Sri Lanka’s 2025 budget marks a significant shift towards parliamentary control, ensuring full disclosure of spending and limiting discretionary allocations, according to Labour Minister and Deputy Minister of Economic Development Anil Jayantha. This move contrasts with previous administrations, where large sums were allocated under ‘contingencies’ without prior parliamentary approval.
Historically, Sri Lanka’s budget functioned as a symbolic document, with governments securing legal authorization from parliament but spending funds at their discretion. Under the new Public Finance Management Act, discretionary spending is now capped at 2% of primary expenditure, amounting to Rs. 38 billion in 2025, significantly lower than previous years.
The 2025 budget outlines total spending of Rs. 7,190 billion, financed through Rs. 4,990 billion in tax, non-tax revenues, and grants. The overall deficit is estimated at 6.7% of GDP. Minister Jayantha emphasized that the deficit will not be financed through inflationary measures like money printing, with Rs. 2,125 billion raised domestically through non-inflationary means and $75 million through foreign financing.
Sri Lanka has historically faced challenges in managing inflation due to macroeconomic policies favoring monetary expansion. Analysts note that excessive money supply growth has led to currency depreciation, inflation spikes, and financial instability, forcing stabilization measures. With the central bank undershooting its inflation target in 2024, monetary stability has returned, reinforcing the government’s commitment to fiscal discipline.