Hon. (Ms.) Lakmali Hemachandra, Attorney-at-Law

¶ 01 Hon. Deputy Chairperson of Committees, thank you for the opportunity. A recurring question over these three days has been: what is the ideological orientation of this Government’s Budget? Is it a neoliberal Budget? Before deciding that, we must first be clear on what we mean by “neoliberalism.”

¶ 02 As Minister Lal Kantha explained, neoliberalism is the politico-economic doctrine ushered into Sri Lanka after 1977, aligned with the contemporaneous policies in the UK and USA. Its simple idea is this: the state should withdraw from economic activity; market forces alone are best suited to manage resources and allocate them efficiently; state intervention cannot improve upon markets. For three decades, successive governments privatized state enterprises and retreated from regulation. As a party, we believe a main structural cause of Sri Lanka’s 2022 crisis and default was that neoliberal path.

¶ 03 Now, some accuse us of adopting Ranil Wickremesinghe’s economic policy. I understand why the Opposition raises this—because we are operating within parameters set by the IMF programme. They argue that being within an IMF programme makes us neoliberal.

¶ 04 However, our Government faces legal and practical constraints no past Budget faced. The State Finance Management Act passed in August 2024 imposes explicit fiscal limits, including capping Government expenditure at 13 per cent of GDP and constraining borrowing. Previous Budgets always operated with leeway to run deficits as suited. We do not have that. Despite these constraints, this Government has presented an extremely people-oriented, democratic Budget.

¶ 05 Returning to the core question—Is this Budget neoliberal?—I say no. This Budget reasserts the state’s role in the economy and accepts the necessity of state responsibility. For example, we have substantially increased social protection. The number one expenditure in this Budget, Madam Chairperson, is on social protection—Rs. 749 billion—covering broad groups: drought relief, care for orphans, prisoner welfare facilities, elder care, child care, and others through an expanded social safety net.

¶ 06 Beyond social protection, we have made historic allocations to education and health: Rs. 619 billion for education and Rs. 604 billion for health. Combined spending on education, health and social protection is around Rs. 1.9 trillion—major investment for society. In contrast to past governments which steadily withdrew from education and health—pushing privatization—this Budget clearly reverses that.

¶ 07 State investment is also significant: total public investment at Rs. 1.3 trillion, including Rs. 766 billion for highways, agriculture modernization, transport modernization, and water supply upgrades and rehabilitation. This shows we are reversing the policy of state withdrawal and re-engaging the state productively through our first NPP Budget.

¶ 08 It is not just financing. There are legal and regulatory interventions to enhance state engagement. One example: we will amend the 2024 Electricity Act—brought for privatization—to strengthen the public sector and halt privatization of electricity. Another: we will strengthen the Paddy Marketing Board Act of the 1970s—past governments rendered it ineffective. We will expand the PMB’s capacity to participate in the paddy market, register aggregators and wholesalers, and ensure orderly market functioning through new amendments.