The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 Hon. Speaker, at the close of the Second Reading debate on our Government’s second Budget Statement, I would like first to set out an approach to this Budget. We all know the National People’s Power (NPP) has formed a government through political power for the first time. Previous governments, over decades, developed ingrained practices and mechanisms. They assumed every government must run according to their old methods and definitions of governance—elevating a segment above the people to enjoy privileges and place themselves above the law. Even today, from the Opposition, they try to play that same role. It would be easy for them if we too played that game. But our approach, our vision, is different—governing together with the people. That is where you are unsettled.

¶ 02 On this Budget debate, I must say: you define a Budget merely as mobilizing State revenue for State expenditure heads within a year, and how to spend after allocation. Hence your history of tussles—jostling for allocations among ministries, conflicts after the Budget. You look at our Budget similarly, searching for what was not allocated enough. But our State financial management and expenditure are guided by a vision—the strategic objectives set out on page 5 of the Budget Speech. All expenditures are positioned to achieve those objectives. You spent discretionarily; we do not. We spend under fiscal discipline, under the State Finance Management Act, ensuring transparency and accountability. That is why you struggle to sustain a quality debate on this Budget. I invite you, and the public, to analyse this Budget against the objectives we were mandated to deliver.

¶ 03 Our goal is a prosperous country and better lives through social transformation. This Budget reflects step-by-step progress to lift the country higher. Judging us on a single year’s cash allocations will mislead you. In our first Budget, we stabilized the country, a stabilization for which we received praise—from the business community, investors, international organizations, and states. The challenge of this second Budget is to channel sizable investments for sustainable, medium-term growth, steering the country towards over 7% economic growth.

¶ 04 I will answer several Opposition charges before summarizing the Budget. One MP said Parliament exists to pass laws and that this Government has brought too few—228, he said. The number of Bills alone does not measure quality or purpose. Moreover, he omitted that in 2015 there were 168 Acts passed, and in 2020 only 7 Acts. As for us, to date we have passed 22 Acts; by December we plan to table another 14 Bills, with 10 more new Bills to follow. Among them are decisive reforms to spur investment and improve the business climate: the State-Owned Enterprises restructuring law; a Public–Private Partnership law; a Microfinance and Credit Regulatory Authority law; strengthened anti–money laundering and counter–terrorist financing measures; and oversight on financial transactions. We are doing the right things legislatively.

¶ 05 Regarding the Parliamentary Budget Office, Hon. W.D.J. Seneviratne raised figures about an Rs. 8 billion allocation and Rs. 3 billion recurrent. Under the Parliamentary Budget Office Act, No. 6 of 2023, section 37(1) clearly provides for submission of annual estimates through the Committee on Public Finance by the Parliamentary Budget Officer, with approvals and variations as set out in sections 2 and 3. There was no arbitrary cut. If anything is short or further funding is required to run the Office well, we will consider additions within the available space at a future committee stage.

¶ 06 Another criticism was that our capital expenditure execution is low. Rather than comparing partial-year (September/October) percentages, compare full-year outcomes. From 2019 onwards, the highest September progress was 32.28%. In 2025, despite practical challenges, our executed revised capital expenditure is already 45.3% by September. In full-year terms since 2019, the highest capital execution recorded—58%—is ours. Do not spread misinformation. In 2016, your Government executed only 50.3% of the Rs. 1,182 billion capital allocation—half—yet you question 2025 execution.

¶ 07 You also misread the Presidential Expenditure Head. Comparing 2024–2026, we have allocated properly: additional funds were for Clean Sri Lanka, last year’s salary increases, and research. In 2024, under the Ranil Wickremesinghe administration, an extra Rs. 40 billion was allocated by Supplementary Estimates; in our three months of management we brought that down to Rs. 25 billion. Your narrative that we allocated more is false. Discretionary items approved by Parliament are within those totals.

¶ 08 On estate workers’ wages, much has been said. Plantation workers toil under harsh conditions, with social and health deprivations. Through talks with estate owners and unions, and with the President’s direct intervention, we reached a practical solution with shared burdens: Rs. 400 per day added—Rs. 200 from Government and Rs. 200 from the companies. Are you for or against a Rs. 400 increase shared this way? Also, nowhere did we require 25 working days per month; that claim is false. If a worker works one day, he gets Rs. 400 more; at 25 days, that yields Rs. 10,000—an incentive, not a fiction.

