Hon. Anura Kumara Dissanayake

¶ 01 Re-initiating of Giribawa–Eppawala Water Supply Scheme

¶ 02 Giribawa and Eppawala, located in the dry zone of the North Central Province, face difficulties in accessing quality drinking water, creating various risks to the local population. We recognize the importance of providing drinking water from surface water sources to these areas, preferably from the Rajanganaya Tank, which is fed by Kala Wewa through the Kala Oya. Accordingly, we propose to allocate Rs. 1,000 million to re-initiate the initial works of the Giribawa–Eppawala Water Supply Scheme to provide pipe-borne water to the area.

¶ 03 38. Filling Essential Vacancies in the Public Service

¶ 04 We have ended the past practice of filling the Public Service with supporters of politicians. In line with the Government’s vision, recruitment, promotions, and transfers in the Public Service will be based on qualifications and skills, free from political influence.

¶ 05 Due to the challenges posed by the COVID-19 pandemic, economic downturn, and political instability, there is a large number of unemployed graduates and youth. We will implement a strategic recruitment plan to hire 30,000 individuals for essential Public Service roles, strictly according to cadre vacancies starting from this year. Accordingly, we propose to allocate Rs. 10,000 million for this purpose in 2025.

¶ 06 39. Public Service Salary Increase

¶ 07 Nearly a decade has passed since the last basic salary revision. It is now time to revise the salary structure in a holistic manner to ensure a decent standard of living for public sector employees, enabling the Government to attract talented and skilled workers, while avoiding an excessive burden on the Budget.

¶ 08 Accordingly, we propose to increase the minimum monthly basic salary from Rs. 24,250 to Rs. 40,000, a rise of Rs. 15,750. The current ad-hoc interim allowance and special allowance will be integrated into the basic salary, giving a net increase of Rs. 8,250 in the minimum salary.

¶ 09 The proposed minimum monthly basic salary increase of Rs. 15,750 will also apply, on the same basis, to judicial services, public corporations, statutory boards, university staff, and officers of the tri-forces, in line with the minimum basic salary increase for public sector employees.

¶ 10 In addition to the minimum monthly basic salary increase of Rs. 15,750, it is proposed to raise the value of the annual salary increment by 80 per cent. Consequently, the minimum annual salary increment will be increased from Rs. 250 to Rs. 450. It is also proposed to adjust annual salary increments for all public sector employees by the same percentage.

¶ 11 The total estimated cost of this salary increase is expected to be Rs. 325 billion. Considering present fiscal constraints, this salary increase will be implemented in phases. Of the total net salary increase, Rs. 5,000 and 30 per cent of the balance amount will be paid starting from April 2025, with the remaining 70 per cent being paid in equal portions beginning in January 2026 and January 2027.

¶ 12 Therefore, it is proposed that Rs. 110 billion be allocated for the proposed salary increase in 2025.

¶ 13 As part of this salary increase, it is proposed that retirement benefits for officers retiring on or after 01.01.2025 be calculated based on the new salary structure, ensuring that they receive retirement benefits under the proposed 2025 salary scheme.

¶ 14 Considering the increase in the minimum basic salary of State employees, the limit on distress loans for public servants, currently set at Rs. 250,000, will be increased to Rs. 400,000. Further details of the salary increase are provided in the Technical Note in Annexure V.

¶ 15 40. Private Sector Minimum Wage Increase

¶ 16 The Employers’ Association has agreed to increase the monthly minimum wage of private sector workers from Rs. 21,000 to Rs. 27,000 in April 2025, and to Rs. 30,000 from 2026.

¶ 17 41. Reconsideration of the Wage of Plantation Workers

¶ 18 Nearly 1.5 million workers are engaged in the plantation sector, mainly in tea, rubber, and coconut. The Government is of the view that their living standards need to be improved. In addition to programmes focused on the development of the plantation sector, the Government will intervene to increase the daily wage of these workers to Rs. 1,700.

¶ 19 42. Public Sector Pensions

¶ 20 Considering salaries and benefits entitled to them, a monthly increase of Rs. 3,000 was implemented immediately after the Presidential Election, thus resolving the pension anomalies of pensioners who retired before 01 January 2020.

¶ 21 We observe that a pension anomaly would be created by revising only the pensions of government employees who retired during 2016–2020, based on the salary scale of the fifth phase related to 2020, since all pensioners who retired up to 31.12.2017 are on the same salary scale.

