On Thursday (12), President Anura Kumara Dissanayake, who is also Minister of Finance, will present the National People’s Power (NPP) Government’s third full Budget. After the Vote on Account that kept the State running in early 2025, the Government delivered its maiden Budget that February and its second last November. The honeymoon, therefore, is over, and Budget 2027 will be judged less on promise than on purpose.
Expectations are high, and understandably so. Colombo consumer inflation reached 8.3% in October, compared with 2.1% a year earlier, while food inflation stood at 8.8%. Moreover, the Middle East conflict has driven up global fuel prices, and diesel is now subsidised by Rs. 70 per litre. For households that lived through the collapse of 2022, these are not abstractions; they are the prices of rice, bus fares, and school shoes.
It is no surprise, then, that the Government has been preparing the ground. The President has said repeatedly that certain taxes will be reduced, albeit without jeopardising revenue targets. Meanwhile, officials indicate that public sector salaries will rise by between Rs. 20,000 and Rs. 80,000 in the final instalment of a three-phase increase, at a cost of Rs. 330 billion. Welfare spending is expected to exceed Rs. 1.2 trillion.
None of this is unreasonable in itself, yet it follows a familiar script. For decades, the Sri Lankan budget has been less a statement of economic policy than an annual exercise in appeasement. The public servant waits for a salary increase, the trader for a duty concession, and the taxpayer for a higher threshold. Governments of every colour have obliged, because budget day is when a finance minister can make a whole nation feel looked after. The tax cuts of December 2019 belong to that tradition, and they hollowed out State revenue just before the pandemic and the default.
The difficulty is not that our budgets offer relief. Rather, it is that they seldom offer anything else. A budget is meant to be the blueprint of the Government’s income and expenditure for the year ahead, approved by Parliament as the custodian of public finance. In practice, however, development is tacked on and then abandoned when the books must balance.
The figures bear this out. According to the Asian Development Bank, capital spending averaged only 3% of GDP between 2022 and 2025, whereas budgets typically allocated 5–6%. In 2025, the Government spent about Rs. 1 trillion on capital projects against an allocation of Rs. 1.3 trillion. This year has been worse, since by June only around Rs. 240 billion of the Rs. 1,380 billion earmarked for capital works had been spent. In other words, roads, railways, and irrigation schemes are announced with fanfare, but their funds are the first to be sacrificed.
To its credit, the Government appears to recognise the problem. The Appropriation Bill raises capital expenditure by 24.7% to Rs. 1.753 trillion, and the Treasury has begun overhauling how public investment is managed. Furthermore, the President has been unusually candid. Pointing to a record current account surplus of $ 1.8 billion, he remarked at a gathering in Colombo recently: “That is economic progress; it is not an economic transformation.” He is right, and Budget 2027 is where that transformation either begins or is postponed once again.
What would such a budget look like? First, it would treat capital spending as a commitment rather than a cushion, with procurement reforms that allow allocated money to be spent within the year. Second, it would confront the structural weaknesses that relief merely papers over. Agriculture, for instance, employs 28% of the workforce yet contributes only 7% of GDP; no subsidy will close that gap, whereas land reform, irrigation, and access to markets might. Likewise, a serious plan for exports, skills, and the digital economy would do more for the next generation than another allowance for this one.
Of course, relief cannot be abandoned while families struggle. Nevertheless, it should be targeted, temporary, and honestly costed, so that it does not crowd out the investment that would make relief unnecessary in future.
The NPP came to power promising a break with the political culture of the past. On Thursday, the country will learn whether that promise extends to the Budget. A Government with a two-thirds majority and no national election due for some years has every opportunity to be bold. It would be a pity if, once again, the nation were handed a cheque when what it needed was a plan.