The Government is still deciding whether to introduce a vote on account or a fully-fledged budget, according to State Minister of Finance Shehan Semasinghe.
With nearly a month remaining before the Presidential Election, both options are still under consideration, despite recent indications that a new budget for the fiscal year 2025 is unlikely to be presented, with a vote on account being considered instead to cover expenses in the first few months of the following year. Either way, the consensus is that it should align with the policies and targets of the International Monetary Fund (IMF).
The Public Financial Management (PMF) Act No.44 of 2024 specifies that in the event the appropriation bill for the succeeding year is not approved by Parliament by 31 December of the current year, the minister of finance shall submit a vote on account to Parliament, under which the Parliament shall allocate funds for ongoing projects and continuously provide specified public services which need to be maintained.
The period for which expenditure is allocated under the vote on account shall not exceed four months and shall be followed by the adoption of the appropriation act integrating the expenditure of the vote on account.
Hence, vote on account is an estimate of Government expenditure approved by the Parliament to continue Government services and development activities for a maximum of four months without an appropriation act. It is a temporary financial measure that allows the Government to withdraw funds for a limited period until a full budget can be passed – a limited budget that is proportional to the expenditure allocations given in the previous year’s budget.
Considering the upcoming elections in September, there is a possibility of the presentation of a vote on account, reportedly to be implemented by the end of March 2025.
It is considered a democratic exercise granting each candidate space to implement their policies. The Government has employed a vote on account on numerous occasions, including in 2019.
A fully-fledged budget preferable
Speaking to The Sunday Morning, State Minister Semasinghe stated that the decision on whether to introduce a vote on account or a fully-fledged budget would be made following the conclusion of the Presidential Election, as it was still too early to finalise the matter. However, he added that the Government would prefer to present a full budget.
“We would always prefer to have a budget before going into elections, as this would allow us to include what we have promised. However, this depends on how Parliament reacts, so the options remain open at the moment. We cannot say precisely what it will be yet. There are also a few IMF requirements that need to be passed by Parliament. Ultimately, the President will decide after the elections.”
He further stated that there would be sufficient time to formulate a full budget. If not, it will be a vote on account for the first quarter, followed by the full budget, but it will depend on what is decided after the elections.
Semasinghe added that since the country was about a month away from the election, it was not possible to determine if the matter would be finalised by a particular date.
“We will have to wait and see how it works out after the elections. The officials are already considering the budget and preparing the necessary details.”
Vote on account potential
First Capital Chief Research and Strategy Officer Dimantha Mathew told The Sunday Morning that should a new president from a different political party come into power, they may initially implement a vote on account.
Once a full Parliament is established with some form of majority, it will then consider introducing a full budget. If the incumbent President is re-elected, a full budget can be expected. However, if a new president assumes office, it is likely that a vote on account will be used until the new president secures a majority in Parliament.
Mathew emphasised that given the current Government’s composition, it was unlikely that a new president would be able to achieve all their goals with the existing Parliament. Therefore, a vote on account for the first three months is likely to be adopted until the conclusion of the General Election.
“The next budget is expected to be quite different from previous ones, primarily due to the major task of reducing the deficit to possibly around 5-5.5%. Under the IMF agreement, there is little room for deviation from the prescribed framework. Therefore, significant changes beyond the IMF programme are deemed highly unlikely.”
Sharing her perspectives on the decision between a vote on account and a full budget, Frontier Research Senior Research Lead Anjali Hewapathage said: “On occasions where the budgetary process is interrupted, particularly in times of heightened uncertainty, a vote on account instead of a full budget has been put forward.
“In recent history, a vote on account has been the standard procedure when the budgetary process was interrupted by the election cycle in 2009, the constitutional crisis in 2018, the Presidential Election in 2019, and due to Covid-19 in 2020.”
“What we have seen in the past is that with a vote on account, new government expenditure can be more challenging as expenditure approved with a vote on account is basically proportional to the expenditure allocations given in the previous year’s budget. Any extra expenditure beyond those proportions are limited until a new budget is proposed,” she added.
Economic reform agenda essential
Meanwhile, Ceylon Chamber of Commerce (CCC) Senior Economist Sanjaya Ariyawansa stated that regardless of whether the upcoming decision involved a vote on account or a full budget, staying committed to the economic reform agenda was essential.
He noted that this agenda must include critical reforms in the energy sector, labour, land, and taxation, alongside public sector reforms with a special emphasis on restructuring State-Owned Enterprises (SOEs).
“These reforms are not just about boosting efficiency but are fundamental to enhancing competitiveness and establishing a robust foundation for sustainable growth. Equally important is the need to strengthen social protection systems, ensuring that the gains from these reforms are widely shared. Addressing climate change and sustainability is also crucial, as well as aligning the country with global investment trends and securing long-term economic resilience,” he said.
Ariyawansa further stated that in addition to these reforms, the focus should be on areas that could drive immediate economic growth, such as shipping and logistics, investment promotion, export growth, tourism, and the development of Small and Medium-sized Enterprises (SMEs). Digitalisation, a cross-cutting enabler across all sectors, plays a pivotal role here.
“Implementing key components like digital ID, National Single Window (NSW), Digital Public Infrastructure (DPI), and interoperability will be essential in maximising the benefits of these growth strategies. Fostering a supportive environment for startups is also critical, as it fuels innovation and creates jobs.
“Moreover, strengthening governance, as highlighted in the IMF’s Governance Diagnostic Report, is vital for improving transparency, accountability, and investor confidence. The budget must also focus on reinforcing macroeconomic fundamentals, with a strong commitment to achieving a primary surplus in line with set targets.
“This, alongside other targets, is crucial for maintaining debt sustainability and shielding the economy from external shocks. By balancing these priorities, the country can create a more resilient economy, capable of meeting both current and future challenges with confidence.”