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Despite 20% revenue boost, Sri Lanka’s soaring expenditure and debt cast shadow on fiscal gains

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The health sector has been allocated Rs. 604 billion in Budget 2025, , accounting for 1.5% of GDP. Photo Credit: hsep.lk

Sri Lanka’s fiscal performance in the first five months of 2025 has shown signs of improvement, with the overall budget deficit narrowing and a reduction in net domestic financing, according to the latest Central Bank data.

From January to May 2025, the government’s budget deficit stood at Rs. 236.6 billion, a notable decline from Rs. 366.8 billion recorded in the same period last year.

This improvement was supported by an increase in revenue and grants, which rose to Rs. 1,942.4 billion, up from Rs. 1,619.2 billion in 2024- recording an increase of 20% in revenue.

However, expenditure also grew, reaching Rs. 2,179.0 billion, reflecting continued public spending pressures.

A key positive development was the reduction in net domestic financing, which fell to Rs. 298.6 billion compared to Rs. 394.4 billion in 2024.

This suggests that the government is relying less on local borrowing to bridge its fiscal gap, a move that could ease pressure on interest rates and private-sector credit in the long run.

On the external front, foreign financing recorded a net repayment of Rs. 62.0 billion, higher than the Rs. 27.6 billion repaid in the same period last year. This aligns with Sri Lanka’s ongoing efforts to manage its external debt obligations amid economic recovery.

Investor confidence appeared steady, with Treasury bill and bond auctions seeing oversubscription rates of 1.8x and 1.6x, respectively. Foreign holdings of Sri Lankan government securities also increased by 3% week-on-week, signaling cautious optimism among international investors.

Beyond fiscal indicators, the economy showed mixed signals:

– Tea production rose due to favorable weather, while rubber output declined.

– Manufacturing and services sectors expanded in June, per PMI data.

– Oil prices fluctuated amid global economic shifts and Middle East tensions.

– The stock market gained, with the ASPI rising 2.33% in the week ending 18 July.

Delving into the sectoral data, an analyst told The Island Financial Review, “Despite progress, risks remain. The rupee depreciated 3% against the dollar year-to-date, and global oil price volatility could pressure import costs. Moreover, while reduced domestic borrowing is positive, sustaining revenue growth while controlling expenditure will be crucial for long-term fiscal stability. Sri Lanka’s fiscal health appears to be on a gradual recovery path, with a smaller deficit and lower reliance on domestic borrowing. However, maintaining this trajectory will require disciplined reforms and stable economic policies in the months ahead.”

Sri Lanka’s health sector has been allocated Rs. 604 billion in Budget 2025, accounting for 1.5% of GDP (excluding provincial council spending). However, this is five times smaller than the Rs. 2,950 billion allocated for interest payments on public debt, highlighting fiscal constraints on social spending.

By Sanath Nanayakkare ✍️



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“ViYASA” National Business Facilitation Centre (NBFC) to be opened tomorrow (22)

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The National Business Facilitation Centre (NBFC), which is being established under the Presidential Secretariat with the aim of removing administrative and regulatory barriers that exist among government institutions in relation to investment and industry and expediting these processes, will be opened tomorrow (22).

The centre is being established on the President’s initiative with the aim of bringing about a positive transformation in the industrial sector. The centre will provide solutions to issues that arise in dealing with the government machinery when starting and operating a business, while also coordinating with the relevant government institutions to provide the necessary facilities.

The “ViYASA” National Business Facilitation Centre (NBFC) has been established at Building C-80, Hector Kobbekaduwa Mawatha, Colombo 07, and is headed by Senior Additional( Secretary to the President, Seevali Arukgoda.

The centre will be opened under the patronage of Minister of Labour and Deputy Minister of Finance and Planning Dr Anil Jayantha Fernando and Minister of Industry and Entrepreneurship Development Sunil Handunnetti, with the participation of Secretary to the President Dr Nandika Sanath Kumanayake.