¶ 22 As this issue has remained unresolved for a long time, we believe it must be resolved in a phased manner within the existing limited fiscal space. Therefore, we propose to revise the pensions of all pensioners who retired before 01.01.2020 in three phases, corresponding to the salary scales applicable to 2020 as per Public Administration Circular No. 03/2016.

¶ 23 As the first phase, the pensions of all pensioners who retired before 01.01.2018 will be revised in line with the third-stage salary scales relevant to 2018 in Public Administration Circular No. 03/2016, to be implemented from July 2025. For this phase, we propose to allocate Rs. 10,000 million through the 2025 Budget.

¶ 24 Furthermore, we propose to implement the pension conversions related to the fourth and fifth stages of the salary conversion from July 2026 and July 2027, respectively.

¶ 25 43. Legal Reforms

¶ 26 The Government will introduce a number of legal reforms in the coming year to establish sound legal provisions aimed at fostering rapid economic development, good governance, and effective public service delivery. These include laws to improve governance of State-Owned Enterprises, create a legal framework for public–private partnerships, enhance governance around procurement, public asset management, statistics, data exchange, valuation, asset management, microfinance and credit, and anti-money laundering and countering the financing of terrorism. More details are available in Annexure VIII of the Budget.

¶ 27 44. Revenue Measures

¶ 28 Sri Lanka’s economic reform programme is based on revenue-based fiscal consolidation. Leading up to the economic crisis, Sri Lanka had one of the world’s lowest government tax revenue levels—7.3 per cent of GDP in 2022.

¶ 29 For 2025, the bulk of revenue gains is expected from the liberalization of motor vehicle imports that took place on 01 February 2025. This process is being carefully monitored to ensure that vehicle imports do not unduly destabilize the external sector. Other key revenue measures, previously announced in Parliament in December 2024, include increasing the tax-free threshold for personal income tax, further adjustments to the second income tax slab, and removal of VAT on fresh milk and yoghurt. The Government also decided not to pursue, this year, the Imputed Rental Income Tax that had been agreed to by the previous administration. To compensate for any revenue losses, the Government has presented measures including the introduction of VAT on digital services, the imposition of Corporate Income Tax on export of services, and an increase in the Corporate Tax on cigarettes, liquor, and gaming.

¶ 30 These tax policy measures are expected to deliver the required revenue to meet the target of 15.1 per cent of GDP in 2025. In parallel, the Government is taking concerted efforts to improve tax administration and compliance. The upcoming Budget’s revenue strategy aims to enhance fiscal sustainability by strengthening tax administration, improving compliance, and institutional capacity through enhanced digitalization and rigorous monitoring mechanisms, while providing relief to the most vulnerable groups. Efforts will be directed toward digitalizing tax systems to reduce leakages and enhance transparency while minimizing human interactions in tax administration.

¶ 31 Sri Lanka is moving toward a cashless economy as part of its broader digitalization agenda to formalize the economy and improve revenue collection. The use of Point-of-Sale (POS) machines across businesses, especially in VAT-registered enterprises, will be implemented as a key initiative to facilitate digital transactions and reduce cash dependency. A cashless economy will curb tax evasion and illicit financial activities and enhance fiscal efficiency, contributing to Sri Lanka’s economic stability and growth.

¶ 32 Digitalization of revenue agencies and the overall digital economy drive is expected to significantly boost revenue-enhancing efforts. However, it is not just tax collection authorities that bear responsibility; other stakeholders, including audit firms and tax accountants, must discharge their duties in a socially responsible manner so that the Government is not deprived of due tax revenue. Appropriate measures will be taken to ensure compliance with the regulatory and legal framework.

¶ 33 We are confident that these tax administration and compliance measures will enable Sri Lanka to surpass revenue targets beyond 2025. At that point, it will be possible to provide further relief to the public in a manner that does not jeopardize revenue targets or the country’s fiscal and economic stability.

¶ 34 45. Borrowing Limit

¶ 35 The Borrowing Limit for the Appropriation Bill for the Financial Year 2025 is presented in Annexure II. In addition, the Technical Note on expenditure and revenue measures is given in Annexure III and Annexure IV, respectively. Further, the documents required to be submitted along with the Second Reading of the Budget under the Public Financial Management Act, No. 44 of 2024, are also tabled.

