By Dr. Gayan Gunewardana BSc, MBA, PhD, CIMA/ ACMA/CGMA, FRM, AIB
Sri Lanka's Budget 2025 sets an ambitious yet pragmatic foundation for economic recovery and sustainable development, presenting a forward-looking framework that balances immediate stabilization with strategic long-term growth. With a planned expenditure of Rs. 7.19 trillion against a projected revenue of Rs. 4.99 trillion, the fiscal policy aims to achieve a primary surplus of 2.3% of GDP while reducing the fiscal deficit to 6.7%. In alignment with the International Monetary Fund (IMF) program, it emphasizes fiscal discipline, enhanced tax governance, and targeted reforms designed to elevate the revenue-to-GDP ratio to 15.1% during 2025. These measures highlight the nation's resolve to address systemic inefficiencies and catalyze growth across key sectors.
Targeted investments are steering the economy toward diversification and inclusivity. In the tourism sector, infrastructure advancements such as the expansion of Bandaranaike International Airport and global marketing campaigns are projected to establish the country as a premier destination for leisure and culture. By focusing on high-value tourism that prioritizes luxury stays, wellness retreats, cultural heritage, and eco-tourism, the nation aims to drive sustainable growth while leveraging public-private partnerships and enhanced air connectivity to attract high-spending visitors.
Meanwhile, the vision for a $15 billion digital economy by 2030 underscores a commitment to innovation and integration. Institutional frameworks like the Apex Digital Economy Authority and investments in innovative technologies within the Port City are central to these efforts. By fostering global competitiveness in trade and financial services, attracting tech-driven firms, and boosting employment opportunities, the digital sector is poised to redefine the country's economic trajectory.
Agricultural modernization receives a transformative boost with Rs. 254 billion earmarked for advanced measures such as drone surveillance and solar-powered fencing to mitigate wildlife-related losses. Enhancing the export value of tea, rubber, and other key commodities ensures competitiveness in global markets, aligning with broader economic priorities.
Renewable energy diversification remains a cornerstone for industrial efficiency and resilience. Future power projects are essential to securing a stable supply, reducing dependency on imports, and meeting growing energy demands. The timely execution of these initiatives strengthens energy security and fosters sustainable growth, while low-cost energy solutions enhance competitiveness and household consumption.
Strategic focus on human capital development and SME empowerment forms the backbone of inclusivity initiatives. Investments in education, healthcare, and skill enhancement are complemented by targeted credit guarantees and export diversification programs aimed at SMEs, which contribute over half of the GDP. By stimulating innovation and enabling global integration, these measures ensure broad-based economic participation.
Structural reforms and digitization play a pivotal role in bridging governance gaps and ensuring long-term resilience. Exchange rate stabilization and favorable monetary policies enhance investor confidence and enable seamless integration into global markets. Debt restructuring efforts supported by the IMF’s $3 billion Extended Fund Facility reduce repayment burdens, redirecting critical resources to essential development areas.
Despite these efforts, the nation must navigate challenges posed by global economic downturns, climate risks, and geopolitical uncertainties. Export diversification, enhanced local production, and robust disaster preparedness are essential to mitigate these risks. Additionally, maintaining foreign exchange reserves, which stand at $6.095 billion as of February 2025, stabilizes the currency, reduces inflation, and safeguards macroeconomic resilience.
Reshaping Sri Lanka's Future: Budget 2025 and Strategic Proposals for Economic Stabilization
emerges as a vital strategy for sustainable development. By fostering productivity, attracting investments, and enhancing export competitiveness, the country can strengthen its global standing.
Simultaneously, the government’s role in addressing the economic and social crises caused by rising poverty is critical. Initiatives such as fostering public-private partnerships, tax incentives, credit facilitation, and welfare programs support inclusive development while reducing socio-economic disparities.
The cooperative model, empowering rural economies and promoting financial inclusion, aligns seamlessly with Sri Lanka’s growth strategy. By fostering community-driven initiatives, cooperatives amplify resilience and support equitable economic progress. Parallelly, liberalizing education reduces public spending, opens avenues for international student revenue, and accelerates global competitiveness.
The Budget 2025 encapsulates resilience and vision, harmonizing fiscal prudence with inclusive growth strategies. By navigating challenges with adaptive measures and fostering innovation, the blueprint sets a transformative path for long-term prosperity and global competitiveness, ensuring Sri Lanka’s future remains dynamic and sustainable. Periodic assessments ensure adaptability, fostering enduring prosperity and stability.
Thanks Dr. Gayan. Well explain on the focus and challenges. Excellent forward thinking
Thanks Dr. Gayan for sharing an impressive review on Sri Lanka’s Budget 2025.