The NPP Government’s maiden Budget 2025 introduces an extensive social welfare package aimed at supporting vulnerable populations while navigating economic challenges. The increase in welfare spending, while much appreciated, continues to raise concerns about fiscal sustainability, economic dependency, and Sri Lanka’s commitments to the International Monetary Fund (IMF).

With the budget allocations spanning poverty alleviation, education, healthcare, and housing, the Government aims to provide relief to struggling communities. The ‘Aswesuma’ social welfare programme has been expanded, providing Rs. 17,500 per month for extremely poor households, Rs. 10,000 per month for low-income households, and Rs. 5,000 for the elderly and disabled. In education, the Government has allocated Rs. 6,000 per student for school supplies, Rs. 4,600 million for Mahapola and university scholarships, and Rs. 32.1 billion for school meal programmes to combat malnutrition. Following up with an election promise, healthcare has also been allocated a historic Rs. 604 billion, with Rs. 185 billion earmarked for essential medical supplies, Rs. 7.5 billion for maternal nutrition programmes, and Rs. 5 billion for the Thriposha nutrition supplement for children and expectant mothers. These are some of the key welfare expenditures the Government has planned. It is a significant increase in welfare spending from previous years and includes relief for low-income families, students, the elderly, and persons with disabilities. Some of the most substantial allocations include in ‘Aswesuma,’ with increased financial assistance for low-income and extremely poor households; child welfare and education benefits such as free textbooks, uniform grants, and scholarships for university students; healthcare and nutrition initiatives including increased allowances for kidney patients, improved nutrition schemes for pregnant women, and additional mental health awareness programmes; and housing and resettlement assistance for estate housing, war-affected families, and urban low-income communities.

Additionally, the Government is investing in digital transformation to modernise welfare distribution and ensure transparency, with plans to launch the Sri Lanka Unique Digital Identity (SLUDI) to track beneficiaries and eliminate corruption. The move to accelerate digitalisation will help to streamline public services and reduce the risk of corruption and malpractice.

However, the Government acknowledged the concerns about the economic impact of increased welfare benefits but asserted that they had carefully designed these programmes to fuel economic growth. They have stressed the need to improve export revenue and diversify exports. According to one government minister, investments in agriculture, health, education development programmes, and other critical sectors aim to balance welfare spending while fostering savings and economic activity. He opined that they expect strategic investments to mitigate concerns about fiscal deficits and long-term dependency. However, some economic experts have cautioned that even with such plans, the challenge lay in whether Sri Lanka could generate sufficient revenue to sustain its welfare programmes. They have pointed out that unless the island nation generates sufficient income, the welfare relief programme will become unsustainable, and some may not even be able to be fully implemented. Former Deputy Governor of the Central Bank of Sri Lanka Dr. W.A. Wijewardena cautioned that; “Currently, the Government’s revenue target is 15.1% of Gross Domestic Product (GDP), amounting to approximately Rs. 5 trillion. However, out of this amount, Rs. 2.9 trillion is required for interest payments on debt and Rs. 1.3 trillion is allocated for capital expenditure. This leaves only Rs. 800 billion, which must be spread across all welfare programmes, making financial feasibility a significant concern.” He also pointed out the need for efficient targeting and accountability, stressing that mismanaged welfare programmes had historically fuelled corruption. Addressing the matter of excessive handouts leading to misuse and dependency, he said: “Historically, whenever free benefits are distributed, it creates incentives for misuse. There must be incentives for self-sufficiency.”

The coming years will reveal whether Sri Lanka’s new welfare model can be sustained and leveraged for economic transformation, or whether it risks becoming a burden on the country’s fragile financial system.