¶ 36 Conclusion

¶ 37 While the policies that I outlined today reflect the vision upon which I was elected to this office, I did not develop them alone. These policies are the result of an incredible effort, born out of the dedication and collective action of a Cabinet—most of whom have never served in Parliament but have vast experience and practical knowledge. They were born from the experience of many dedicated and devoted civil servants and policymakers who finally have a voice in shaping the destiny of our country. And they were born from the confidence and courage of many renowned, patriotic professionals who have distinguished themselves in their careers and, for the first time, had the confidence that they could contribute to a truly clean, truly functional, and truly compassionate Government.

¶ 38 If you look at the ranks of this Government, you will see a mix of passionate and disciplined politicians and accomplished academics and professionals who have sacrificed their careers, time with their families, and even their business legacies to put country before profit. Together, we have begun a monumental effort. We have brought down the cost of living; we have begun restoring confidence in our justice system; and we have, for the first time, banished not just corruption but even the appearance of corruption from the highest echelons of power.

¶ 39 For many years, those who felt moved to invest in Sri Lanka found that, to get anything done, they would first have to invest in middlemen. That era is over. I can assure you that no elected representative or appointed official in this Government will seek bribes or favours in return for doing or not doing their jobs. However, in the very unlikely event that anyone among us does bend or break the law, I can promise that whoever is responsible will be investigated and prosecuted to the full extent of the law. This Government will never, ever, tolerate corruption among its ranks. From here on, those who attempt to receive bribes should be afraid—one should not be afraid of not paying the bribe.

¶ 40 Our Judiciary has never been more free or independent than now. Our police force has never been more empowered or independent than now. They will enforce the law without fear or favour. However, many who have left Sri Lanka and live overseas know that the elimination of corruption is about more than just enforcing the law. It is about modernizing the way the Government functions—making the State machinery operate more efficiently and more transparently. This will address the root causes of corruption by making it harder to take bribes and less attractive to pay them.

¶ 41 Never has Sri Lanka had a chance like this to catch up with the modern world. I see a chance for a united Sri Lanka—for a clean Sri Lanka, for a prosperous Sri Lanka—to fulfil everyone’s expectations.

¶ 42 To the Sri Lankan expatriates, I would also make an appeal. Those with Sri Lankan roots—whether you were born in Sri Lanka or learned of your motherland from your parents—know that to us, you are all Sri Lankans.

¶ 43 Your country is proud of your success. We understand why you may have lost faith in our motherland. I am grateful for every effort that any of you make, even from afar, to help our country.

¶ 44 We invite you, one and all, to come back and see for yourselves how much Sri Lanka has changed. We invite you to contribute your expertise, your talent, and your perspective to our island nation—whether in the private, public, or non-profit sectors. Join us and work with us to accomplish a level of success that we can only achieve together.

¶ 45 A majority of our citizens voted last year to chart a new course—to unite, to rebuild our country, and to reach the full potential of our people. For the first time in history, all of Sri Lanka—from north to south and east to west—has united behind a common purpose. Religion, race, gender, class, and age no longer divide us. That is one thing I can promise about the people of Sri Lanka: the people will never again be divided against each other. The people will never again be fooled by those who seek to turn us against each other for their own political or personal gain.

¶ 46 Public representatives and officials of our Government share a common objective. Similarly, the thousands of hardworking, dedicated, and patriotic public servants who have joined us to make a difference also have a collective objective. We will never tire; we will never waver; we will not compromise on our principles. We will never, ever, let you down. We will lead by example and raise all Sri Lankans up together. Together, we will all prosper. We will all be proud of each other and of the beautiful, sacred island we call home.

¶ 47 Finally, I want to express my gratitude to the officials of the Ministry of Finance, especially the Secretary to the Treasury, Mahinda Siriwardana, who worked tirelessly for weeks to finalize the Budget. I expect further cooperation from the officials at the Treasury to successfully implement the Budget proposals in time and take forward the Government’s economic programme.

¶ 48 Thank you.

¶ 49 Annexes tabled:

¶ 50 Annexure I — Summary of the Budget Estimates 2025 (Rs. Billion) - Total Revenue and Grants: 2024 Provisional 3,074; 2024 Budget 4,091; 2025 4,990 - Total Revenue: 3,049; 4,031; 4,960 - Tax Revenue: 2,721; 3,705; 4,590 - Income Tax: 911; 1,026; 1,167 - Taxes on Goods and Services: 1,420; 2,201; 2,772 - Taxes on External Trade: 389; 477; 651 - Non-Tax Revenue: 328; 326; 370 - Grants: 26; 60; 30 - Total Expenditure: 5,357; 6,131; 7,190 - Recurrent: 4,700; 5,340; 5,886 - Salaries and Wages: 939; 1,096; 1,230 - Other Goods and Services: 300; 392; 416 - Interest: 2,456; 2,690; 2,950 - Subsidies and Transfers: 1,005; 1,162; 1,290 - Public Investment: 933; 817; 1,315 - Other: (276); (26); (11) - Revenue Surplus (+)/Deficit (-): (1,651); (1,309); (926) - Primary Surplus (+)/Deficit (-): 173; 650; 750 - Budget Surplus (+)/Deficit (-): (2,282); (2,040); (2,200) - Financing: Foreign 495; (3,044); 175 | Domestic 1,788; 5,084; 2,125 - Ratios to GDP (%): Revenue and Grants 11.1; 13.6; 15.1 | Total Expenditure 19.4; 20.4; 21.8 | etc.

