• Prez pushes for greater econ. empowerment, fair distribution of econ. oppos., asserting econ. rights, notes the need for econ. sovereignty from IMF
• Economic Transformation Act to be amended to suit emerging developments
• Overall budget deficit would be Rs 2,200 billion, up from 2,040 billion in 2024
• Econ. growth estimate 5%, exports to $ 19 b, primary Budget surplus of GDP 2.3% 
• Health allocation hiked Rs. 604,000 m
• Total revenue and grants – Rs. 4,990 b/ GDP, total expenditure Rs. 7,190 b/GDP
• Primary balance surplus estimated at Rs. 750 bn, budget deficit 6.7% of GDP
• PPP Bill mooted, FDIs for mineral resources and marine econ., new digital econ. laws, digital payment infrastructure to shift away from cash based econ
• Public service salary increase – minimum monthly basic salary by Rs. 15,750, net minimum increase of Rs. 8,250 

President and Finance, Planning and Economic Development Minister Anura Kumara Dissanayake, presenting the National People's Power (NPP) Government's maiden Budget for this financial year 2025, yesterday (17), emphasised that this was a Budget prepared under significant fiscal constraints but with a philosophy of greater economic democratisation.

However, despite previous promises to reduce state expenditure, according to the budget, planned state expenditure soars above Rs. 7 trillion. 

The President pointed out that through this Budget, the Government plans greater empowerment, the fair distribution of economic opportunities and the assertion of the economic rights of citizens. However, he stressed that his Government will ensure justice for every taxpayer rupee and vowed to create a society where everyone shuns taking bribes.

He observed that the Government expects an economic growth of around 5% in 2025 and over 5% real gross domestic product (GDP) over the medium term, via the export of goods and services close to United States Dollars ($) 19 billion, and a primary budget surplus of 2.3% of the GDP.

Whilst recognising the role played by the International Monetary Fund Extended Fund Facility Programme (IMF-EFF), he opined that in order to design Sri Lanka’s economic agenda, achieving economic sovereignty is necessary.

He added that while the debt restructuring process has provided substantial debt relief by significantly reducing debt servicing costs, it is however imperative that the country leverages this fiscal space to strengthen external and fiscal buffers and enhance non-debt generating inflows such as export income and foreign investment and thereby ensure long-term financial stability. He argued that this was important to facilitate the smooth resumption of debt service payments from 2028 onwards, and to gradually increase them.

He noted that although inflation has declined, the price levels of many goods and services remain elevated, with income growth having not kept pace accordingly, thereby reducing the living standards of the people. "Especially because real wages have dropped significantly over the last couple of years, it is necessary to offer a fair pay hike.”

Further, the Government has increased cash transfers to targeted communities and extended the beneficiary time period through the Aswesuma programme. “We all know that there are inclusion and exclusion errors in the Aswesuma programme. That’s why the Government is planning to select the most deserving people to the programme," he said.

Since growth must also be driven by continuous productivity-related growth, the President elaborated that the digitalisation of the economy is essential. Another critical foundation for economic advancement, social upliftment, and political reform, is, according to Dissanayake, good governance and the elimination of corruption, and therefore, governance-related reforms and anti-corruption initiatives are a top governmental priority.

He further espoused on sound financial management, responsible debt management, human capital investment, a robust social safety net, economic diversification, the promotion of exports, the improvement of the investment climate, the modernisation of agriculture, green economy policies, innovation, digitalisation, entrepreneurship and start-up ecosystems, public-private partnerships, the strengthening of anti-corruption measures, the improvement of governance, the promotion of transparency, and sustainable growth strategies.

