Features

Budget 2021 – Playing Ostrich or Parading in the Emperor’s New Clothes?

Published

5 years ago

2021/01/17

by Anila Dias Bandaranaike, Ph. D.

The national budget is a financial plan, not a policy statement. Specific budget proposals become nonsense, unless they form part of a consistent whole. Unfortunately, Budget 2021 parts did not add up to a consistent whole. Yet, Sri Lanka’s leadership in both public and private domains did not seem to care.

Parliament and Corporate Response to the 2021 Budget

Budget 2021 was presented in parliament on 17 November 2020. Several analysts with knowledge, experience, and integrity reported that this budget 1) provided no numeric estimates of the revenue impact of the budget proposals (e.g. revenue lost or gained under each tax revision or concession); 2) had key estimates differing between the budget speech and the statistical tables by Rs. 50 – 70 billion, (e.g. Rs.1,961 billion vs. 2,019 billion for revenue, Rs. 3,525 billion vs. 3,594 billion for expenditure); and 3) had glaring inconsistencies between the budget proposals and associated numeric targets (highlighted below). However, on 10 December 2020, Budget 2021 was approved by parliament with a two thirds majority.

I have evaluated national budgets at post-budget seminars for over 15 years and been invited by the Parliamentary Committee on Public Finance (COPF), previously and this year, to help them analyse the budget. Never have I felt such despair for the management of this country’s finances.

Yet, observations in public by members of the corporate sector conveyed that they were either nervous of the adverse consequences of a thoughtful opinion or totally self-absorbed. Their observations only referred to tax breaks and concessions given to their own businesses. One panelist even contradicted his own words. He began by saying how happy he was that Budget 2021 gave his sector incentives instead of handouts, but in the next breath, asked the Government for a handout to pay employees in that sector during COVID-19! The newspapers quoted this. Sadly, corporate sector comments were uniformly superficial. Not one made any reference to the bigger picture – that the numbers did not match with statements in the budget speech and that the strategies presented could not deliver what they said they would, given the extremely difficult financial situation Sri Lanka is facing.

A New Government with Sri Lanka at a Crossroads

This was the maiden budget of a strong new government, elected with the people’s blessings, with greater powers under the 20^th Amendment to the Constitution and a two thirds majority in parliament. Budget 2021 was a unique opportunity for a strong, capable government to implement difficult reforms to address Sri Lanka’s priorities. Alas, they lost this opportunity.

Sri Lanka is at a crossroads in a new global reality created by COVID-19. This reality underlines the fragility of global connectivity and uncertainty of Pre-COVID-19 economic activities as we knew them. International and domestic movement of people, goods, and services can no more be taken for granted. Sri Lanka’s priorities must adjust to this new reality.

As I see it, Sri Lanka’s immediate priorities should be to address:

 = a pandemic-related health and welfare crisis; and

 = a looming economic and debt crisis

Sri Lanka’s long-term priorities should be to reverse:

 = People/skills drain of 200-300,000 per year, searching for greener pastures abroad;

 = Environmental drain, with rainforests, sanctuaries, mangroves, coasts destroyed for short-term monetary gains; and

 = Investment drain, with investment below 30% of GDP and declining.

Budget 2021, oblivious to reality, ignored both pandemic and priorities.

Irrelevant Budget

The government’s policy statement, ‘Vistas of Prosperity and Splendour’ is embodied in their 10 key principles. As I see it, those principles can be divided into three categories, People, Environment, and International Relations.

People:

People centric economic development (6) in a technology based society (7) with a productive citizenry and a vibrant human resource (5) in a disciplined, law abiding and values-based society (10) under a new constitution that fulfills the people’s wishes (4) and an administration free from corruption (3), giving priority to national security (1).

Environment:

Development of physical resources (8) with sustainable environmental management (9).

International Relations:

A friendly, non-aligned, foreign policy (2).

The budget speech hit some good buttons, consistent with their vision and Sri Lanka’s current reality —support the rural heartland, agriculture and small entrepreneurs; protect the environment; promote technology and vocational training; raise investment; curtail non-essential imports and expand exports; etc. However, budgetary allocations in the Appropriation Bill told a different story, as follows:

People:

The ministries of Defence (Rs.355bn) and Highways (Rs.330bn) were allocated 26% of total expenditure (Rs. 2,678 bn), while Health (Rs. 220bn), during a COVID-19 crisis, Education and related ministries, including pharmaceuticals, distance learning, technical and vocational skills and education reforms, (Rs.177bn) together, were allocated only 15% in total.

