Hon. Anura Kumara Dissanayake - President; Minister of Defence; Minister of Finance, Planning and Economic Development; and Minister of Digital Economy

¶ 01 Hon. Speaker, I move, “That the Bill be now read a Second time.”

¶ 02 Preamble

¶ 03 Hon. Speaker, we are pleased to present to this House the first National Budget of our Government.

¶ 04 Sri Lanka in 2022 faced the gravest and most complex social, economic and political crisis since Independence. Though its most acute phase unfolded in 2022, the drivers of the crisis were both historical and structural: corrupt governance, failed economic policies, and irresponsible public financial management. As a result, normal economic activity collapsed, affecting every sector and social group from businesses to households. Shortages of fuel, electricity and food, and soaring prices caused severe hardship, particularly for women, children, persons with disabilities and the elderly; professionals emigrated; people queued for hours for essentials and some even died while in queues. The crisis was not merely economic; it was a monumental failure of political power. Initial stabilization measures curbed the freefall to some extent, but the 2022 economic crisis evolved into a humanitarian crisis, bearing disproportionately on the poorest and most vulnerable.

¶ 05 As the economic and social crisis deepened, it generated profound political consequences. The people rose against corrupt rulers, forcing them from power. Thereafter, a temporary administration that distorted the people’s mandate was installed. It protected the corrupt, engaged in corruption, wasted public funds, and continued to repress the people. Thus, public aspirations for social, economic and political transformation went unfulfilled. The local government elections due in March 2023 were postponed, further betraying democratic expectations.

¶ 06 Through the Presidential and General Elections held in late 2024, the people made a decisive choice to establish a new government with firm resolve, commitment and leadership, to restructure the economic, social and political order and steer the country towards shared prosperity.

¶ 07 This Budget, which lays the foundation for the growth and development we need, is historic in that it is designed to realize those aspirations through a sustainable economic base.

¶ 08 One of our earliest challenges was to correct the false narrative propagated by those who sought to thwart our victory—misinformation and fearmongering about our economic policy and vision. Predictions that the dollar would shoot to Rs. 400, that fuel queues would return, that international development partners would isolate the new government, that investor confidence would evaporate, or that all private property would be nationalized—these have been proven wrong. Despite negative campaigns, we stabilized the economy, rebuilt strong relations with international partners, and restored investor confidence.

¶ 09 Accordingly, with the 12-month Treasury bill yield falling to 8.8 percent, the financial sector has gradually stabilized. Despite making payments connected to the December 2024 external debt restructuring amounting to USD 570 million, we ended 2024—with a first for recent years—with gross official reserves at USD 6.1 billion. Meanwhile, despite fears of monetary expansion, the rupee appreciated in net terms to around Rs. 300 per USD. We expect economic growth of about 5 percent in 2025.

¶ 10 Since mid-2022, Sri Lanka implemented economic reforms with the support of the IMF and other international partners. Measures such as cost-reflective energy pricing, tax increases, and higher interest rates imposed a burden on citizens. We acknowledge the IMF’s role in stabilization via the EFF, and we believe regaining economic sovereignty requires that our economic policy framework be shaped by us.

¶ 11 We are candid: we are not yet economically sovereign; we are regaining that space and we aim to fully restore it.

¶ 12 A key recent milestone was the conclusion of the external debt restructuring in December 2024. When we assumed office, negotiations were underway; we did not disrupt them to avoid jeopardizing stability, especially given the time and cost already sunk in the process. The agreement provides substantial debt relief, markedly lowering debt-service costs. This fiscal space must be used to strengthen financial stability, boost non-debt inflows such as export growth and FDI, and resume orderly debt service over the medium term to ensure long-run fiscal sustainability.

¶ 13 Debt service will resume in 2028. We have secured a window of several years. We must exploit this period to build an economy capable of servicing its obligations.

¶ 14 Reflecting improved prospects, rating agencies such as Fitch and Moody’s upgraded Sri Lanka by multiple notches, paving the way for rising investor confidence, more trade and investment opportunities, and reduced international financing costs.

¶ 15 Yet the crisis continues to exert pressure on many, especially the most vulnerable. Inflation that peaked around 70 percent in 2022 severely increased the cost of living. Though inflation has eased, many prices remain elevated and incomes have not recovered proportionately, depressing living standards. Real wages have fallen significantly over the past two years, warranting fair wage increases. We have enhanced allocations to the Aswesuma social safety net by raising benefit amounts and duration, and expanded other social transfers to protect those in need.

