The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Economic Development

¶ 01 Hon. Deputy Chairperson, thank you very much for the opportunity.

¶ 02 In speaking on the Head of Expenditure of the Ministry of Finance, Economic Stabilization and National Policies, I will refer to our 2025 Appropriation Bill and the Budget Statement. Traditionally, one might see this simply as the Budget for the next year following the end of 2024. But it is not so.

¶ 03 We have received a special popular mandate. The public expected substantial social, political, and economic transformation. The 2025 Budget is the first foundation-laying for that transformation. Its direction cannot be understood from aggregates alone; it must be analyzed.

¶ 04 We took over a shattered country. The first priority was stabilization, and while moving forward we must eradicate poverty and leverage digital technology for long‑term stabilization and development. Key focuses include:

¶ 05 - Achieving sufficient, sustainable economic growth. Despite forecasts that recovery would be very difficult and long, we turned negative growth around to positive 5.4% in Q4 2024 within a short time. - Establishing the Public Financial Management and Public Debt Management Acts, to ensure a government and team that can function under any conditions, managing state finance and the budget deficit. - Rebuilding investor confidence and improving Sri Lanka’s credit ratings, essential to attract the investments needed for development.

¶ 06 More than 50% of our population is in hardship and seeking assistance. Through proportionate social assistance and trust-building, we must quickly reintegrate them into the economy. We enhanced the Aswesuma benefits and adjusted timelines to strengthen beneficiaries’ incomes.

¶ 07 On production, access to capital matters—inputs, equipment, labor, machinery. We have created an enabling environment for SMEs, the capital market, and investors. We are prioritizing fair and level playing fields, with emphasis on infrastructure for transport—roads, rail, and rural connectivity—and on promoting technology corridors targeting agriculture, industrialization and services, with budget allocations for necessary infrastructure and technology.

¶ 08 On debt management under Treasury Operations: despite accusations, we are managing debt prudently. Regarding public sector salaries, we made a substantial raise that many did not expect. We could have chosen not to raise salaries or to pay only an allowance. Instead, we decided to raise the basic salary and the salary increment scale. The increment rises to 80%, and basic salary rises by 60–80% depending on category. There is misinformation that salaries are being cut under this reform; that is false.

¶ 09 We are trying to reflect the higher salaries in the April 10 payslip. For example, a Technology Officer in the university system with a current basic of Rs. 31,625 will see Rs. 51,095 as basic. A Lecturer with current basic of Rs. 69,580 will see Rs. 118,305. This large increase uplifts purchasing power and recognizes labor and identity, and also improves access to credit. Payments will be phased in three stages; in the first stage, any not-yet-paid amounts appear as “unpaid salary” adjustments to be paid in subsequent stages. We have also allocated significantly for digital payment expansion and the digital economy.

¶ 10 Agriculture and food security are essential—not only economic, but civilizational. No country advances without securing food. Hence we have allocated notable funds to strengthen agriculture and value-added agro-based production.

¶ 11 Human capital development is ongoing, with substantial allocations for health and education.

¶ 12 Development was previously concentrated around Colombo/Western Province, which accounts for about 45% of GDP. We must reduce regional disparities by bringing industries and infrastructure to the villages and prioritizing FDI and related activities accordingly.

¶ 13 Sri Lanka’s geostrategic location can be leveraged without becoming a party to geopolitical conflicts—positioning as a maritime hub to provide maritime services and promote trade, with necessary budgetary support.

¶ 14 On expenditure management: excluding debt service, total government spending is Rs. 7,190 billion. Primary expenditure (recurrent excluding interest plus capital) is 13% of expected GDP, amounting to Rs. 4,240 billion. Interest payments are Rs. 2,950 billion—roughly 40% of total expenditure—much of it from past high‑rate borrowings (over 30% in some cases). On the oft‑debated bond issue, the problem was insider trading that pushed yields from market ~9–9.5% to 11.75% within half an hour by expanding the issuance tenfold; we are investigating.

¶ 15 For 2025, total financing needs are Rs. 8,835 billion (Rs. 7,190 bn expenditure, Rs. 1,600 bn debt amortization, Rs. 45 bn adjustments). The budget deficit is Rs. 2,200 billion. Of financing, about Rs. 75 billion from external sources and the remainder domestically. The primary surplus is Rs. 750 billion, to be used appropriately for debt service. While refinancing is sometimes unavoidable, our priority is to use the surplus to repay debt. In 2024, we achieved a primary surplus of Rs. 650 billion against a target of Rs. 250 billion, of which Rs. 377 billion was used for debt servicing, with the remainder maintained as a prudent buffer in Treasury Operations to help anchor interest rates.

¶ 16 On revenue management: total revenue is Rs. 4,990 billion (near Rs. 5,000 bn), of which tax revenue is Rs. 4,590 billion: Rs. 1,167 bn income tax (25% of tax), VAT domestic + import about 35%, excises and others including SSCL; export-related Rs. 651 bn. Non‑tax revenues (property income, rent, interest, dividends, fines, fees) about Rs. 370 bn. We set monthly targets for Inland Revenue; by mid‑March, January and February collections exceeded targets, achieving about 123% of expected, Rs. 438,991 million actual vs Rs. 356,825 million estimated. Customs faced issues but achieved 100% of target by year-end 2024 and are tracking targets early this year as well.

¶ 17 Within the Ministry, Treasury Operations has significantly improved cash flow management via technology, building a stable buffer and coordinating with Central Bank policy to stabilize interest rates, which are trending down. We assure suppliers that duly supported bills will be settled within 30 days. Pension and gratuity processing delays have been reduced to about one month, versus 18–24 months previously for gratuities. Outstanding unpaid bills at Treasury Operations are now under Rs. 100 million, compared with Rs. 242 billion two years ago.

¶ 18 On health supplies, arrears have been cleared for last year, and Rs. 15 billion has already been released this month for 2025.

¶ 19 On borrowing, we aim to leverage debt to support the economy without undue inflationary pressure, relying more on lower‑cost domestic markets and prudent debt management. Government’s share of GDP through expenditure is about 20%; while advanced economies can reach 35–40%, given constraints we will proceed prudently. We have a breathing space through 2028 to strengthen management, with coupon rates on recently issued 4‑, 7‑, and 9‑year bonds stabilizing lower.

¶ 20 External financing remains constrained; within the IMF program, we will use its resources and those from multilaterals (World Bank, ADB), including budget support. Building reserves depends on export growth, sustained FDI, higher remittances, and tourism development.

¶ 21 [Time called]

¶ 22 Please allow me a few more seconds.

¶ 23 Through the Integrated Treasury Management Information System, we are integrating ASYCUDA (Customs), RAMIS (Inland Revenue), and RASED (Excise). About 90% of institutions are already integrated. This will enhance expenditure management efficiency. Under the 2025 Budget, these measures under the Finance Ministry will help set Sri Lanka on a new path. Thank you.