Most people live in rural communities. Yet, 15 ministries responsible for their key needs—agriculture, fisheries and livestock, irrigation and water supply—together only received an allocation of 10% (Rs. 262bn) of the total. The major share of Sri Lanka’s employment and output (GDP) is with her informal sector, not corporates. In Sri Lanka’s labour force, 53% work in the informal sector. They have no social security. 18% work in the public sector and only 29% work in the formal private sector. Yet, significant tax concessions and incentives in the budget prioritised listed or large corporates. The vast majority will continue to pay indirect taxes on their basic consumption, inconsistent with principle 6.

Critical structural reforms to address the mismatch between products of the education system and needs of the labour market, particularly English, mathematical, analytical and technological skills, identified in the policy statement, need funds. Yet, education reforms, vocational training and research and innovation received a paltry Rs.15 bn (0.5% of total expenditure), despite principles 5 and 7.

Critical structural reforms in the wage structure and labour laws to address employee dissatisfaction and reverse the exodus of professional, skilled and unskilled persons from Sri Lanka need funds. Without budgetary allocations for such reforms, brain and skills drain will continue, contrary to principle (5).

Environment:

The entire allocation for the environment (Rs. 9 bn) is below 3% of the Defence or Highways allocations. The environment is facing serious problems due to ill-conceived construction, encroachment, poaching, illicit logging and destruction of national parks, dry zone forest cover, rainforests, mangroves and wetlands. Yala, Wilpattu, Sinharaja, Anawilundawa, Mannar, Moneragala are examples highlighted in mainstream and social media recently. This budget only pays lip service to principles 8 and 9. Soon, we will have nothing to attract tourists in the short term nor for future generations in the long term.

International Relations

: This budget has been unable to build confidence with long-term foreign investors (highlighted below) to raise foreign investment, despite principle 2.

In summary, monetary allocations in Budget 2021 were neither relevant to the government’s vision nor Sri Lanka’s short-term and long-term priorities.

Unrealistic Budget

Budget 2021 estimates and strategies were unrealistic. For example,

1) The Budget’s GDP growth estimates were -1.6% for 2020 and +5.5 for 2021. Official GDP statistics released on 15 December recorded a contraction of -5.3% for the first three quarters of 2020. With the COVID-19 second wave, 2020 GDP will obviously contract by more than -5.3 %, highlighting the unrealistic optimism of GDP estimates.

2) The investment estimate was also optimistic. The official release of 2020 2^nd Quarter GDP contraction of -15.3% was delayed by three months. Loss of confidence among potential local and foreign investors, by the deliberate withholding of official statistics, cannot be overcome by tax breaks and incentives. Two rating agencies, Fitch and Moody’s, downgraded Sri Lanka recently, criticizing economic management. Subsequently, the Citi Group went further, actually stating that the government is “in denial”. Serious long-haul investors will want positive signals from rating agencies. Who will invest here now?

3) The estimates for inflation and private sector credit expansion were inconsistent. The State Minister stated that there will be no IMF bailout, while the budget speech stated that bilateral loans and domestic borrowing would meet the deficit. This conveys that government will borrow from captive sources like state banks, EPF and ETF. Till now, with low private credit demand, interest rates have remained low. The estimated optimistic rise in private sector credit by 14.7% (6% in 2020), together with high govt borrowing and low interest rates cannot all three be reconciled. Alternatively, printing money will raise inflation to well over the 5% estimate.

4) Revenue was overestimated in relation to actual data up to October. With the tax breaks and tax holidays given, from where will this huge revenue appear in this current climate?

5) Budget 2021 made no effort to trim public sector expenditure, contradicting the policy statement. The deficit will likely be higher than estimated due to higher recurrent expenditure and debt repayments, unless investment is cut below budget, as has been done in the past.

6) The unrealistic economic strategies proposed for import substitution and export and investment promotion, respectively, were tried and failed in the Bandaranaike Government of ’70-77 and the Jayawardena Government of ’77-’90. Can old rhetoric promoting failed ideas succeed 30-50 years later?

In summary, Budget 2021 numbers were both unrealistic and inconsistent with Sri Lanka’s current economic and financial situation.

In conclusion, this budget is a farce set in an alternate reality. I cannot understand whether those who prepared it and who supported it are entirely devoid of thinking capacity or callously devoid of any regard for our people and our environment. Are they playing ostrich to fool themselves or making the emperor parade in his new clothes to fool himself and others? Either way, during 2021 and beyond, Sri Lanka will remain a country of vast potential and lost opportunities.