The Budgetary estimates are as follows: total revenue and grants Rs. 4,990 billion, total revenue Rs. 4,960 billion, tax revenue Rs. 4,590 (income tax, taxes on goods and services, and external trade), non-tax revenue Rs. 370 billion, total expenditure Rs. 7,190 (recurrent including salaries and wages, other goods and services, interest, and subsidies and transfers), revenue surplus Rs. 926 billion, primary surplus Rs. 750 billion, Budgetary surplus Rs. 2,200 billion, total financing Rs. 2,200 billion (foreign borrowings – gross, and debt repayment, non-bank borrowings), total revenue and grants/GDP 15.1%, total expenditure/GDP 21.8%, revenue surplus/deficit GDP 2.8%, primary surplus/deficit GDP 2.3%, and Budgetary surplus/deficit GDP 6.7%. The total receipts other than Government borrowings is Rs. 5,042 billion, the total primary expenditure is Rs. 4,285 billion, debt service payments is Rs. 4,550 billion, the provision for advanced accounts is Rs. 7 billion, and the total gross borrowing requirement to be recorded in Government accounts is Rs. 4,000 billion.

In the context of the promotion and facilitation of investments, the Government is to revisit the Economic Transformation Act with appropriate revisions to suit emerging developments, the 2025 Budget proposals meanwhile outlined.

Further, the Government is to formulate the national export development plan (2025-2029). Micro-, small- and medium-scale enterprises will be facilitated to tap new export markets, expand existing markets or to connect in the value chains of large-scale exporters and global value chains. New tariff rates pertaining to removing limitations in access to high-quality, affordable raw materials, will be based on a national tariff policy. The network of free trade agreements will be expanded through the regional comprehensive economic partnership and other agreements, particularly with a view to greater economic ties with Association of Southeast Asian Nations countries. Key border agencies and exporter registration will be automated and integrated through the implementation of the trade national single window.

The new Customs Law will be introduced to enhance trade facilitation and revenue collection.

Double taxation avoidance agreements will be expanded with priority given to countries with high trade and investment potential.

The Government is to support the expansion of export-oriented investment, sector-specific zones, establishing eco-industrial parks which focus on sustainable practices, resource management, and green technology through public private partnerships and privately run zones. The Government will lease out under-utilised State-owned land for productive economic activities.

Improvements in the ease of doing business will be prioritised in registering property, paying taxes, trade facilitation, the enforcement of contracts, and obtaining credit to attract foreign direct investments. The Government will introduce laws to ensure the effective implementation of the one stop-shop concept which consolidates all necessary approvals.

Barriers for local firms to invest overseas are to be reviewed and gradually rationalised by establishing appropriate safeguards to track the repatriation of earnings and dividends.

A Public Private Partnership (PPP) Bill will be introduced. Further, the Bimsaviya programme will be expedited to develop good quality land titles for small-scale landowners. A new Insolvency Law, already in the draft stages, will be expedited. The Government will call for foreign direct investments to optimise the utilisation of untapped potential in investment, industrial development, and value-added exports of mineral resources and the marine economy.

The Government will provide required technical and financial assistance for exporters and importers to obtain quality testing and certifications. The testing and calibration labs, referral centres, the referral centre for health research on cancers, universities and other conformity assessment bodies will also be developed with an effective coordination mechanism.

The President acknowledged that Sri Lanka has the potential to be a hub for trade, logistics, financial services, and the digital economy. According to him, the completion of the East and West Container Terminal projects will have a capacity enhancement of the Colombo Port. The proposed Colombo West Terminal 2 and Colombo North Port are expected to be expedited. The Government is to call for expressions of interest for these projects within a month. Further, the Government proposes to allocate Rs. 500 million to support the land acquisition process and initial preparatory works of the Kerawalapitiya Customs inspection yard and the Bloemendhal Logistics Park. It is proposed to establish an internal container dry port (ICD) at Veyangoda as a rail based integrated multimodal cargo and logistics centre. The Government proposes to allocate Rs. 500 million to review previous studies, identify an institutional mechanism, land acquisition and initial preparatory works on the ICD at Veyangoda. The Government proposes to allocate Rs. 500 million to support the initial development of the national single window system, the truck appointment system, and electronic-cargo. The Government proposes to allocate Rs. 1,000 million to support the initial development and establishment of advanced scanning systems for the Colombo Port and the Bandaranaike International Airport.

