Sri Lanka expects a 5 per cent growth in 2025 — by improving productivity, boosting exports and attracting foreign investments — President Anura Kumara Dissanayake said on Monday, presenting his maiden Budget that signalled his government’s firm adherence to an ongoing International Monetary Fund (IMF) programme.
Growth will be facilitated by a strong export sector said Mr. Dissanayake, who is also the Finance Minister. “We expect exports of goods and services to reach an all-time high of close to $19 billion in 2025.”
Outlining key economic indicators reflecting relative fiscal stability over the last two years, after Sri Lanka’s unprecedented default in 2022, Mr. Dissanayake said Foreign currency reserves stood at $ 6.1 billion in December 2024, “surpassing predictions”. Additionally, despite concerns over currency depreciation, the Sri Lankan Rupee has strengthened to nearly LKR 300 (₹ 88.17) per US dollar, he pointed out.
However, for most Sri Lankans the crisis is far from over. Families are struggling to cope, even as they squeeze their household budgets to meet the most essential expenses, including food, education, health, transport, and utility bills.
Acknowledging the enduring impact of the financial meltdown, President Dissanayake highlighted high cost of living and a fall in real wages, especially after inflation soared to 70 % in 2022. “Although inflation has since declined, price levels of many goods and services remain elevated, and income growth has not kept pace accordingly, thereby reducing living standards of the people,” he said, unveiling the Budget that outlined increase in minimum wages in private sector and public sector salaries. Growth for the sake of growth has little value to society unless it is a means to uplifting the lives of all members of society, Mr. Dissanayke said, citing income disparity and geographic disparity in incomes.
Terming the Budget “historic for laying the foundation for “economic transformation”, Mr. Dissanayake said: “One of the challenges we faced at the outset was dispelling the wrong picture of us created by the myths and malicious political propaganda against our economic policy and vision.”
“Safe and sound”
Commenting on the Budget, noted economist and former Central Bank Governor Indrajit Coomaraswamy called it “safe and sound”. The President “deserves a great deal of credit” for maintaining fiscal discipline despite the ideological orientation of his [leftist] party, he noted. “The President has demonstrated that he is a safe pair of hands as far as the economy is concerned,” he told The Hindu, adding that the 5 per cent growth will be crucial for the reversal for sharp increase in poverty in the last few years. Sri Lanka’s poverty rate rose to 25.9 in 2023, the World Bank estimated.
Observing that the Budget was “pragmatic and prudent”, Mr. Coomaraswamy said President Dissanayake had allocated a “fair amount” for social welfare, especially education, health, without undermining the IMF-prescribed macro-fiscal framework. “The welfare payments are well designed, well targeted.”
While several economists hailed the “fiscal discipline” envisaged in the Budget, activists working with poor families said it failed to offer relief from the crushing austerity measures that came with the IMF programme. The Budget reflected the constraints placed by the IMF and did not deviate from previous austerity budgets seen since the economic crisis, the Feminist Collective for Economic Justice contended. “Half of the expenditure allocated is for debt servicing and the amount allocated for public investment is negligible,” it noted, however welcoming the government’s commitment to education and health.
“While the budget speech indicated an increase in Aswesuma [welfare benefit], it is still within the minimum 0.6 % of GDP parameter set by the IMF, which has been repeatedly highlighted as inadequate,” the Collective said. “The Government should immediately take steps to renegotiate the IMF agreement if it is serious about bringing Sri Lankans out of the pain caused by the economic crisis,” it said.
(Meera Srinivasan is The Hindu Correspondent in Colombo)