(The author is a former Assistant Governor and Director of Statistics of the Central Bank of Sri Lanka)

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Features

The Easter investigation must not become ethno-religious politics

Published

10 hours ago

2026/04/7

Sahan Weerasooriya

Zahran and other bombers

Representatives of almost all the main opposition parties were in attendance at the recent book launch by Pivithuru Hela Urumaya leader Udaya Gammanpila. The book written by the PHU leader was his analysis of the Easter bombing of April 2019 that led to the mass killing of 279 persons, caused injuries to more than 500 others and caused panic and shock in the entire country. The Easter bombing was inexplicable for a number of reasons. First, it was perpetrated by suicide bombers who were Sri Lankan Muslims, a community not known for this practice. They targeted Christian churches in particular, which led to the largest number of casualties. The bombing of Sri Lankan Christian churches by Sri Lankan Muslims was also inexplicable in a country that had no history of any serious violence between the two religions.

There were two further inexplicable features of the bombing. The six suicide bombings took place almost simultaneously in different parts of the country. The logistical complexity of this operation exceeded any previously seen in Sri Lanka. Even during the three decade long civil war that pitted the Sri Lankan military against the LTTE, which had earned international notoriety for suicide attacks, Sri Lanka had rarely witnessed such a synchronised operation. The country’s former Attorney General, Dappula de Livera, who investigated the bombing at the time it took place, later stated, upon retirement, that there was a “grand conspiracy” behind the bombings. That phrase has remained central to public debate because it suggested that the visible perpetrators may not have been the only planners behind the attack.

The other inexplicable factor was that intelligence services based in India repeatedly warned their Sri Lankan counterparts that the bombings would take place and even gave specific targets. Later investigations confirmed that warnings were transmitted days before the attacks and repeated again shortly before the explosions, yet they were not acted upon. It was these several inexplicable factors that gave rise to the surmise of a mastermind behind the students and religious fanatics led by the extremist preacher Zahran Hashim from the east of the country, who also blew himself up in the attacks. Even at the time of the bombing there was doubt that such a complex and synchronised operation could have been planned and executed by the motley band who comprised the suicide bombers.

Determined Attempt

The book by PHU leader Gammanpila is a determined attempt to make explicable the inexplicable by marshalling logic and evidence that this complex and synchronised operation was planned and executed by Zahran himself. This is a possible line of argumentation in a democratic society. Competing interpretations of public tragedies are part of political discourse. However, the timing of the intervention makes it politically more significant. The launch of the PHU leader’s book comes at a critical time when the protracted investigation into the Easter bombing appears to be moving forward under the present government.

The performance of the three previous governments at investigating the bombing was desultory at best. The Supreme Court held former President Maithripala Sirisena and several senior officials responsible for failing to act on prior intelligence and ordered compensation to victims. This judicial finding gave legal recognition to what victims had long maintained, that there was a grave dereliction of duty at the highest levels of the state. In recent weeks the investigation has taken a dramatic turn with the arrest and court production of former State Intelligence Service chief Suresh Sallay on allegations linked directly to the attacks. Whether these allegations are ultimately proven or disproven, they indicate that the present phase of the investigation is moving beyond negligence into possible complicity.

This is why the present moment requires political sobriety. There is a danger that the line of political division regarding the investigation into the Easter bombing can take on an ethnic complexion. The insistence that the suicide bombers alone were the planners and executors of the dastardly crime makes the focus invariably one of Muslim extremism, as the suicide bombers were all Muslims. This may unintentionally narrow public attention away from the unanswered questions regarding intelligence failures, possible political manipulation, and the allegations of a broader conspiracy that remain under active investigation. The minority political parties representing ethnic and religious minorities appear to have realised this danger. Their absence from the book launch was politically significant. It suggests an unwillingness to be drawn into a narrative that could once again stigmatise an entire community for the crimes of a handful of extremists and their possible handlers.

Another Tragedy

It would be another tragedy comparable in political consequence to the havoc wreaked by the Easter bombing if moderate mainstream political parties, such as the SJB to which the Leader of the Opposition belongs, were to subscribe to positions merely to score political points against the present government. They need to guard against the promotion of anti-minority sentiment and the fuelling of majority prejudice against ethnic and religious minorities. Indeed, opposition leader Sajith Premadasa in his Easter message said that justice for the victims of the 2019 Sri Lanka Easter Sunday attacks remains a fundamental responsibility of the state and noted that seven years on, both past and present governments have failed to deliver accountability. He added that building a society grounded in trust and peace, uniting all ethnicities, religions and communities, is vital to ensure such tragedies do not occur again.