¶ 16 However, cash transfers alone cannot sustainably eradicate poverty. A humane state must protect citizens unable to engage in productive activity due to various hardships. We recognize inclusion and exclusion errors in Aswesuma; many deserving families do not receive benefits while some ineligible do. We will refine targeting to include the most deserving, while also creating opportunities for all to engage productively and exit poverty sustainably.

¶ 17 Growth must be broad-based, with benefits shared fairly across society. For decades, economic activity and gains have been concentrated in the hands of a few. According to the 2019 Household Income and Expenditure Survey, the top income quintile accounts for 47 percent of total household expenditure; in 2023, the Western Province contributed about 44 percent of GDP. We must therefore democratize the economy so that opportunities are more fairly distributed. The people affirmed their political rights through the Aragalaya and the 2024 elections; now we must secure their economic rights. This Budget’s vision is to entrench those economic rights.

¶ 18 The Budget is crafted under stringent constraints, mindful of the severity of the crisis since 2022. Many countries emerging from sovereign default have endured a “lost decade.” We, however, have achieved an initial stabilization. To consolidate this, the Budget is anchored in fiscal discipline, clear economic vision, and guidance. We are prepared to provide the political leadership required.

¶ 19 Consistent with the State Finance Law within the Public Financial Management Act, primary expenditure is capped at 13 percent of GDP; this Budget conforms to that. We are committed to prudent use of scarce tax revenues—prioritizing, targeting, and extracting maximum social return. It is our duty, as stewards of public funds, to deploy limited resources to the most essential ends.

¶ 20 Even within constraints, we have funded key priorities that align with the people’s mandate, while maintaining continuity of critical ongoing programs. We have increased spending for Aswesuma and other social protection priorities. Subject to limits, we will from July 2025 allocate funds for an interest support scheme for senior citizens, fortified with strong safeguards against abuse.

¶ 21 We allocate 4 percent of GDP for capital expenditure—vital for growth. Priorities include strengthening MSMEs; public transport; rural connectivity and empowerment; agricultural revival; domestic entrepreneurship; research; and removing bottlenecks to growth and productivity in domestic and export-oriented industries. Across all outlays, we emphasize prioritization, targeting, efficient execution, and value for money—so every rupee yields economic and social dividends.

¶ 22 As stabilization progresses, fiscal space will widen. Efficiency gains, anti-corruption and waste reduction, better targeting, and improved tax administration will free significant savings to address people’s needs. With collective discipline and resolve, the benefits will accrue swiftly.

¶ 23 Principles of Budget 2025

¶ 24 A Budget is more than an income-and-expenditure plan; it reflects the Government’s stance on rebuilding the economy and overall policy. Our supply-side policy rests on three pillars: 1. Expanding production in industry, agriculture, and services; 2. Ensuring production is driven by active public participation; 3. Sharing the gains of production and growth fairly across society.

¶ 25 On the demand side—managing markets for goods and services—our aims are: 1. Uninterrupted supply; 2. Fair prices; and 3. Acceptable quality.

¶ 26 To realize these aims, we will: - Rely on competitive markets where appropriate to balance supply, demand, and prices; - Regulate where necessary through competent agencies; - Ensure active state participation in certain sectors; and - Organize production in some areas via cooperative models.

¶ 27 Our role is to remove barriers and provide facilitation so people can realize their economic potential. Disadvantages from geography, disability, lack of education, or poor infrastructure should not block opportunity. Addressing such inequities requires sustained effort—investing in education and skills, and in health, to empower citizens. This Budget records the highest-ever allocations for education and health.

¶ 28 We will provide infrastructure that connects people to domestic and global markets and ensure fair competition by preventing excessive market concentration and monopolies.

¶ 29 This Budget begins the task of economically empowering our people and laying the foundation for the democratization of Sri Lanka’s economy. Digitalization is essential for sustained productivity gains. Good governance and anti-corruption are the decisive basis not only for economic progress but also for social upliftment and political reform. Our Clean Sri Lanka program embodies these priorities.

¶ 30 Medium-term macroeconomic direction

¶ 31 With this Budget, we lay the foundation for a new trajectory: medium-term real GDP growth above 5 percent; strengthening supply capacity to contain volatility and achieve low, stable inflation; and shifting from a large, persistent external current account deficit towards a stable external position. A market-based exchange rate will be better anchored against excessive swings.

¶ 32 In 2025, we expect a record near-USD 19 billion in goods and services exports, with robust export growth driving overall expansion. Together with higher non-debt inflows and a primary surplus of 2.3 percent of GDP, Sri Lanka will be well-prepared by 2028 to meet rising debt service. No one should fear—our task is to use the available window to build capacity to repay. By 2028, we will be a country that services its debts successfully.

