The Hon. (Prof.) Anil Jayantha

¶ 01 When producing goods and services, economics is about how we manage our country’s resources and knowledge, how we engage with the world to invigorate the national economy, and how the benefits are shared among the people.

¶ 02 While in Opposition we continuously criticized the economic policy pursued by previous governments as wrong, anti-democratic and unjust. What do we mean? Like many authoritarian regimes, the economy was managed in a way where the outcomes favored a few. Economic data never fully reflect people’s lives, nor can people’s lives be reduced to economic data; there is a disconnect. Therefore, if we interpret economic development, social progress, politics and culture only through data, we go wrong.

¶ 03 Another salient feature we experienced in this flawed and corrupt model is that when the economy “grew” (not true development), the benefits were captured by a few. Over the last 30 years, even when growth averaged about 4% while debt increased by over 15% each year, the benefits of higher growth years (7%, 8%, 9%) accrued to a handful. But when growth turned negative, the burden fell squarely on the general public. This is the model we have repeatedly highlighted: when there are gains, a few enjoy them; when there is pain, the entire burden is thrust upon ordinary people. To clarify this, let me place two sets of numbers on record.

¶ 04 First, per capita GDP. By end-2023, Sri Lanka’s per capita GDP was USD 3,828. Even if we increase that by about 3,000 and convert, a family of four should receive close to Rs. 400,000 a month to live decently. We know they do not. That amount is much lower in reality. Even within our region, this per capita level is not strong; it is on the lower side. Yet even with this lower per capita GDP, a family of four does not receive Rs. 400,000 in income. This is due to inequality in income distribution. The Mid-Year Fiscal Position Report shows this. According to the section “Sri Lanka: Selected Indicators” (around page 111), the Gini coefficient, last surveyed in 2019, had risen to about 0.46 from around 0.398 in 2013. So while fiscal targets may show progress, social indicators reveal deterioration through rising inequality.

¶ 05 This is the true state of the real economy that successive governments followed, pushing a majority outside the economy, granting only small transfers, never an income that ensures a dignified life. As a result, more than half the population has become poor enough to require assistance. Instead of presenting this reality to the people and engaging them honestly, governments kept pushing forward, enabled by domestic and external financialization to mask and roll over mistakes. People were never lifted out of poverty; policies kept them vulnerable while channeling benefits to a small minority and offering mere handouts to the excluded. This deliberate approach broke the economy; it was not a mere collapse due to circumstances. Earlier governments socialized the blame by saying COVID-19 caused an unmanageable fall. That is false. They hid the true economic facts and portrayed themselves as the only ones who could rebuild. But those who broke it cannot rebuild it.

¶ 06 In parallel, a narrative was micro-targeted and socialized that signing an agreement with the IMF and obtaining some loans would make the economy right again. IMF engagements come with parameters on fiscal management, stabilization, and debt restructuring, which are understood and sometimes necessary. But doing only that will not take a country forward. Yet, the public was made to believe that working with the IMF alone would develop the country.

¶ 07 We do not subscribe to that belief. We work with the IMF recognizing those limits and within those conditions, but we will not let the public be misled about the true problem.

¶ 08 Under a National People’s Power government, how will we use the Mid-Year Fiscal Position Report to chart the path ahead? We base our approach on four pillars: the domestic economic trend, the global economic trend, a realistic stabilization path, and a fair distribution of benefits. A degree of stabilization emerged by the end of the first two quarters of 2024, aided by pent-up demand being released into the economy. However, beyond this initial rebound, constraints arise, particularly when forecasting GDP for 2025. We have questioned the forecasting model in Table 4, noting methodological issues and the policy constraints it imposes on broadening the economy, attracting foreign investment, and expanding public expenditure.

¶ 09 For example, under current projections, the nominal envelope available to us in 2025 is around Rs. 33,000 billion. This is not GDP itself but a forecast value used for fiscal planning, underpinning growth projections of about 2% in 2024 and 3.1% in 2025, with roughly 3% in 2026–2028, based on past and current data. The key issue is that with a Rs. 33,000 billion envelope, the Fiscal Management Responsibility framework caps primary expenditure at 13% of estimated GDP, giving about Rs. 4,290 billion. Excluding interest, the combined capital and recurrent primary outlays are constrained, with about Rs. 2,480 billion for primary non-interest spending that must cover salaries, pensions, and essential maintenance, leaving only a small space for capital expenditure. We must manage within these limits while still delivering on our policy commitments during 2025–2028.

