Hon. (Dr.) Harsha de Silva

¶ 01 Hon. Speaker, I present the Report of the Committee on Public Finance on the Appropriation Bill for the Financial Year 2025 in terms of Standing Order No. 121(5)(1) of Parliament (on the fiscal, financial and economic assumptions used as the basis in arriving at total estimated expenditure and revenue of the Budget) only in the English language with special leave of the House and the copies in Sinhala and Tamil languages will be presented as soon as possible.

¶ 02 Ordered to lie upon the Table.

¶ 03 Sir, let me take three minutes of your valuable time to give a brief summary of the Report. Every Member has this Report on the table right now. What we have done is, we have looked at the Budget that was presented a week ago. According to the Standing Orders, we must present a Report on the fiscal, financial and economic assumptions used as the basis in arriving at the total estimated expenditure and revenue before commencement of the Committee Stage Discussion of the Appropriation Bill. So, this is the first Report. There is another Report that is due. We will present that. It refers to the Estimates and looks into whether the allocation of money is in compliance with Government policies. That Report, Sir, we will present to this House on Thursday morning before the Committee Stage Discussion begins.

¶ 04 Sir, this Report consists of 92 pages. We have gone through the Budget, looked at the assumptions on revenue and expenditure and prepared this summary Report. First, the Report refers to the legislative background upon which these Reports are presented and also the Budget is prepared. Sir, the key legislations are, the Public Financial Management Act, the Economic Transformation Act and the Public Debt Management Act. Next, we have looked at the key macroeconomic projections in the Budget for 2025. The basic projection is the growth rate of the economy, which is expected to be between 3 per cent to 5 per cent this year. We have mentioned here that, however, the growth remains vulnerable to global trade uncertainties, geopolitical risks and climate-related disruptions.

¶ 05 Sir, the inflation is expected to return to the 5 per cent target by the third quarter of this year, after several quarters of deflation. The relaxation of import restrictions is expected to boost tax revenue, but it may also widen the trade deficit and exert pressure on foreign exchange reserves. Here, we also discuss about ensuring fiscal and monetary policy coordination along with structural reforms, which will be crucial for maintaining macroeconomic stability and achieving fiscal targets for 2025.

¶ 06 Then, in Section 3, we analyse the revenue projections in the Budget for 2025. The estimates for this year project the revenue to increase by 1.67 per cent of GDP primarily driven by indirect taxes. The Government’s revenue strategy heavily relies on vehicle imports, contributing to between 50 per cent to 70 per cent of the total revenue increase.

¶ 07 Then, Sir, compliance with the IMF's Extended Fund Facility targets hinges on achieving a tax-to-GDP ratio of 13.9 per cent, but any delays or setbacks in vehicle importation or administrative inefficiencies could jeopardize this goal.

¶ 08 Section 4 of this Report looks at the Government expenditure, projecting a 17.3 per cent increase in 2025, which is an increase from 14.4 per cent in 2024. This excludes debt amortization. It is primarily driven on account of a 61 per cent increase to Rs. 1.3 trillion in Capital Expenditure, in comparison to a 12.4 per cent reduction to Rs. 817 billion last year. The increase is mainly on account of the resumption of foreign-funded projects, post-debt restructuring.

¶ 09 Then, in Section 5, we look at the Debt Sustainability Analysis, which is a key important factor, and the IMF Debt Sustainability Analysis (DSA) targets. Sir, by the end of 2024, Sri Lanka outperformed IMF projections with Central Government debt-to-GDP at 98.7 per cent compared to the IMF’s target of 108.8 per cent. Sri Lanka’s debt trajectory remains on a positive path, benefiting from improved economic performance, a stable exchange rate and lower-than-expected inflation, as per the IMF projections.

¶ 10 Finally, Sir, we conclude with some concerns pertaining to the Budget process. The initial assumptions provided to our Committee stipulated that the Budget estimates are prepared based on the assumption of Sri Lanka recording a 10 per cent nominal growth rate and this was made up of a 3 per cent real growth and a 6.7 per cent GDP deflator for this year. We observe that these initial assumptions by the Ministry of Finance differ from the assumptions presented in the documents of Budget, 2025, which refer to an estimated real economic growth rate of 5 per cent in 2025. That concludes the summary.

¶ 11 Sir, finally, I want to mention that we have not still got our team in place; we still have not got a technical team. We had a number of volunteers. I want to briefly mention them because they did it as volunteers. The team was led by Dr. Roshan Anne Perera and consisted of Dr. Venura Welagedara, Mr. Umesh Moramudali, Ms. Chethana Ranatunga, Ms. Hansini Yasu-e Karunaratne, Ms. Fathima Hafsa Haniffa, Mr. K.D.D.B. Vimanga and Mr. Damintha Gunasekera.

¶ 12 Thank you very much.

¶ 13 PETITIONS