissanayake
The Government has begun preparing the 2027 Budget with tighter spending controls, imposing binding expenditure ceilings on ministries and requiring new spending proposals to compete for limited fiscal space through a more rigorous public investment process. The Budget Call for 2027, issued under National Budget Circular 02/2026, makes clear that next year’s Budget will continue the Government’s fiscal consolidation program. Ministries have been instructed to keep all recurrent and ongoing expenditure within pre-approved baseline ceilings, while new initiatives will be considered separately. The Government is planning for a 2.6% of GDP primary surplus in 2027, up from 2.1% in 2026 with the Budget deficit contracting to 4.5% of GDP from 5.6% in 2026. The expenditure ceilings also offer an early indication of the Government’s spending priorities. The Ministry of Public Administration, Provincial Councils and Local Government has received the largest baseline allocation of Rs. 722 billion, followed by Provincial Councils at Rs. 655 billion, the Ministry of Health and Mass Media at Rs. 595 billion, the Ministry of Transport, Highways and Urban Development at Rs. 491 billion, the Ministry of Finance, Planning and Economic Development at Rs. 458.1 billion and the Ministry of Defence at Rs. 447 billion. The Treasury said the ceilings, based on baseline estimates already submitted by spending agencies, represent the maximum resources available for preparing the 2027 Budget. Ministries have been instructed to accommodate all ongoing commitments within those limits, leaving little scope for additional expenditure outside approved priorities. Unlike previous budget cycles, proposals for new development projects, programs, activities, services and policy initiatives will not be included within baseline allocations. Instead, they must be submitted separately and will be assessed against national priorities, implementation readiness and available fiscal space before they are considered for inclusion in the Annual Budget.
The revised project selection process follows the Public Financial Management Act, under which the Public Investment Committee will evaluate proposals on strategic relevance, economic and social returns, implementation readiness, affordability and consistency with national development priorities before making recommendations. The Treasury has asked ministries to give priority to projects that support economic growth, exports, digital transformation, climate resilience and improvements in public service delivery, while ensuring value for money and long-term fiscal sustainability. Chief Accounting Officers have also been instructed to give precedence to statutory and contractual obligations, including salaries, pensions, rents, taxes, utility bills and other unavoidable expenditure. Ministries are expected to make adequate provision for all non-discretionary spending to reduce the need for supplementary allocations during the year. The Circular also directs ministries to prioritise projects nearing completion, identify efficiency gains and cost savings, and reallocate resources from lower-priority activities to higher-priority programs within approved ceilings. Multi-year contractual commitments must be reviewed to ensure adequate funding for obligations falling due in 2027. For new capital spending, ministries must identify projects from the Public Investment Programme for implementation between 2027 and 2029 and submit detailed proposals demonstrating implementation readiness. Chief Accounting Officers have been made responsible for ensuring that only projects meeting the prescribed criteria are forwarded for consideration. The Budget Call also requires all ministries and State institutions to prepare and submit their estimates through the Integrated Treasury Management Information System (ITMIS), extending the Treasury’s push to digitise public financial management. All ministries and spending agencies have been instructed to submit their 2027 Budget estimates to the Department of National Budget by 31 July.