‘The mountain has laboured and brought forth a mouse.’ This old Greek proverb going back to Aesop two-and-a-half millennia ago basically describes the new Government’s maiden Budget that was presented in Parliament by the Minister of Finance last Monday. The National People’s Power (NPP) regime’s first proper budget, though essentially interim in nature as it only covers the period from April to December 2025, came about amidst an immense sense of anticipation stemming from the mountain of promises made during the twin election campaigns last year and the underlying promise of radical change on socialist lines in accordance with the party’s Marxist credentials. 

But what saw the light of day as Budget 2025 was quite the anticlimax, with the regime deciding to play it safe and continue with what has been described as Wickremesinghe version 2.0 as far as budgetary direction is concerned. While continuation of former President Ranil Wickremesinghe’s International Monetary Fund (IMF)-calibrated budget direction has been hailed as positive by the business community – for it provides no shocks and ensures continuity of the economic reform process that has been in the works since the IMF bailout programme kicked in at the height of the economic crisis mid-2022 – it flies in the face of what the NPP kept telling the people during the hustings.

In fact, the NPP manifesto elaborates that the “wrong economic policies” of the regimes that governed this nation for the past 75 years will be reversed and new progressive ones will be introduced in their place. While it is to be seen whether such radical change will occur in the future, Budget 2025 has confirmed that such change is nowhere on the horizon. Therefore, the big question is, how can something that has consistently been described as wrong and the root cause of a ‘failed system’ now become right once in office? The irony of it all is that the party that condemned the economic policies of regimes past is now in the vanguard of defending and implementing those same liberal policies.

Be that as it may, Budget 2025 has ensured policy consistency through an almost seamless continuation of what has been, leading to fiscal stability. But the issue here is that the stability that has prevailed for some time now needs to be urgently transformed into growth if the nation is to achieve the targeted Gross Domestic Product growth rate of 5.5%, which is the minimum threshold if it is to be in a position to begin servicing its debt in 2028. Failure on that score will inevitably result in a second default which the nation can ill afford. 

Therefore, the lack of export incentives in Budget 2025 in the backdrop of a new export tax coming into effect in April is certainly not the most ideal given the circumstances in which the nation finds itself. The lack of incentives could also be due to the authorities getting wise to the tactics of some exporters who are known to under-invoice and park the excess forex elsewhere. The thinking could be that more incentives could result in bigger leakages, but this is an issue that needs to be closely studied in order to come up with an equitable formula.

While policy consistency will contribute to investor confidence, a deterioration in law and order will have the opposite effect. In just the past week, barely a day has gone without a shooting being reported, the most startling being the brazen shooting of a suspect inside a courthouse in Hulftsdorp, despite heightened security in the premises. The regime needs to seriously and urgently tackle the crime wave that appears to be a growing phenomenon, with potential to not only scare away tourists but also hard-to-come-by investors.

Speaking at a media briefing yesterday (22), the Acting Inspector General of Police (IGP) made some startling revelations that could put Chicago to shame. According to the Acting IGP, there are some 57 identified organised criminal gangs comprising a staggering 1,400 gang members currently active in the country. What is a serious cause for concern is that some of these members comprise well-trained armed forces as well as Police personnel. These rogue agents of the State not only need to be rooted out fast but be made to face the full force of the law in order to be a deterrent to others. 

According to the Acting IGP, there have been 22 murders so far this year, in which three cops, two forces personnel, and seven Army deserters have been involved. This alarming trend prompted the Secretary of Defence, who was present at the same media briefing, to acknowledge that there was a new tendency for forces personnel with weapons training to desert the forces and engage in lucrative criminal activities. He assured the public that all necessary steps were being taken to apprehend these rogue elements.

Returning to matters economic, while the regime has sought refuge in the IMF programme and its limited confines for maintaining the status quo, it appears to have forgotten its promise to go the extra mile in seeking to change the agreement to a more favourable formula for the average citizen. Meanwhile, despite the regime’s widely publicised cost-cutting measures, it seems that these measures have only had a minimal impact, with the budget deficit soaring to Rs. 2.2 trillion – Rs. 160 billion more than Budget 2024 presented by former President Wickremesinghe, despite allegations of extravagance.

While the people’s aspiration for radical change is slowly dissipating, paving the way for the continuation of the economic policy that has been in place for the past 75 years, so is the goodwill enjoyed by the regime in the aftermath of its resounding triumph. It is probably in recognition of this that the NPP has been urging the Election Commission to conduct the Local Government Elections without delay. Political analysts have been pointing out that should the elections be held after 25 April – the first payday for State sector workers after the proposed salary amendments come into effect – the fallout for the regime could potentially turn out to be adverse, with the actual salary increase not being what has been portrayed.

While the Government has announced a salary increase of a minimum of Rs. 15,750, what it has not explained adequately is that this increase has come about by incorporating some existing allowances into the basic salary amounting to nearly Rs. 7,000, making the actual increase Rs. 8,750. This too is to be paid out in instalments over the course of the next three years. While some trade unions are already making noises about the quantum of the increase, it will likely reach a crescendo when salaries are credited in April. However, the proposed increase is not without benefits as far as State sector employees are concerned, who will now receive higher pensions as a result of the increase in the basic salary structure. The move will also leave future governments with a much bigger pension bill to sort out. 

On the flip side, the minimum private sector salary has also been revised to Rs. 30,000 from the existing Rs. 21,000. While it is understood that no employee can survive for a month on the existing minimum salary and therefore an increase is imperative, it is the norm that private sector employees are paid various allowances to prop up the take-home salary. The substantial arbitrary increase without consulting private sector stakeholders will inevitably lead to the higher salary bill being directly passed on to consumers, resulting in higher prices for products and services. For the companies that cannot afford to do so due to the risk of losing out to foreign competition, the only option will be to downsize, resulting in job losses.

While Budget 2025 arguably has more emphasis on the spending aspect and to a lesser degree on the revenue aspect, with mixed signals going out even on a key revenue initiative – vehicle import taxation – leaving importers in two minds, the success of the proposals will ultimately lie not only on how well they are implemented, but equally importantly on the maintenance of law and order.