Saturday 8th November, 2025

What was mainly reflected in Budget 2026, presented by President Anura Kumara Dissanayake, in his capacity as the Minister of Finance, yesterday, in Parliament, was his government’s commitment to keeping the IMF bailout on track. The President spelt out how his government intended to boost investment and carry out reforms essential for economic growth. Salary/wage hikes have been proposed but the government would surely have gone out of its way to do much more for the state and estate workers if not for the economic straitjacket the IMF has put it in. It has had to act with some restraint.

President Dissanayake has set for his government an ambitious goal of achieving a 7% economic growth, in the next few years, driven by investment and productivity-led expansion. This is no doubt a tall order, given the growth forecasts.

The World Bank has projected that the economy will grow by 4.6% in the current year and slow to 3.5% in 2026. It is hoped that the goal set by the government will be attainable; the country will have to resume foreign debt repayment in earnest in 2028, and that task requires a high growth rate, which should be above 6%.

The government’s debt sustainability targets include increasing state revenue as a percentage of GDP while reducing the debt-to-GDP ratio significantly. The government has proposed to increase state revenue to 15.3% of GDP and lower the debt-to-GDP ratio to 87% in 2030.

The projected budget deficit of 5.2% can be considered something positive that signals fiscal consolidation, as the government has claimed. But one of the main criticisms of Budget 2026 is that out of 62 expenditure proposals, which account for a mere 2.4% of government spending, according to the Opposition, only 13 are directly related to development.

The Opposition demanded to know yesterday how the country could achieve its development goals without a substantial increase in capital expenditure. State expenditure has to be kept low to reduce the budget deficit, but that must not be done at the expense of investment in projects that support investment and growth.

The government’s wisdom of planning to recruit as many as 75,000 workers into the state sector stands questioned. The state service is already bursting at the seams, with about one public official per 15 citizens. It has earned notoriety for inefficiency, waste and corruption, and the government’s recruitment policy will only worsen an already bad situation. The NPP has failed to be different from its predecessors which resorted to public sector recruitment for political reasons.

There has been a sensible suggestion that instead of expanding the public service, the government seriously consider reskilling and reassigning excess workers in state institutions as a solution to shortages of human resources elsewhere.

Meanwhile, the IMF programme requires Sri Lanka to restructure quite a few loss-making state enterprises while implementing land and labour reforms, and adjusting tax policies to promote investment. These are politically sensitive issues that the government needs like a hole in the head, with the Provincial Council elections expected late next year. The government is also required to increase electricity tariff, but a Public Utilities Commission intervention has stood in the way of a power tariff hike. However, it may get what it wants, early next year, when the electricity tariffs will be up for revision. It has also proposed to reduce the annual turnover threshold for VAT registration from Rs. 60 million to Rs. 36 million. A positive feature of the revenue enhancing strategy is the proposed streamlining of tax administration.

Overall, the economic outlook may be positive, but it will be far from plain sailing for the NPP government, which is tasked with pushing a major reform package uphill amidst protests and resistance, while fulfilling the aspirations of the public. 2026 is going to be a challenging year for both the government and the public.

Friday 7th November, 2025

Partisan politics has spared hardly anything in this country, with politicians striving to gain political mileage out of everything. It is therefore not surprising at all that the so-called ‘national programmes’ end up being mere political campaigns and run out of steam with the passage of time. Operation Yukthiya, launched by the previous government with the ambitious goal of neutralising the underworld, is a case in point.

The Mahinda Rajapaksa government branded its political opponents as ‘traitors’, and made the most of the defeat of the LTTE to further its political interests. President Maithripala Sirisena embarked on an anti-narcotics campaign to prepare the ground for his re-election bid, and condemned his critics as crooks. His plan went awry due to the Easter Sunday terror attacks (2019). The NPP government has launched a country-wide drug-bust, and is demonising its opponents as drug dealers.

The NPP made use of an increase in drug detections in Tangalle and adjoining areas to make the SLPP out to be a party of drug dealers. It used the alleged involvement of a former SLPP local government member in the drug trade to bolster its claim. The boot is now on the other foot. An NPP local councillor, her husband and her son have been arrested and remanded on narcotics charges. The Opposition has got hold of something to beat the government with.

