Sri Lanka's 2025 Budget: Key Allocations, Economic Recovery Strategies, and Sectoral Initiatives

Sri Lanka's President Anura Kumara Dissanayake has presented the nation's 2025 Budget, outlining strategic measures to bolster economic recovery and sustainable growth following the 2022 financial crisis.

Economic Context and Macroeconomic Targets

• Post-Crisis Recovery: The 2022 crisis, which saw inflation peak at 70%, was addressed through comprehensive IMF reforms. Debt restructuring was concluded in December 2024, with a $570 million payment made.

• 2025 Projections:

  • GDP Growth: Targeted at 5%.
  • Reserves: Projected at $6.1 billion by December 2024.
  • Exchange Rate: Strengthened to LKR 300/USD from previous lows.
  • Exports Target: $19 billion (goods/services), leveraging RCEP and ASEAN ties.
  • Primary Surplus: Aiming for 2.3% of GDP.
  • Poverty Rate: Efforts to reverse the 2023 rate of 25.9% post-default.

Key Fiscal Allocations (Rs. Billion)

• Total Revenue: 4,990
• Total Expenditure: 7,190
• Deficit: 2,200
• Public Sector Salaries: 1,230 (with a Rs. 110 billion increase)
• Interest Payments: 2,950
• Aswesuma Welfare: 232.5
• Health: 604
• Education: 135 (Universities)
• Energy: 20,000 (SriLankan Airlines debt)

Sector-Specific Initiatives

1. Export & Investment

   • National Export Plan (2025–29): Focus on MSMEs, FTAs (RCEP), and Digital Single Window.
   • Rs. 750 million for National Quality Infrastructure (testing labs).
   • Rs. 500 million for Veyangoda ICD (logistics hub).

2. Tourism

   • Rs. 500 million for destination branding; Bandaranaike Airport Terminal 2 (Japanese-funded).

3. Agriculture & Food Security

   • Rs. 35 billion fertilizer subsidy; Rs. 5 billion paddy buffer stock.
   • Dairy: Rs. 2.5 billion to boost production (45% to 2030 target).

4. Digital Economy

   • Target: $15 billion (12% of GDP) by 2030; Rs. 3 billion for digital ID, cybersecurity, and AI/FinTech.

5. Infrastructure

   • Rs. 5 billion for Northern Province roads; Rs. 1 billion for Vadduvakal Bridge (Mullaitivu).
   • Ports: Rs. 1 billion for advanced scanning systems; Colombo congestion relief.

Social Welfare & Equity

• Aswesuma: Monthly grants increased (Extreme Poor: Rs. 17,500; Poor: Rs. 10,000).
• Allowances: Elderly (+Rs. 2,000), disabled/kidney patients (+Rs. 2,500).
• Education:
  • Grade 5 Scholarship: Rs. 1,500/month (+100%).
  • University Mahapola: Rs. 7,500/month (+50%).
  • Rs. 1 billion for neurodevelopmental disability centers (e.g., Lady Ridgeway Hospital).

Public Sector & Reforms

• Salary Hike: Minimum basic salary increased to Rs. 40,000 (from Rs. 24,250), phased through 2027.
• Pension Revisions: Rs. 10 billion allocated for pre-2018 retirees (phased till 2027).
• Anti-Corruption: Proceeds of Crime Bill, CIABOC strengthening.

Revenue & Tax Measures

• Motor Vehicle Imports: Liberalized (February 2025) to boost revenue.
• VAT: Expanded to digital services; removed on fresh milk/yoghurt.
• Betting Levy: Increased to 18%; Casino entry fee raised to Rs. 100,000 (from Rs. 50,000).

Regional Development

• Eastern Province: Indian-funded multi-sectoral grants (health, tourism, agriculture).
• Malayagam Community: Rs. 7.58 billion for housing, youth training, schools.
• Water Supply: Rs. 20 billion to complete stalled projects (Gampaha, Attanagalle).

Legal & Governance Reforms

• State-Owned Enterprises: Holding company model for governance.
• PPP Law: Encourage private partnerships in eco-parks, ports.
• AML/CFT: Amendments to align with global standards.

Additional Measures

• Digital Transformation: Rs. 3 billion allocated to enhance digital infrastructure, including the creation of a Digital Economic Authority to oversee the transition to a cashless economy.
• SME Support: Establishment of a State Development Bank to provide financial assistance to Small and Medium Enterprises (SMEs).
• Tourism Enhancement: Rs. 500 million allocated for the development and marketing of key historical sites such as Anuradhapura and Yapahuwa, along with the introduction of a digital ticketing system for these attractions.