Option 1 of 8
Collect more tax
Bring in more money each year, by raising rates, widening who pays, or collecting what is already owed.
In the house
Take a second job, or make sure every customer who owes you actually pays.
The idea
The government raises its income so that more is left after paying for services, which can then go to paying down loans. There are three main routes: higher tax rates, more people and activities inside the tax system, and better collection of taxes that are already due.
How it works
- Change tax rules, for example rates, exemptions or who must register.
- Improve collection with better records, digital filing and enforcement.
- Use the extra income to run a surplus before interest (a primary surplus), and use that surplus to pay down debt.
How long
Rule changes can take effect within a year, but the full effect usually builds over several years.
Who has to agree
Parliament. Lenders and the IMF often ask for it in a programme.
Who feels it first
Households and businesses that pay the new or higher taxes.
What makes it hard
- Tax rises are unpopular, and exemptions are hard to remove once granted.
- Part of the economy is informal and hard to reach.
- If the economy is weak, the same tax rate collects less.
How people and the world may react
Households
Prices and tax bills can rise. People tend to accept it more when they can see where the money goes.
Businesses
Firms want rules that stay the same for years. Frequent changes make planning hard.
Lenders and other countries
Lenders and the IMF usually see lasting revenue as the most credible way to repay, because it does not depend on one-off events.
Pros and cons
Pros
- Repeats every year, unlike a one-off sale.
- Does not cut services.
- Lenders usually view it favourably.
Cons
- Can slow spending in the economy if it falls on people who would have spent the money.
- Political cost is immediate, benefits come later.
- Needs a working tax office to deliver.
A real example
Sri Lanka, 2022 to 2025
IMF figures shown on this site put general government revenue at 8.4% of GDP in 2022 and 16.7% in 2025. How much of that came from tax changes and how much from the economy recovering is a question the IMF's own reports discuss.
Sources:
Try it with numbers
The starting settings show this option as a simple example. Change any slider to explore. Open the full calculator, or build a mix of options in Try your strategy.
The government keeps more before interest: a primary surplus of 4.5% of GDP.
Each year, debt as a share of GDP = last year's share × (1 + interest rate) ÷ (1 + growth of GDP in rupees) − primary surplus. Growth in rupees combines real growth and inflation. Debt starts at 96.8% of GDP in 2025 (IMF, general government gross debt). The interest rate is the Central Bank's actual interest paid in 2025 divided by central government debt at the end of 2025. This is a simple illustration with the settings you choose, not a forecast, and it cannot show shocks such as exchange rate moves or new borrowing for other reasons.
These pages describe options and what happened when countries tried them. Budgets LK does not recommend any option, and nothing here is a forecast or financial advice.