The NPP politician’s husband, arrested with heroin, is a school principal. This shows the gravity of the problem. Drug dealers are a very innovative lot. They use multiple facades and fronts to conceal their dirty operations. Following the 2004 assassination of Sarath Ambepitiya, an upright High Court judge, we revealed that Kudu Nauffer, who masterminded the murder, had, through a front, sponsored food and beverages served at a judicial officers’ function. A drug dealer, named Shiyam, and his wife, posed as wealthy garment factory owners, before being arrested with a huge stock of heroin in their Ward Place residence, where they had entertained political and business leaders among others. Kudu Lal, a heroin supplier in Colombo, had himself elected to the Colombo Municipal Council. Subsequently, he fled the country. In 2002, the then IGP T. E. Anandaraja attended a drug dealer’s party in a Colombo hotel. In 2013, a drug dealer obtained a letter from the then Prime Minister D. M. Jayaratne’s office, requesting the Customs to clear some freight containers on a priority basis; the Customs detected 131 kilos of heroin, concealed in one of them. Such is the socio-political clout of drug barons, who are also known to shower funds on some politicians and political parties.

In democratic societies, regimes change, with the declining elite being replaced by a new, more vigorous one. This is what Vilfredo Pareto called the circulation of elites. In this country, regime changes lead to the circulation of underworld figures as well, with the criminals identified with the outgoing regime being replaced by those working for the incoming one. However, criminals, such as drug dealers, do not circulate when regime changes occur. They retain their political clout through various means and carry out their sordid operations under all governments.

As for the proliferation of narcotics, the wild allegations the NPP and its opponents are trading and their arguments are tainted with false generalisation or drawing conclusions about a whole group based on a small or unrepresentative sample. These claims and counterclaims have riven the electorate along political lines, much to the detriment of the country’s efforts to eliminate the drug menace.

It is imperative that the government and the Opposition stop their mud-slinging campaigns and take cognisance of the severity of the drug problem and how drug dealers have infiltrated political parties, the police and other state institutions. They must join forces to eliminate the hydra-headed drug scourge.

Thursday 6th November, 2025

President Anura Kumara Dissanayake is scheduled to perform an unenviable task tomorrow—presenting Budget 2026. The JVP-led NPP raised people’s expectations beyond measure to win elections, and it is now under tremendous pressure to honour its pledges.

State sector trade unions are demanding pay hikes and tax relief, as usual. The Government Medical Officers’ Association is prominent among them. It has called for a salary increase and a PAYE tax reduction for its members.

The ordinary people are also crying out for relief. The only way to ease their economic burden is for the government to reduce taxes and tariffs substantially. But the government will have to increase state expenditure significantly if it is to increase public sector salaries, reduce taxes and tariffs and grant other forms of relief. At the same time, it has to curtail expenditure substantially to boost state revenue, reduce the budget deficit and, above all, fulfil the IMF bailout conditions. This is a typical Catch-22 situation.

The government has been able to achieve a 30% revenue increase, according to media reports, which also reveal a 10% increase in state expenditure. Overall, this may look like a positive development, but capital expenditure has been curtailed. An increase in capital expenditure is a prerequisite for economic development, but it will cause the budget deficit to widen. There’s the rub.

There has been a 4.8% economic growth during the first eight months of the current year, according to some media reports, but experts inform us that the government will have to increase the growth rate at least up to 6% for the economy to remain robust and for the foreign debt repayment to commence in earnest in 2028. This is an uphill task.

Vehicle imports have given a big fillip to the ongoing efforts to increase state revenue, but it is not advisable for the government to rely solely thereon for that purpose. There will be a decrease in vehicle imports sooner or later, and they have led to a huge increase in the outflow of foreign exchange. Taxes and tariffs have already been pushed to the maximum, and further increases therein and/or new taxes are fraught with the danger of causing public anger to spill over onto the streets. The NPP came to power, promising to slash taxes and tariffs.

The government will have to introduce economic reforms expeditiously to achieve its revenue targets, spur growth and keep the economy on an even keel. But going by stiff resistance the Ceylon Electricity Board workers have put up against the proposed power sector restructuring, the government has apparently come up against a brick wall.

Loss-incurring state ventures are a drain on the state coffers, and the people have to pay through the nose to maintain them. President Dissanayake, speaking at a Ratnapura District Coordination Committee meeting, recently, declared that local government institutions should not engage in business activities, such as building supermarkets, as they were best left to the private sector. He revealed a plan to seek private sector participation in running the state-owned rest houses across the country. That declaration, which runs counter to statism, a hallmark of socialism, signalled an ideological volte face on the part of the JVP, which calls itself a Marxist party. Yet the President’s contention at issue makes economic sense, at least where state ventures in this country are concerned. He said such infrastructural projects had become huge white elephants, causing staggering losses to the state. Curiously, the government has retained the loss-incurring national carrier as a state venture, and keeps on injecting billions of rupees in tax money into it annually.

It remains to be seen how the government will navigate the treacherous economic waters between Scylla and Charybdis.