The National People’s Power (NPP) came to power with a vision of "a thriving nation, a beautiful life," promising a productive economy and the elimination of waste and corruption. However, a government’s first budget is a reflection of its policy direction, and unfortunately, the current administration's proposals fail to break away from the failed neoliberal economic model that has plagued Sri Lanka since 1977.
Rather than initiating a decisive shift towards economic sovereignty and long-term national development, the NPP government appears to be continuing within the restrictive framework of the 17th IMF programme—an agreement inherited from the previous administration and left unchallenged. The IMF's policies prioritize debt repayment and fiscal austerity over national development, locking countries like Sri Lanka into cycles of economic dependency and underdevelopment. Without a structural transformation that prioritizes industrialization, self-sufficiency, and economic modernization, the current policy direction risks deepening the country’s crisis rather than resolving it.
The short-term survival measures proposed in the budget lack a cohesive strategy for national development. This approach echoes the economic policies of past governments—governments that have consistently prioritized short-term fixes over sustainable growth. If Sri Lanka is to escape its economic turmoil, a fundamental shift in direction is necessary.
Breaking Free from IMF Constraints
The IMF programme has imposed several laws that undermine Sri Lanka’s economic sovereignty:
✔ The Central Bank Act No. 16 of 2023
✔ The Public Financial Management Act No. 44 of 2024
✔ The Economic Transformation Act No. 45 of 2024
✔ The Public Debt Management Act No. 33 of 2024
These laws restrict the government’s ability to independently manage its fiscal and monetary policies. A Commission of Inquiry should investigate the circumstances under which these laws were passed and whether undue foreign pressure influenced their enactment. If Sri Lanka is to regain control over its economy, these laws must be repealed.
Reviving Industry Through a Development Bank
One of the key campaign promises of the NPP was the establishment of a state-owned development bank—a promise that remains unfulfilled. Sri Lanka is one of the only countries in Asia without a national development bank, despite historical evidence showing that economic growth is impossible without direct state-backed credit for domestic industries.
The establishment of a development bank is crucial for:
✔ Providing low-interest credit to manufacturing industries
✔ Supporting small and medium enterprises (SMEs) and entrepreneurs
✔ Reducing dependency on foreign loans and private sector banks
Without this institution, Sri Lanka will continue to rely on external financial institutions that prioritize foreign interests over national development.
Ensuring Food Security Through Agricultural Reforms
The rice market crisis in Sri Lanka highlights the need for state intervention to stabilize food prices. The government must:
✔ Revive the Paddy Marketing Board (PMB) to counter the monopoly of private mill owners.
✔ Allocate funds to buy paddy at competitive prices from farmers and distribute it fairly to consumers.
✔ Release PMD reserves to prevent price manipulation by private entities.
Food security is a national priority, and reliance on private traders and foreign imports has only worsened market volatility.
Strengthening the Fisheries Sector
✔ Fish is a primary protein source for many Sri Lankans, and hundreds of thousands of families depend on the fisheries industry.
✔ The government should invest in cold storage and transport facilities to reduce waste and improve efficiency.
✔ Fish-Aggregating Devices (FADs) should be deployed in Sri Lanka’s Exclusive Economic Zone (EEZ) to increase fish catch while reducing fuel consumption for fishing vessels.
✔ Funding should be increased for electronic identification and distress communication systems to enhance safety and efficiency in the sector.
Supporting Free Trade Zone (FTZ) Workers
Workers in FTZs generate a significant portion of Sri Lanka’s foreign exchange revenue, yet their living conditions remain dire. The budget should allocate funds to improve public facilities, housing, sanitation, and healthcare services for these workers. A healthier and more secure workforce will enhance productivity and strengthen Sri Lanka’s export sector.
Debt Relief for SMEs and Microfinance Victims
The economic crisis has severely impacted small businesses, many of which are trapped under crippling debt burdens. The government should:
✔ Provide soft loans and financial aid to struggling SMEs.
✔ Restructure or write off microfinance debts under transparent and fair criteria.
✔ Create a financial safety net for small business owners to recover from the crisis.
Establishing a Fair Taxation System
The IMF-mandated tax reforms have disproportionately impacted middle-class workers through regressive taxes like VAT and PAYE. The budget should focus on:
✔ Ensuring fair taxation by increasing corporate and high-income taxes.
✔ Raising the PAYE tax threshold and restructuring tax slabs to ease the burden on low- and middle-income earners.
✔ Addressing corruption and inefficiencies in tax collection.
✔ Re-evaluating the Digital Service Tax (DST) and Global Minimum Tax (GMT) to prevent consumer exploitation.
Raising Wages and Implementing Social Protections
✔ Sri Lankan wages have not kept pace with inflation, worsening poverty and economic insecurity.
✔ Minimum wages in both the public and private sectors should be raised to match the real cost of living.
✔ A national insurance scheme should be created for self-employed workers, such as carpenters, tailors, and small traders.
Utilizing National Assets Efficiently
✔ The government should conduct a nationwide audit of underutilized resources, including:
- State-owned land
- Idle government buildings
- Unused machinery and equipment
✔ A comprehensive plan must be formulated to put these national assets to productive use—creating employment opportunities and boosting the economy.
A New Economic Direction is Needed
The proposals outlined above mark the beginning of a necessary shift in Sri Lanka’s economic strategy. The crisis demands a return to rational economic planning and state-led industrial policies that move beyond dependency on global financial institutions.
✔ Unregulated free markets alone will not drive Sri Lanka’s economic transformation.
✔ The government must play an active role in industrialization, strategic investment, and infrastructure development.
✔ Sri Lanka should strengthen its economic ties with the Global South, engaging with organizations like BRICS and the Belt and Road Initiative (BRI) to create new trade and investment opportunities.
Conclusion
If the NPP government is serious about building a productive economy and improving the lives of its people, it must move beyond IMF-imposed constraints and adopt a development-focused strategy. The current approach of short-term survival without a long-term vision will only prolong Sri Lanka’s economic struggles.
✔ The repeal of restrictive laws, investment in domestic industries, food security, fair taxation, wage increases, and efficient use of national resources must form the foundation of a sustainable economic model.
✔ Sri Lanka must not remain a passive player in global financial markets but should assert control over its development path through strategic economic planning.
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