- A US Lesson for 12 November Budget
Sri Lanka stands at a difficult crossroads, waiting for the future proposals revealed by the 12 November budget. While the Government continues to promise minor tax reforms alongside small adjustments, astute observers note the core plan lacks teeth. This is due to a complete absence of an aggressive push to drive the economic engine and provide more bucks to the local markets. The previous budgets followed a similar template because the Anura Kumara Dissanayake administration is working entirely within a rigid blueprint written by the International Monetary Fund.
This presents a severe structural test for a new administration, prompting critics to argue that it reveals a deep gap in its negotiation capacity and creative economic policy. The Government appears completely trapped by complex global financial frameworks, struggling to think outside the formula in a classic dilemma of modern governance. The Government has failed miserably to generate confidence for people to invest in revenue generating activities. Hopeful numbers on a spreadsheet cannot easily feed a family at the kitchen table.
This challenge brings to mind a lesson from the 2008 global financial crisis. I was at the Harvard Kennedy School in September, 2008, attending a prominent panel discussion titled ‘Transformative Presidencies,’ which examined the exact leadership qualities needed to steer the next US presidency through an economic storm. During the discussion, the late Professor Joseph Nye offered a sharp, unforgettable warning, arguing that a leader must show courage when addressing an economic crisis and must never fall into the passive trap of asking average citizens to simply tighten their belts. Instead, he insisted that the state must aggressively stimulate the public by empowering people to generate more business avenues and work their way out of a tight economy.
President Obama, who was running for election during this period, is notably said to have taken this advice to heart and let it shape his policy, with the help of forward-thinking advisors and executors in the league of Tim Geithner and Ben Bernanke. Geithner’s memoir, ‘Stress Test: Reflections on Financial Crises’, explains the thinking behind the recovery plan, which is what is lacking in the poor thinking of the AKD’s economic advisors. Obama’s men were capable enough to understand this kind of situation and drive it effectively. However, President-cum-Finance Minister Dissanayake’s economic plans are copied and executed only by accountants, who all lack the expertise and experience that would stop them from fumbling this situation.
These accountants, who have only a superficial understanding of numbers have thoroughly misled the President, leading to the President facing embarrassment due to the setting of expectations he could not deliver upon. The fact that there are no dollars in circulation is something concealed by an incapability to see the bigger picture. By relying heavily on fiscal consolidation rather than fostering active domestic wealth creation, they have entirely missed the critical psychological tipping point of the nation. The public mood has shifted from initial resilience to deep, unyielding fatigue. It is eminently unreasonable to ask an exhausted population to endure more belt-tightening.
The US establishment was surprised by the exit polls of the 2026 US Midterm Elections, based off of the results compiled by, CBS News, NBC News and Reuters among others, which clearly shows where the main concern of the people lies. 75-80% were concerned about the state of the economy, with a staggering 85-90% of voters concerned about the price of Gasoline Diesel, and basic essentials like groceries as a result of the levied tariffs and the knock-on effect of the War in Iran. This is in stark contrast to the issues that you would believe faced by the American people by Republican advertisements which focused primarily on cultural concerns such as transgender individuals and the race and religion of their opposition. "It's the economy stupid" were the words of Bill Clinton's strategist, James Carville all the way back in 1992, and 34 years later it has held true again.
Voters exhausted by high prices
The US midterm elections carry a sharp warning for this exact approach. American voters took power away from the ruling Republican party because they were completely exhausted by high prices, expensive fuel, and foreign conflicts. This lesson stretches far beyond Washington and reaches right into our neighborhood, where Prime Minister Narendra Modi’s Government faces the exact same reality. The balance of payments means nothing to the average citizen, while the price of essentials means everything. From the American Midwest to the villages of India and the markets of Colombo, the core driver of the vote remains identical because the ability to set the kitchen table inevitably outweighs all manner of political destinies.
The Government should look closely at this global pattern. On paper, Colombo has a technical success story with a stable rupee despite it being held at a very unreasonable, artificially maintained level, and headline inflation dropping from its historic peak. The state checks every box the IMF requires, but the local markets tell a different story. The average citizen is still crushed by heavy indirect taxes. Electricity tariffs, alongside the prices of rice and other essential commodities, remain punishingly high while the domestic market feels completely dead. The Government is more concerned about giving out rhetoric that suppresses dissent than in investing in actual measures to help those who are capable of generating more economic value.
Yet, the shift in Washington has given the Government an unexpected lifeline. When the American balance of power shifted, global energy markets reacted instantly by sending Brent crude oil down by nearly 9%. Markets anticipated less tension in the Middle East, which acts as a natural shield for an island like Sri Lanka that relies entirely on imported fuel and other petroleum products. This price drop is a massive victory that spares the struggling Government from raising domestic fuel and power costs again, while simultaneously keeping fragile foreign reserves from bleeding out.
Global financial pressure
The change in Washington also protected Sri Lanka’s most critical industries. The central problem with them is that the export income they generate cannot be compared to the import bill that rises steadily each year. However, current events may act as a beginning to provide a solution to these problems. These effects can be seen in how before the midterms, local garment factories feared radical, unpredictable American tariffs, but a split US Government effectively ended that threat. For the country’s garment sector, which employs hundreds of thousands of working people, this legislative friction means safety. It provides a stable market to secure global orders and protects vital jobs just when the country needs foreign revenue the most. Global financial pressure has eased alongside these trade shifts. The US election results effectively blocked heavy spending bills in Washington, which caused Treasury yields to cool down and the American dollar to soften. For an IMF-bound island facing a massive wall of external debt payments, a calmer global market is a great relief that lowers the temperature on emerging economies and makes long-term recovery manageable. But the warning at home remains severe. Opposition leaders are already weaponising the American election on the parliament floor with a simple message that voters anywhere in the world will ruthlessly punish a Government if everyday hardship piles up, and they do not care about macroeconomic justifications.
The President will deliver the budget speech on 12 November, and the ultimate lesson is already clear. The global shifts from the American election have given Sri Lanka structural stability on paper, but relying purely on an IMF blueprint without building local wealth is a dangerous game. The Government must act fast to convert this external breathing room into lower costs for food, fuel, and basic goods, because if this upcoming budget remains unyielding and formulaic, public frustration will inevitably boil over into a brutal electoral backlash.
The writer is a freelance contributor
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The views and opinions expressed in this column are those of the writer, and do not necessarily reflect those of this publication