Economic analysts who follow Sri Lanka would be scratching their heads following the 2024 Budget speech made by President and Minister of Finance Ranil Wickremesinghe in Parliament yesterday (13). The 2024 Budget will be an acid test for the Sri Lankan Government, especially if lessons were learnt, and how international agreements will be honoured. Let’s not forget that even though the IMF and Sri Lankan have concluded the staff level agreement, the global moneylender’s executive board is yet to approve the payment of around $ 330 million in a second tranche. The Budget and its implementation will likely decide the political future of Wickremesinghe, and the Rajapaksha-led SLPP. It will also decide the fate of the Sri Lankan economy, which is now in a fragile state.

Wickremesinghe was right in saying “we have a long way to go”, and that the political and economic concepts Sri Lanka had practised for the last 75 years had failed. Many had warned about the policies, inefficiency and corruption over decades, but were not heard. He was also correct in saying that the fairy-tale politics practised before had no place in Sri Lanka’s future. He acknowledged that the State has failed to reach its revenue targets for 2023. “Reviving an economy in a state of bankruptcy is a formidable task. However, if we successfully navigate through this challenging period, we can create a free and decent society. Instead, if we continue to build sandcastles by giving relief to the people based on political motives, the country will again be bankrupt,” he said.

Which brings us to the elephant in the room; can Sri Lanka afford some of what he has planned for 2024 in the Budget? Can we implement most of what is proposed? It remains to be seen if the Wickremesinghe- SLPP Government can walk the talk.

Delivering a nearly two-hour Budget speech, Wickremesinghe claimed that the Budget was not an “election budget” like many we have seen in the past, and stressed that it was aimed as one “that constructs the future of the country”. Some would argue otherwise. 

While many in Sri Lanka deserve some means of relief, the question of can Sri Lanka as a State afford to provide more relief to a large segment of the bloated public sector, is deeply concerning. His budget plans to provide an Rs 10,000 boost to allowances of nearly 1.3 million state employees, raising the question where the Government plans to find the funds for such a massive disbursement. By providing the allowance increase, the Government may be trying to walk the tightrope between the IMF austerity measures aimed at economic recovery, and the need to ease the public pressure.  

President Wickremesinghe took the time to elaborate on a budget speech which covered many key sectors, and pointed out reforms expected in the coming year. There were many positives in the budget proposal, especially in terms of state sector reforms, tax policies and revenue collecting. Measures to improve revenue raising and improve fiscal control would be most welcomed, if they are properly implemented and left in the hands of independent professionals, and not politicised as the practice has been to-date.

Nevertheless, the Budget which was read out yesterday raises three core questions. First, with revenue targets unmet for this year, can Sri Lanka afford the state sector pay increment? Second, will the Government walk the talk, or will a majority of the Budget be unimplemented by the end 2024, like Sri Lankans have experienced before? Thirdly, will all of this “derail” Sri Lanka’s recovery efforts?

Wickremesinghe stated that he inherited a derailed economy, which has now been placed back on rails to move forward. Let’s hope that Sri Lanka can indeed afford much of what the President has promised, and that Sri Lanka can convince the IMF, foreign creditors, donors and investors that our bankrupt nation has indeed learnt from its mistakes, and has changed.