Sri Lanka’s post war history offers too many examples of how unresolved security crises become vehicles for majoritarian mobilisation. The Easter tragedy itself was followed by waves of anti-Muslim suspicion and violence in some parts of the country. Responsible political leadership should seek to prevent any return to that atmosphere. There are many other legitimate issues on which the moderate and mainstream opposition parties can take the government to task. These include the lack of decisive action against government members accused of corruption, the passing of the entire burden of rising fuel prices on consumers instead of the government sharing the burden, and the failure to hold provincial council elections within the promised timeframe. These are issues that touch the daily lives of citizens and the health of democratic governance. They offer the opposition ample ground on which to build credibility as a government in waiting.

The search for truth and justice over the Easter bombing needs to continue until all those responsible are identified, whether they were direct perpetrators, negligent officials, or political actors who may have exploited the tragedy. This is what the victim families want and the country needs. But this search must not be turned into a partisan and religiously divisive matter such as by claiming that there are more potential suicide bombers lurking in the country who had been followers of Zaharan. If it is, Sri Lanka risks replacing one national tragedy with another. coming together to discredit the ongoing investigations into the Easter bombing of 2019 is an unacceptable use of ethno-religious nationalism to politically challenge the government. The opposition needs to find legitimate issues on which to challenge the government if they are to gain the respect and support of the general public and not their opprobrium.

by Jehan Perera

Features

China’s new duty-free regime for Africa: Implications for Global Trade and Sri Lanka

Published

10 hours ago

2026/04/7

Sahan Weerasooriya

Image courtesy The Global Times

* The new duty-free regime for Africa, announced by Chinese President Xi Jinping in February, is the most generous unilateral nonreciprocal trade concession offered by any country to developing countries since the beginning of the modern rule based international trading system.

* Yet, it is a clear violation of the cornerstone of the multilateral trade law, the Most-Favoured-Nation (MFN) principle.

* Hence, its implications on developing countries, without duty-free access to China, will be extremely negative. Sri Lanka is one of the few developing countries without duty-free access to China.

On 14 February, 2026, Chinese President Xi Jinping announced that China will grant zero-tariff treatment to 53 African nations, effective 01 May, 2026. Under this new unilateral policy initiative, China would eliminate all import tariffs on all goods imported from all the countries in Africa, except Eswatini. China already enforces a zero-tariff policy for 33 Least Developed Countries (LDCs) in Africa. Now this policy would be extended to non LDCs as well. This policy initiative clearly aims at reducing the continuously expanding trade deficit between China and Africa. In 2024, China’s trade surplus against Africa was recorded at US $ 61 billion.

This trade initiative, a precious gift amidst ongoing global trade tensions, is the most generous unilateral nonreciprocal trade concession given by any country to developing countries, since the beginning of the modern rule based international trading system.

Though this landmark announcement has far-reaching implications on global trade, as much as President Trump’s “Liberation Day” tariffs, it was almost overlooked by the global media.

Implications for Global Trade

This Chinese policy initiative, though very generous, is a clear violation of the Most-Favoured-Nation (MFN) principle and the “Enabling Clause” of the International Trade Law. The MFN principle is the cornerstone of the multilateral trading system under the World Trade Organisation (WTO) and is enshrined in Article I of the General Agreement on Tariffs and Trade (GATT). It mandates that any trade advantage, privilege, or immunity granted by a WTO member to any country must be extended immediately and unconditionally to all other WTO members. Though, the GATT “Enabling Clause” allows developed nations to offer non-reciprocal preferential treatment (lower tariffs) to developing countries without extending them to all WTO members, this has to be done in a non-discriminatory manner. By extending tariff concessions only to developing countries in Africa, China has also breached this requirement.

This deliberate violation of the MFN principle by China occurs less than 12 months after the announcement of “Liberation Day” tariffs by President Trump, which breached Article I (MFN) and Article II (bound rates) of the GATT. However, it is important to underline that the objectives of the actions by the two Presidents are poles apart; the US objective was to limit imports from all its trading partners, and China’s objective is to increase imports from African countries.

Though the importance of the MFN principle of the WTO law had eroded over the years due to the proliferation of preferential trade agreements and unilateral preferential arrangements, the WTO members almost always obtained WTO waivers, whenever they breached the MFN principle. Now the leaders of the main trading powers have decided to violate the core principles of the multilateral trading system so brazenly, the impact of their decisions on the international trading system will be irrevocable.

Implications for Sri Lanka

China’s unilateral decision to provide zero-tariff treatment to African countries will have a strong adverse impact on Sri Lanka. Currently, all Asian countries, other than India and Sri Lanka, have duty-free access, for most of their exports, into the Chinese market through bilateral or regional trade agreements, or the LDC preferences. Though Sri Lanka, India and China are members of the Asia Pacific Trade Agreement (APTA), preferential margins extended by China under APTA to India and Sri Lanka are limited.