The website https://nbfc.presidentsoffice.gov.lk is also scheduled to be officially launched on the occasion.

President’s Media Division)

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Charting a worker-centered AI future: Colombo hosts landmark ITF conference

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The ITF’s first-ever AI-focused global conference and the first of its kind hosted in Sri Lanka

By Sanath Nanayakkare

Artificial intelligence and automation present serious challenges for workers – such as job consequences seen in docks and rail systems – and emphasises that workers cannot simply stop technological progress. By gathering young trade unionists in Sri Lanka, the ITF aims to establish key principles for engaging with technology, ensuring workers have a strong voice at the bargaining table, and encouraging constructive social dialogue with corporations and governments.

These compelling words from ITF General Secretary Stephen Cotton underscored the urgent reality facing modern labor as rapid technological advancements sweep across global industries.

Confronting this shifting landscape head-on, the International Transport Workers’ Federation (ITF), in partnership with the National Union of Seafarers of Sri Lanka (NUSS), convened a ground-breaking conference on artificial intelligence in Colombo from September 15–17.

As the ITF’s first-ever AI-focused global conference and the first of its kind hosted in Sri Lanka, the landmark event marked a critical milestone in balancing technological innovation with worker-centered safeguards.

Representing over 16.6 million transport workers worldwide, the ITF designed the gathering to tackle the multifaceted impacts of AI on safety, operations, workforce development, and governance. Rather than resisting progress, the conference focused on proactive engagement, establishing guiding principles to protect workers’ rights and privacy both at sea and on land.

Key discussions centred on sharing best practices for upskilling and reskilling transport personnel, ensuring that human oversight remains central to AI-driven logistics, routing, and maintenance.

Reflecting on the historic nature of the event, Boa Athu, CEO of National Union of Seafarers Asia Pacific, noted that the conference represented a monumental moment as AI emerges as a permanent fixture of contemporary life.

Highlighting NUSS’s pride in hosting the event in Colombo, Athu emphasised that AI offers transformative potential when guided by strong social dialogue, equitable access to training, and robust governance safeguards.

Ultimately, the Colombo conference demonstrated that the future of transport must be shaped by those who keep the world moving. By uniting international labour leaders, affiliates, port operators, and regulators, the event laid a vital foundation for inclusive policy frameworks that champion fair labour standards, securing a powerful voice for workers in an automated tomorrow.

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Bridging the digital divide: Sri Lanka’s airport licence challenge

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As tourism surges from digitally advanced markets like India, modern independent travelers arriving at BIA find themselves caught in a mismatch between cloudstored credentials and local paper-based transport protocols.

By Sanath Nanayakkare

As Sri Lanka experiences a surge in visitors from its largest tourist market, India, a modern administrative hurdle has emerged at Bandaranaike International Airport (BIA).

While nations like India and Pakistan have successfully transitioned to fully digital driving licences and cashless ecosystems, Sri Lanka’s Department of Motor Traffic counter still requires a physical card to issue temporary local permits, The Island Financial Review learns.

This mismatch creates significant friction for independent travelers who rely entirely on smartphones and cloud-stored credentials. Tourists turned away at the airport – and sometimes redirected to the Werahera office in vain – find themselves unable to legally rent and drive vehicles. Consequently, this policy gap harms local car rental operators, causes tourist frustration, and deprives the government of valuable permit revenue.

The situation highlights a distinct irony: Sri Lankan motorists easily travel abroad using International Driving Permits that are readily accepted in India and Pakistan, yet local infrastructure cannot reciprocate due to outdated verification systems.

Recognizing the problem, Department of Motor Traffic officials have noted that upgrades and new equipment are currently in the works to integrate foreign digital platforms.

For a nation aggressively pursuing a national digitalisation drive, rapidly modernising these transport protocols is essential to keeping pace with global travelers and unlocking the full potential of its tourism economy.

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