By: Staff Writer
November 09, Colombo (LNW): Sri Lanka’s 2026 Budget, presented by President and Finance Minister Anura Kumara Dissanayake, attempts to project confidence and reformist zeal under the new National People’s Power (NPP) government. With promises of clean governance, investor transparency, and rapid economic recovery, the budget seeks to convince the public and global markets that a left-leaning administration can also be pro-business. But behind the rhetoric lies a complex web of risks, weak fiscal direction, and governance challenges that could blunt its ambitious targets.
The President promised to transform Sri Lanka into an attractive destination for investors through “transparency, predictability, and partnership.” Amendments to the Strategic Development Projects Act and the Colombo Port City Commission Act are meant to streamline approvals and reassure foreign investors. A new Investment Protection Act and Public-Private Partnership (PPP) law are scheduled for early 2026, both designed to build investor confidence and attract foreign direct investment (FDI).
However, economic analysts remain cautious. While Dissanayake projects 7% economic growth over the medium term up from the current 4–5% such optimism appears detached from ground realities. The fiscal space remains tight, with public debt still exceeding 120% of GDP and interest payments consuming over 40% of government revenue, according to Finance Ministry data for 2025. The government’s reliance on foreign borrowing and concessional aid under the IMF’s Extended Fund Facility (EFF) continues to limit its fiscal flexibility.
Although the budget includes initiatives to strengthen the export sector, promote agriculture and livestock, and develop tourism, critics argue that the real bottlenecks policy inconsistency, bureaucratic inefficiency, and political interference remain largely unaddressed. Promised reforms in state-owned enterprises (SOEs), which absorb vast subsidies and produce recurring losses, have again been deferred. Despite public assurances of “transparency and accountability,” there is no clear roadmap for restructuring entities like the Ceylon Petroleum Corporation or Ceylon Electricity Board.
Moreover, the NPP government’s credibility on governance and administration is still being tested. While Dissanayake vows to end “cronyism and nepotism,” his party rooted in Marxist traditions and including former activists once associated with subversive movements faces questions about its real capacity to manage a modern, market-driven economy. The administration’s communication and policy-coordination skills also appear weak; several top officials lack international exposure and technical literacy, which could hinder complex economic negotiations.
From a broader perspective, the 2026 Budget lacks a unified macroeconomic framework. There is heavy emphasis on new projects from AI data centres to digital ID cards and new export zones but little clarity on implementation mechanisms, monitoring frameworks, or sectoral priorities. The government’s revenue targets appear overly ambitious, relying heavily on indirect taxation while offering tax exemptions to selected investors.
For Sri Lanka to translate its promises into progress, the NPP government must move beyond slogans and address the fundamentals: credible fiscal consolidation, professional economic management, and a depoliticised bureaucracy. Without these, the 2026 Budget risks becoming another politically appealing but economically fragile document rich in promises, poor in delivery.
In essence, Budget 2026 showcases a government eager to prove reformist intent but still struggling to reconcile ideology with execution. Its success will depend not on rhetoric or new laws, but on the discipline, skill, and transparency with which those promises are turned into measurable results.
