While Budget 2026 will go down as a masterclass in political performance, it failed where it matters most: policy. Fifteen months later and into its second budget, the NPP Government stands accused not of breaking the old political mould, but of perfecting it: replacing policy with performance, promises with posturing, and governance with grandstanding.

The past 15 months have revealed one undeniable truth, the NPP’s leadership is blessed with extraordinary performance skills. From the highest to the lowest, the NPP’s mastery of performance politics is unmatched. How else can one explain the ability to present two national budgets, neither of which mention the party’s pre-election promises, and yet convince an audience that they have struck gold? 

On Friday, the President, in his dual role as Head of State and Minister of Finance, held court for over five hours, reading the 2026 Budget with a mix of dramatic flair, witty banter, and well-timed jabs at Opposition MPs. Cameras rolled, laughter echoed, and the Government benches applauded on cue. Yet, as with his previous performance earlier this year, the Budget was long on rhetoric and painfully short on reality. The NPP’s manifesto that promised transformation has once again been left to gather dust while its lofty pledges are quietly buried under parliamentary theatrics.

Earlier this year, the first NPP Budget was hailed as the beginning of a new economic dawn. This second presentation proved to be a rerun of that same play, complete with recycled lines and the same convenient erasure of inconvenient truths.

Once again, speaker after speaker from the Government side waxed lyrical about how the NPP “rescued” a bankrupt nation. They spoke of “stabilisation” and “recovery,” painting themselves as the saviours of a ruined economy. Yet, this narrative collapses under even basic scrutiny. Following Sri Lanka’s declaration of bankruptcy in April 2022, the country indeed fell into deep recession, recording a GDP contraction of nearly 7%. Inflation soared to 70%, and the rupee lost nearly half its value. But by 2024, under the Wickremesinghe administration, the worst had passed. GDP growth had returned to above 5%, inflation had been tamed to 1%, foreign reserves had climbed from a mere $ 20 million to $ 6.2 billion, and the rupee had stabilised around Rs. 290 to the dollar. The queues had disappeared. Power cuts ended. Fuel was available.

This was the economy the NPP inherited in September 2024, not the wreckage it claims to have rescued, but a recovering, stabilised system. And yet, a year later, growth has slowed again, inflation has risen to 5%, reserves remain stagnant at $ 6.2 billion, and the rupee has slipped to Rs. 305 to the dollar. When the Government continues to play the same old record of blaming past regimes for its own underperformance, it is increasingly beginning to look like an excuse for its own incompetence.

The 2026 Budget, like its predecessor, was supposed to deliver two critical outcomes: bring down the cost of living and provide momentum for growth. Instead, it has failed on both fronts. What it has achieved, instead, is the addition of several new burdens that threaten to stifle the very sectors capable of reviving the economy. The lowering of the VAT threshold to include SMEs is a textbook example of short-sighted policy-making. 

These businesses form the backbone of Sri Lanka’s economy, the true engine of employment and innovation. Yet, they will now be forced to pay 18% VAT if their annual turnover exceeds Rs. 36 million, down from the previous Rs. 60 million threshold. That translates to just Rs. 100,000 in daily revenue; a figure that captures thousands of small traders, service providers, and entrepreneurs who barely stay afloat as it is.

For many in this sector, the NPP’s promises of support were central to their electoral choice. They believed the party’s rhetoric about reducing taxes, easing the cost of essentials, and supporting small enterprises. Instead, they now face higher compliance costs, lower margins, and rising prices. It appears that the dreamers are being scraped to feed the sleepers. While the tax base is being expanded downward to squeeze the middle and lower tiers, the wealthy continue to enjoy loopholes, exemptions, and political indulgence. The much-vaunted goal of shifting the direct-to-indirect tax ratio from 25:75 to 40:60 remains an illusion.