¶ 51 Annexure II — Gross Borrowing Requirement 2025 (Provisioning for Accounting Transactions) - Total Receipts other than Government Borrowings: Rs. 5,042 billion - Total Primary Expenditure: Rs. 4,285 billion (Recurrent 2,970; Capital 1,315) - Debt Service Payments: Rs. 4,550 billion (Interest 2,950; Repayments 1,600) - Provision for Advance Accounts: Rs. 7 billion - Adjustments for book/cash value of Government Securities: Rs. 200 billion - Total Gross Borrowing Requirement to be recorded in Government Accounts: Rs. 4,000 billion

¶ 52 Annexure III — Expenditure Proposals 2025 (Selected; Rs. Million) - Salary increase 110,000; SLA legacy debts 20,000; Senior Citizens interest subsidy 15,000; Pension revisions 10,000; New staff recruitments 10,000; Northern roads 5,000; Clean Sri Lanka 5,000; Food security (paddy buffer) 5,000; Rural roads & bridges 4,000; Digital economy 3,000; Public transport modernization 3,000; Strategic location initiative 2,900; Irrigation rehabilitation (Gal Oya, Rajanganaya, Huruluwewa, Minneriya) 2,000; District development 2,000; Grade 5 Scholarship allowance increase 1,000; Vadduvakal bridge 1,000; Housing support to orphaned low-income young married couples 1,000; Maintenance of government housing schemes 1,000; Commercialization of research/innovation 1,000; Initiating Giribawa–Eppawala water supply 1,000; Social security allowance to orphaned children 1,000; Essential foods at concessionary price during New Year 1,000; Railway coach refurbishment/manufacturing 750; National Quality Infrastructure systems 750; Solid waste mechanism in Anuradhapura MC 750; Modernization of primary education 500; Sports culture 500; Certified schools/remand homes/child care institutions 500; Coconut production & Northern coconut triangle 500; Tourism promotion/city branding 500; Rehabilitation process for drug-addicted persons 500; Assistive devices for differently-abled 500; Other field crops production 500; Aswesuma empowerment 500; Chemical manufacturing industrial zone 500; Youth entrepreneurs in agriculture/industry 500; National cultural event for all communities; Transport for child convicts 250; Day care centers for children with Autism 250; Mental health education 250; Underutilized land for investments 250; Kelaniveli railway line from Avissawella onwards 250; Export agriculture promotion 250; Scholarships for high-ranking universities (undergraduate) 200; Services for children with Autism 200; Allowance for low-income vocational trainees 200; Freshwater prawn/non-traditional aquaculture 200; Modernization of regional libraries 200; Preschool teacher allowance 100; Jaffna library improvement 100; ID system for differently-abled 100; Skills development for convicted prisoners 100; Producer cooperative society for youth entrepreneurs 100; Rail transport for agriculture products 100.