¶ 33 According to World Bank estimates, poverty reached 25.9 percent in 2023. Unlike many post-default countries where poverty persists for long, we aim to reverse this trend from 2025. As growth resumes, we will implement plans to curb the rise in poverty—marking 2025 as a turning point.

¶ 34 Through better public financial management, responsible debt management, human capital investment, a strong social safety net, economic diversification, export promotion, improved investment climate, agricultural modernization, green policies, innovation, digitalization, entrepreneurship, PPPs, anti-corruption and transparency, and sustainable fiscal practices, we will leverage the post-crisis moment to structurally transform Sri Lanka’s economy for long-term stability and prosperity.

¶ 35 Budget 2025 proposals

¶ 36 1. Expanding goods and services exports

¶ 37 We will prepare a National Export Development Plan 2025-2029 to significantly boost Sri Lanka’s capacity to export goods and services by improving access to global markets. MSMEs will be assisted to enter new markets, scale in existing ones, and integrate into global value chains alongside large exporters.

¶ 38 A National Tariff Policy will underpin a simplified, transparent and predictable tariff framework, including rational duty regimes to ensure access to quality, affordable inputs essential for export competitiveness.

¶ 39 We will deepen economic ties with ASEAN states, including via RCEP and other agreements, and expand Sri Lanka’s FTA network with strategic partners.

¶ 40 We will strengthen economic diplomacy with dedicated, professional efforts across our missions abroad, connect with the Sri Lankan diaspora to open business networks and partnerships for exporters, and operationalize a National Single Window by automating and digitalizing key border agencies and exporter registrations.

¶ 41 A new Customs Act will be introduced to improve revenue collection and trade facilitation, replacing and modernizing the current law.

¶ 42 Sri Lanka’s network of Double Taxation Avoidance Agreements will be expanded beyond the existing 44, prioritizing countries with significant trade and investment potential.

¶ 43 2. Investment promotion and facilitation

¶ 44 We will expand export-oriented investment and specialized zones, and support development of environmentally friendly industrial parks—focused on sustainability, resource management, and technology—through PPPs and privately managed zones.

¶ 45 We will amend the Economic Transformation Act to align with emerging investment dynamics and re-submit an amended BOI Act to Parliament.

¶ 46 Underutilized state lands will be leased for productive economic activities.

¶ 47 An Investment Protection Act will be enacted to ensure facilitation and protection of investors.

¶ 48 We will improve the ease of doing business in areas such as property registration, tax payment, trade facilitation, contract enforcement, and access to credit. Digitalization of public services will be pivotal.

¶ 49 We will implement an effective “one-stop shop” with defined timelines and integrated approvals.

¶ 50 We will establish safeguards and monitoring for repatriation of earnings and dividends, and gradually remove impediments to outward investment by domestic firms so Sri Lankan companies can expand abroad.

¶ 51 A new PPP law will be introduced.

¶ 52 The Bim Saviya land titling program will be expedited to strengthen land rights and commercial use.

¶ 53 The Insolvency Bill, now in drafting, will be fast-tracked.

¶ 54 We will seek quality FDI to develop Sri Lanka’s mineral resources and blue economy, ensuring prudent management of untapped assets to drive investment, industrial growth, and exports.

¶ 55 Government will provide technical and financial support for exporters to obtain testing and certification. We will develop testing and calibration laboratories, referral centers, carcinogen research referrals, and services of universities and the Industrial Technology Institute to deliver efficient services.

¶ 56 To achieve desired outcomes under a National Quality Infrastructure, we propose to allocate Rs. 750 million in 2025.

¶ 57 3. Leveraging Sri Lanka’s strategic location

¶ 58 Sri Lanka can become a hub for trade, logistics, services, and the digital economy. This Budget takes foundational steps to realize that potential.

¶ 59 Logistics can become a prime driver of growth. Currently, logistics contribute about 2.5 percent to GDP and around 7 percent to exports, providing 40,000–50,000 direct full-time jobs. With the completion of the East and West Container Terminals, Colombo Port capacity will expand substantially. Together with the proposed Colombo West Terminal and Colombo North Port, we expect accelerated port operations. Within a month, we will call for Expressions of Interest for these projects.

¶ 60 Given sharply rising volumes and congestion at Colombo Port, decisive upgrades to infrastructure, systems, and processes are required. Therefore, the Kerawalapitiya Customs… (continues).