¶ 10 Page 10 of the Report highlights fiscal trends. Any fiscal consolidation we pursue happens within a constrained, previously suppressed economy. With a hard ceiling of roughly Rs. 33,000 billion, the agreed fiscal measures must operate within that band. Within this, and contrary to the old model that shifted the full burden to the people, we will try our utmost to protect the public by raising the personal income tax-free threshold and granting VAT relief to selected sectors, to the extent possible.

¶ 11 To reconnect people with the economy, we introduced targeted relief: increasing fertilizer subsidies for selected crops from Rs. 15,000 to Rs. 25,000, allocating funds for schoolchildren’s supplies, and raising and extending harvest-related benefits. While mid-year revenue had reached about 45% of the annual estimate by June (consistent with a half-year outcome), by end-November preliminary data indicate that the three main revenue agencies—Inland Revenue, Sri Lanka Customs, and the Excise Department—had collectively reached about 98–99% of their expected collections by December.

¶ 12 On expenditure management, there was a reduction by June. Spending cuts are not inherently good or bad; under current constraints, they helped the deficit. But we must examine what was cut: reducing benefits and essential social support is not acceptable; cutting capital and development outlays undermines the future. Our plan is to transition from crude cuts to sound management, optimizing capital spending within the Rs. 33,000 billion framework, fast-tracking stalled, abandoned, and slow projects, and bringing forward a pipeline of new projects.

¶ 13 In fiscal management, beyond revenue and expenditure, we must ensure adequate cash flow. We know previous administrations faced cash management crises that pushed them to the brink of overdrafts. By June we maintained a positive cash position, and this improved substantially to about Rs. 1,111 billion by November as a cash balance within a short period.

¶ 14 The Report also addresses State-Owned Enterprises (SOEs). There is much public discourse that SOEs cannot be run and must be sold due to losses. Our position is different. Many SOEs were set up for various reasons and some can and must be restructured. Restructuring does not mean only divestiture; there are multiple models, as outlined in our policy statement. We will invite Boards, management teams, and experts in each entity to present restructuring proposals. The mid-year data show notable improvements in SOE profitability over the six months compared to the previous year; we will use these facts to guide prudent turnaround plans and restructuring where appropriate.

¶ 15 On external financing, 2024 was constrained due to the ongoing debt restructuring, which has now concluded. Multilateral windows—IMF, World Bank, ADB, JICA—provide limited space, largely bounded by IMF parameters. By June 2024 we had mobilized some external resources, and we expect a significant expansion in 2025, now that the two-year debt restructuring impasse has ended. There were many misinterpretations of our policy statement. Our actions evolve as we move toward the core goals: a prosperous country with better lives, a democratic economy and society, integrating people into the economy and sharing benefits fairly. As we approach those aims, some measures will change, be amended, or be newly introduced; others may be dropped if unsuitable. That is our prerogative in governance. We will take guidance from those committed to the country and to this policy path, not from partisan prescriptions.

¶ 16 Some say we follow Ranil Wickremesinghe’s policies. Any economy advances if it develops agriculture, industry, and exports. Those are common economic imperatives. What matters is how we manage resources, capture economic gains, and distribute them fairly with the people in mind. We will continue on this path despite criticisms.

¶ 17 In implementing our policy, informed by the 2024 Mid-Year Fiscal Position Report, we will adopt short-, medium-, and long-term measures and focus on several strategic areas. We face a major challenge: a large segment has been pushed into poverty. Our aim is not merely poverty reduction but poverty elimination. To do this, we will expand production in identified sectors, especially modernizing agriculture—deeply tied to our culture and food security—moving from subsistence toward value addition and global value chains. We will pursue rapid, appropriate industrialization by scaling micro, small, and medium industries nationwide, and we will increase women’s labor force participation—currently around 30%—as a priority in poverty elimination.

¶ 18 The world has advanced rapidly; to catch up we must leap technologically. Hence our emphasis on building a digital economy and implementing a comprehensive digitalization process across public and private sectors.

¶ 19 We also introduce, with a new vision and mindset, the “Clean Sri Lanka” program, integrating multiple initiatives. With the people’s mandate and within the period granted, we are confident we can move steadily toward these development goals. I present this assurance to the public and conclude. Thank you, Hon. Presiding Member.