Speaking about the digital economy’s advancement, the President said that the introduction of the Sri Lanka Unique Digital Identification (SL-UDI) for all citizens is a key priority. The SL-UDI is a foundational digital public infrastructure essential for the development of a digital economy. Steps have already begun towards this process and it is expected that this process will be expedited.

Sri Lanka’s digital economy is to be governed and protected through the creation of new legislation and the strengthening of the existing legislation. The Government is to enact new legislation to further accelerate the digital economy and to empower an apex digital economy authority and agencies in the digital eco-system. The Government is to strengthen legislation and institutions related to cyber security, data privacy and data protection. Digital payment infrastructure is another foundational component. It is necessary to gradually shift away from a cash based economy. It would be implemented in a carefully phased process with clear communication. The Government will also support to attract investments towards innovations in artificial intelligence, robotics, and financial technology. The aim of the Government is to grow the digital economy to a level in excess of $ 15 billion or 12% of the national economy over the next five years. The Government aims to facilitate an increase in the information and communication technology industry’s annual export revenue to $ 5 billion. Accordingly, the Government proposes to allocate Rs. 3,000 million to bolster the acceleration of digital economy development.

The President also said that the entire ecosystem of allowances and benefits provided to public representatives is being reviewed. The Government has decided to minimise heavy expenditure on vehicles by encouraging selected officers through an additional financial benefit.

The Government has also made significant allocations for health. New initiatives and interventions will be carried out to enhance the digitalisation of healthcare delivery. This will include the digitalisation of the functions of the National Medicines Regulatory Authority, the State Pharmaceuticals Corporation, and the improvement and expansion of the ‘Swastha’ system. Efforts are being made to improve the service delivery at over 1,000 primary medical care units (PMCUs) and divisional hospitals with the focus on non-communicable disease control and prevention. Furthermore, palliative and geriatric care services will be available at selected PMCUs in each district. Actions are to be taken to expedite the process of strengthening estate-level healthcare service through PPPs with regional plantation companies. The national capacity for pandemic prevention, preparedness, and response will be improved with the assistance of development partners over the next three years. Accordingly, the Government's health budget has significantly increased to an allocation of Rs. 604,000 million.

Meanwhile, regarding the public service salary increase, the Government proposes to increase the minimum monthly basic salary from Rs. 24,250 to Rs. 40,000 by Rs. 15,750. The current ad-hoc interim allowance and special allowance will be integrated into the basic salary, giving a net increase of Rs. 8,250 in the minimum salary. The proposed minimum monthly basic salary increase of Rs. 15,750 will also be applicable to the judicial services, public corporations, statutory boards, university staff, and officers of the tri-forces. In addition to a minimum monthly basic salary increase of Rs. 15,750, it is proposed to raise the value of the annual salary increment by 80%. Consequently, the minimum annual salary increment of Rs. 250 will be increased to Rs. 450. It is also proposed to adjust annual salary increments for all public sector employees to the same percentage. The total estimated cost of this salary increase is expected to be Rs. 325 billion. This salary increase will be implemented in phases. Of the total net salary increase, Rs. 5,000 and 30% of the balance amount will be paid starting from April, with the remaining 70% being paid in equal portions beginning in January 2026 and January 2027. Therefore, it is proposed that Rs. 110 billion be allocated for the proposed salary increase. It is proposed that the retirement benefits for officers retiring on or after 1 January 2025 be calculated based on the new salary structure. The limit on distress loans for public servants which is currently set at Rs. 250,000 will also be increased to Rs. 400,000. 

On public sector pensions, the Government proposes to revise the pensions of all pensioners who retired before 1 January 2020 in three phases. As the first phase, the pensions of all pensioners who retired before 1 January 2018 will be revised in line with the third stage salary scales relevant to 2018 and to be implemented from July. For this phase, the Government proposes to allocate Rs. 10,000 million. Furthermore, the Government proposes to implement the pension conversions related to the fourth and fifth stages of the salary conversion from July 2026 and July 2027, respectively.