If deception is an art, the NPP has mastered it. Consider the decision to spend Rs. 43 billion on 1,775 new double cabs for the State sector including the 225 MPs. The Finance Minister, with a straight face, assured the House that the vehicles were “for MPs, not ministers,” as though that made any difference in a Parliament where every minister is an MP. It is a mind-bending exercise in semantics, and an insult to public intelligence. 

The claim that the new fleet is somehow “cost-effective” is patently absurd, especially when the previous permit system, if properly enforced, would have cost the Government nothing. The cost of maintaining, insuring, and licensing the new vehicles will add yet another burden on the taxpayer. That apart, the Rs. 12 billion allocated for MPs’ vehicles stands in stark contrast to the paltry Rs. 3.6 billion set aside to buy new buses for the State transport service – another instance of warped priorities. 

The proposed housing loan scheme for State employees is another act in this tragicomedy. The Finance Minister proudly announced a Rs. 3 million concessional loan programme for public servants, with the Government paying 4% of the estimated 10% interest rate. But Opposition MP Harsha de Silva quickly exposed the numbers: only Rs. 500 million has been allocated for the scheme. That means a mere 4,000 out of 1.4 million State employees will actually qualify. The rest will be left to watch as a privileged few cash in on yet another mirage sold as a miracle.

Equally disappointing was the Government’s continuing silence on its signature promises: the exemption of food, medicine, and educational supplies from VAT, and the introduction of affordable vehicle options for the middle class. Two budgets later, these pledges remain unfulfilled. The 2026 Budget has confirmed that these promises were never meant to be kept and mere political theatre designed to captivate, not to deliver.

There is also a deeper problem: the NPP’s misplaced belief that economic growth can be legislated into existence. Every government since independence has tried to attract FDI by introducing ‘new laws’ and ‘investment frameworks.’ Each has failed to different extents for the simple reason that the problem is not only in the laws, but also in the operational environment. Besides investment laws, investors look at the bigger picture: rule of law, independence of the Judiciary, policy stability, and the ability to resolve disputes quickly and fairly. They look at how a country treats contracts, not how many committees it creates. They look at labour laws, comparative utility costs, and ease of doing business.

The highest FDI in Sri Lanka’s history was recorded in 2017 – $ 1.75 billion, exceeding the Government’s own target by $ 250 million. That achievement was not the result of new laws, but a relatively stable environment. A year later, the Easter Sunday attacks struck. The resultant collapse in investor confidence demonstrated what truly drives or deters FDI: trust, security, and predictability. To date, the masterminds of that attack roam free, so how will that serve to reassure investors about law enforcement?

The same opacity also clouds the Government’s international dealings, which also directly impact FDI. Earlier this year, the NPP leadership signed several bilateral pacts with India and China – agreements whose contents remain undisclosed to the public. In an era where transparency is the cornerstone of credibility, such secrecy is deeply damaging. No serious investor will risk millions, let alone billions, in a country where key agreements are hidden from its own citizens. 

The Indian Ocean region is one of the world’s most geopolitically sensitive zones, and Sri Lanka’s strategic position makes it both valuable and vulnerable. Foreign investors, particularly those from neutral or Western blocs, will not commit funds without clarity about the extent of Indian or Chinese influence in domestic policy and infrastructure. Secrecy, in this context, is self-sabotage.

Policy inconsistency has long been Sri Lanka’s Achilles’ heel. Every new administration promises reform, and every new finance minister introduces ‘new’ frameworks, only to abandon them at the next budget. The NPP, despite its revolutionary rhetoric, has fallen into the same trap. Each budget, each amendment, each decree erodes investor confidence. The Government does not appear to grasp that stability, not novelty, attracts capital. 

In the end, the NPP’s second budget is less of an economic blueprint and more of a spectacle choreographed to create the illusion of progress. Behind the applause lies the sobering reality of slowing growth, rising inflation, stagnant reserves, and an increasingly burdened middle class. The SMEs that believed they were voting for change are finding themselves trapped in a new cycle of strangulation.