¶ 09 Turning to the Budget framework: estimated GDP is Rs. 34,500 billion. Primary expenditure is 13% of GDP. Interest payments are Rs. 2,617 billion. The Budget deficit is Rs. 7,102 billion. In addition, amortization (capital of debt service) is Rs. 1,878 billion, and bond/T-bill face-value adjustments add Rs. 105 billion, taking gross financing needs to Rs. 3,740 billion—lower than last year; the deficit is also lower. Sound fiscal management hinges on managing the deficit and gross financing needs; we have improved on both and will sustain this trajectory.

¶ 10 Our constraint is revenue. Hence revenue-based fiscal consolidation. We did not impose brand-new taxes to choke people. We improved compliance and efficiency within the existing tax framework and deployed technology. Broadening the base and tightening collection has increased revenue. I am pleased to note Sri Lanka Customs has already met its annual target of Rs. 2,115 billion by this stage.

¶ 11 On spending: primary expenditure is Rs. 2,285 billion, of which salaries are Rs. 1,464 billion, pensions Rs. 510 billion, and interest Rs. 2,617 billion. Nearly 50% of revenue goes to interest—legacy debt, not a policy choice. Out of every Rs. 100 of revenue, Rs. 85.7 goes to salaries and interest, leaving Rs. 14 for everything else; we manage prudently and borrow for projects, maintaining fiscal discipline.

¶ 12 On tax policy: businesspeople historically feared surprise tax changes at Budget time. We have ended such surprises. Our key structural aim is to shift the direct:indirect tax ratio from 25:75 to 40:60, as presented by the President as Finance Minister. Mechanisms to achieve this are in the Budget. VAT is one tool among others, but our intent is to reduce reliance on indirect taxes over time, after strengthening direct tax capacity.

¶ 13 VAT misconceptions abound. VAT is not paid by the business; the tax incidence is on the consumer. Turnover Tax burdened businesses and cascaded through prices; VAT, properly implemented, avoids cascading by taxing value added along the chain by registered persons. The challenge is coverage and technology. When suppliers or small traders are unregistered, VAT cannot be properly credited, creating distortions. Hence our push for digitalization, e-invoicing, and point-of-sale systems, gradually bringing all into the VAT net, which will ultimately allow lowering VAT rates. For now, VAT rates may appear high relative to peers, but we will reduce them in step with enhanced direct taxation and compliance—do not panic.

¶ 14 Unregistered traders today pay embedded VAT in inputs that becomes their cost; they either pass it to consumers or absorb it by lowering margins, harming competitiveness. Registration enables input credits—this is the better way. We will proceed step by step, including in the motor vehicle sector, to remove confusion and ensure proper collection.

¶ 15 On growth and investment: to achieve over 7% medium-term growth in an inclusive, sustainable economy, we allocate significantly for enabling infrastructure—expressways, railways, rural roads, bridges—to create a connected logistics network. On power, reducing production costs and improving business operations is vital. Beyond generation, we are targeting end-use investments: electrification of transport, data centres for digitalization, and diversified generation with new capabilities. Major allocations include Rs. 284 billion for expressways and transport, including resuming projects like the Bandaranaike International Airport Phase II after correcting contractual issues that previously caused costly delays. Due to errors in your past contracts and repeated addendums from 2016 to 2020, currency conversion mistakes alone cost over Rs. 20 billion—these are the wasteful areas you should question, not the Rs. 200 share to support estate workers.

¶ 16 Urban development, construction, and housing also receive focus as growth enablers. To address the persistent complaint that there is insufficient finance for productive investment, beyond banking sector schemes we have earmarked over Rs. 80 billion in Government-supported, targeted, concessional credit lines for strategic sectors.

¶ 17 Taken together, these allocations, aligned to the Budget’s main objectives, put the country on the right path towards a “Prosperous Country – Beautiful Life.” I ask all Members to support this Budget.

¶ 18 Thank you.