¶ 53 Annexure IV — Technical Notes: Taxation - Income Tax (Amendments to the Inland Revenue Act, No. 24 of 2017) - Removal of Statement of Estimated Tax (SET) from Y/A 2025/26. - Instalment calculations to be based on prior year’s income tax payable. - Exemption for payments to non-residents for aircraft, software licences, or related services from the Sri Lanka Air Force. - WHT relief/refund mechanism for individuals with assessable income not exceeding Rs. 1,800,000 (including seniors; seniors may file manual returns from Y/A 2024/25). - Clarify chargeability of income tax on life insurance proceeds/amounts received by policyholders. - Extend Section 46 treatment to transfers to the Government or universities under the Universities Act. - Increase CGT: individuals/partnerships 15%; other entities 30%. - CGIR empowered to waive interest for liabilities up to Y/A 2022/23 if full payment within six months of amendment. - Revise tax residency rules: Golden Paradise Resident visa holders treated non-resident; seafarers on Sri Lanka-flagged vessels deemed resident while so employed, with source rules clarified for non-citizens. - VAT (Amendments to the VAT Act, No. 14 of 2002) - Exempt import of packing materials for locally manufactured pharmaceuticals/ayurvedic medicines when not manufactured domestically, subject to Health/Ayurveda approvals. - Regulations for VAT on digital platform services (registration, charging, collection, returns). - Consequential amendments post-SVAT removal and to facilitate refunds. - Replace SVAT with risk-based refund system; pilot refunds via RAMIS per CGIR order. - Allow deduction of local authority entertainment tax in valuing film exhibition services. - Supplies by/to Port City “Business of Strategic Importance” per Gazette No. 2343/60 effective 01.01.2024. - Write-off VAT arrears of contractors for Tsunami projects as per CGIR records. - Disallow input tax deduction on capital goods where VAT at import is deferred. - Mandate and operationalize POS machine use for VAT-registered persons. - Social Security Contribution Levy (SSCL) - Define transportation of goods/passengers to include international transport services by container terminal operators. - Clarify exemption for specified articles to include wholesale/retail sale thereof. - Exemption for machinery/equipment for electricity generation where agreements with CEB entered into prior to 18 Feb 2025. - Stamp Duty - Increase duty on lease/hire instruments from Rs. 10 to Rs. 20 per Rs. 1,000 (i.e., from 1% to 2%) effective 01.03.2025. - Betting and Gaming Levy - Increase Gross Collection Levy to 18%. - Increase Casino Entrance Levy from USD 50 to USD 100. - Tax Appeals Commission Act - Increase fee to state a case to Court of Appeal to Rs. 10,000; appeal fee to Rs. 15,000. - Mandate transfer of bank guarantees to CGIR irrespective of further appeals. - Require 25% cash deposit of disputed amount (tax/penalty/interest) to appeal to TAC. - Require completion/decision of administrative review before TAC appeal. - Provide for mediated settlements under Commission supervision. - Disallow new evidence/issues at TAC not raised during assessment/review. - Align legal advisers’ panel term with Commission; allow re-appointment. - Increase Commission members’ term from 3 to 5 years.

¶ 54 Annexure V — Government Sector Employees’ Salary Revision 2025 - Basic salary revisions effective 01.04.2025: minimum monthly basic salary increased by Rs. 15,750. - Public sector: 24,250 → 40,000 - Universities: 27,025 → 42,775 - Other SOEs: 24,750 → 40,500 - Annual increments: minimum Rs. 250 → Rs. 450 (up 80%) from 01.04.2025; all increments adjusted proportionally. - Cancellation of PA Circulars from 01.04.2025: - PA 09/2019 (monthly interim allowance Rs. 2,500) - PA 03/2022 (monthly allowance Rs. 5,000) - SOEs/Universities salary revisions on same basis from 01.04.2025. - Allowances/Overtime: - Percentage-based monthly allowances to be revised not exceeding the net salary increase; specified revised rates for public sector and universities effective 01.04.2025. Other percentage-based allowances to continue on basic salary as at 31.03.2025 until Treasury approval of revised rates. - University backlog allowance (20% since 2016) terminated from 01.04.2025. - Extra Duty Allowance for medical doctors: hourly rate revised from 1/80 to 1/120 of monthly basic salary from 01.04.2025. - OT for nurses, paramedical, allied staff: hourly rate revised from 1/160 to 1/200 of monthly basic salary from 01.04.2025. - OT hourly rate calculation to use basic salary under 2025 structure; where institutions deviated from 1/240 pending Treasury approval, OT to be paid based on basic salary as at 31.03.2025. - Day’s pay/holiday pay revised from 1/20 to 1/30 of monthly basic salary from 01.04.2025. - Minimum gross salary examples per month: - Public sector: total gross 49,550 → 57,800; net increase 8,250. - Universities: 67,391 → 75,644; net increase 8,253. - SOEs: 47,550 → 58,300; net increase 10,750. - Payment procedure: - Net salary increase equals difference between gross salary as at 31.03.2025 (excluding increments earned 01.01.2025–31.03.2025) and basic salary under 2025 structure (excluding increments earned 01.01.2025–31.03.2025). - Staggered payments from April 2025: - From April 2025: Rs. 5,000 + 30% of balance over Rs. 5,000. - From January 2026: Rs. 5,000 + 65% of balance over Rs. 5,000. - From January 2027: full 100% of net salary increase.