SL’s Rs. 2.4 trillion fiscal deficit and the need for ‘incremental, transformative adjustments’

By Ifham Nizam

Sri Lanka has long grappled with economic instability and the Rs 2.4 trillion fiscal deficit remains a daunting challenge for the newly elected National Peoples’ Power (NPP) government, Dr. Rohan Pethiyagoda, a taxonomist and a former senior state official said. Among other things, he is a major contributor to biodiversity research in Sri Lanka.

‘Despite promises of change, bridging this gap requires more than just increased taxation or large-scale reforms. Dr. Pethiyagoda, told The Island Financial Review. He said the way forward is through incremental but transformative adjustments that prioritize efficiency, accountability and governance reform.

Pethiyagoda added: ‘One of the most pressing issues facing the new government is the staggering deficit that no amount of taxation can cover. Even a doubling of taxes will not be sufficient to resolve this economic challenge. Instead, adopting a more conservative approach to economic management—a “conservative batting style”—where efficiency and cost-cutting take precedence over flashy reforms or quick fixes is appropriate.

‘This approach calls for a fundamental shift in how the government operates. It begins by reducing wasteful expenditures, streamlining public services and improving institutional efficiency. References could be made to the success of past efforts to meet government targets in areas like public services, which provide a roadmap for future reforms.

‘To tackle the deficit and improve public service delivery, the government needs to set clear and measurable goals for each institution. The government has already succeeded in meeting targets, such as issuing same-day (4-hour) passports, NICs, driving licenses and EPF releases. These successes demonstrate that, with the right focus, government institutions can be made to function with greater efficiency.

‘Other potential areas for reform include reducing waiting time for essential documents, such as birth, death and marriage certificates, to 30 minutes. Additionally, regulatory institutions should be held accountable for issuing permits, licences and registrations within strict timeframes. The government could publicly advertise these mandatory response times, making the process transparent and creating consequences for institutions or heads that fail to meet these goals.

‘The strategy of improving public services extends to everyday interactions between citizens and the state. Reducing queuing times in hospitals, post offices and other public facilities is another straightforward yet impactful change. By increasing the speed and efficiency of these services, the government can drastically improve the daily lives of citizens, boosting public trust and satisfaction.

‘A critical element in building a more efficient society is improving public discipline. This does not only apply to government institutions but to society at large. Public behavior on the roads and in service queues is a reflection of the country’s broader efficiency issues. Addressing simple matters, like better driving practices and the formation of orderly lines in public spaces, would contribute to an overall culture of discipline and respect for rules.

‘Small improvements in how people interact with government services and each other can set the tone for broader societal changes. My argument is that these incremental improvements in public discipline will, over time, create a more functional and efficient society.

‘It’s clear that Sri Lanka cannot solve its economic problems overnight, but by focusing on small, tangible improvements, the government can create a momentum for lasting change. Reducing public holidays, improving the speed of essential services and holding institutions accountable are the building blocks of a more efficient, transparent, and disciplined society.

‘Do these things, and the rest will follow. These incremental changes might seem minor, but they will make a significant difference over time, helping Sri Lanka move towards economic recovery and societal improvement.

‘The path to reform is not through sweeping changes or aggressive policies, but through consistent, small steps that prioritize efficiency, discipline, and accountability. By focusing on these goals, the government can begin to close the fiscal gap and build a brighter future for Sri Lanka.’