The value of China’s imports from Sri Lanka had declined from US$ 650 million in 2021 to US$ 433 million by 2025. However, China’s exports to Sri Lanka increased significantly during the period, from US$ 5,252 million to US$ 5,753 by 2025. This has resulted in a trade deficit of US$ 5,320 million. Sri Lanka’s exports to China may decline further from next month when African nations with duty-free access start to expand their market share.

Let me illustrate the challenges Sri Lanka will face in the Chinese market with one example. Tea (HS0902) is Sri Lanka’s third largest export to China, after garments and gems. Sri Lanka is the largest exporter of tea to China, followed by India, Kenya and Viet Nam. During the last five years the value of China’s imports of tea from Sri Lanka had declined significantly, from US$76 million in 2021 to US$ 57 million by 2025. Meanwhile, imports from our main competitors had increased substantially. Most importantly, imports from Kenya increased from US$ 7.9 million in 2021 to US$ 15 million in 2025. For tea, the existing tariff in China for Sri Lanka is 7.5% and for Kenya is 15%. From next month the tariff for Kenya will be reduced to 0%. What will be its impact on Sri Lanka exports? That was perhaps explained by a former Ambassador to Africa, when he urged Sri Lankan exporters to “leverage duty free access from Kenya” to expand their exports to China!

(The writer is a retired public servant and a former Chairman of WTO Committee on Trade and Development. He can be reached at senadhiragomi@gmail.com)

by Gomi Senadhira

Features

Daughter in the spotlight …

Published

10 hours ago

2026/04/7

Sahan Weerasooriya

Jeevarani Kurukulasuriya was a famous actress and her name still rings a bell with many. And now in the spotlight is her daughter Senani Wijesena – not as an actress but as a singer – and she has been singing, since the age of five!

The plus factor is that Senani, now based in Australia, is also a songwriter, plays keyboards and piano, dancer, and has filmed and edited some of her own music videos.

Says Senani: “I write the lyrics, melody and music and work with professional musicians who do the needful on my creations.”

Her latest album, ‘Music of the Mirror’, is made up of 16 songs, and her first Sinhala song, called ‘Nidahase’, is scheduled for release this month (April) in Colombo, along with a music video.

‘Nidahase’,

says Senani, is a song about Freedom … of life, movement, love and spirit. Freedom to be your authentic self, express yourself freely and Freedom from any restrictions.

In fact, ‘Nidahase’ is the Sinhala translated version of her English song ‘Free’ which made Senani a celebrity as the song was nominated for a Hollywood Music in Media Award in the RnB /Soul category and reached the Top 20 on the UK Music weekly dance charts, as well as No. 1 on the Yes Home grown Top 15, on Yes FM, for six weeks straight.

Senani went on to say that ‘Nidahase’ has been remixed to include a Sri Lankan touch, using Kandyan drums and the Thammattama drum, with extra music production by local music producer Dilshan L. Silva, and Australia-based Emmy Award winning Producer and Engineer Sean Carey … with Senani also in the scene.

The song was written (lyrics and melody) and produced by Senani and it features Australian musicians, while the music video was produced by Sri Lanka’s Sandesh Bandara and filmed in Sri Lanka.

First Sinhala song scheduled for release this month … in Colombo

Senani’s music is mostly Soul, Funk and RNB – also Fusion, using ethnic sounds such as the tabla, sitar, and sarod – as well as Jazz influenced.

“I also have Alternative Music songs with a rock edge, such as ‘New Day’, and upcoming releases ‘Fly High’ and ‘Whisper’“, says Senani, adding that she has also recorded in other languages, such as Hindi and Spanish.

“As much of my fan base are Sri Lankans, who have asked me to release a song in the Sinhala language, I decided to create and release ‘Nidahase’ and I plan to release other original Sinhala songs in the future.

Senani has a band in Australia and has appeared at festivals in Australia, on radio and TV in Australia, and Sri Lanka.

She trained as a vocalist, through Sydney-based Singing Schools, as well as private tuition, and she has 5th Grade piano music qualifications.

And this makes interesting reading:

“I graduated from the University of Newcastle in Australia with a Bachelor of Medicine and I work part time as a doctor (GP) and an Integrative Medicine practitioner, with a focus on nutrition, and spend the rest of the time dedicated to my music career.”

Senani hails from an illustrious family. In addition to her mum, Jeevarani Kurukulasuriya, who made over 40 films, including starring in the first colour movie ‘Ranmuthu Duwa’, her dad is Dr Lanka Wijesena (retired GP) and she has two sisters – all musical; one is a doctor, while the other is a dietitian/ psychotherapist.