Sri Lanka, Nov. 1 -- Sri Lanka's post-crisis fiscal recovery-which saw tax revenues rebound from 7.3% of GDP in 2021 to 15.4% in 2025-faces serious institutional headwinds.

A comprehensive Revenue Administration Diagnostic report prepared by the International Monetary Fund (IMF) reveals that while policy measures like major Value Added Tax (VAT) reforms successfully drove initial fiscal adjustment, the underlying revenue administration remains heavily constrained by weak digital infrastructure, fragmented structures, and widespread compliance gaps.

Systemic failures across revenue agencies

The diagnostic highlights critical vulnerabilities across Sri Lanka's three primary revenue-generating bodies, pointing to systemic compliance and o...