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By Chula Goonasekera For the LEADS Forum ( [email protected] )
Sri Lanka’s future prosperity will depend on how effectively it positions itself within an increasingly complex global environment. At a recent LEADS Forum discussion (https://youtu.be/Bbr3e_qU1Fw), veteran diplomat Prasad Kariyawasam, former Secretary to the Ministry of Foreign Affairs, High Commissioner to India, Ambassador to the United States, Ambassador /Permanent Representative to the UN in New York and Geneva —outlined the strategic choices Sri Lanka must make to secure long term stability and economic advancement. Kariyawasam offered a rare blend of historical perspective, diplomatic experience and practical guidance.
His central message was clear: Sri Lanka must exercise strategic agency—engaging all major partners while safeguarding its national interests.
Foreign Policy as an Extension of National Aspirations
Foreign policy, Kariyawasam emphasised, is inseparable from domestic priorities. As your text notes, “foreign relations often reflect the medium- and long-term aspirations of a country’s people and its leadership.” Governments must therefore craft external relations that reflect the public’s economic and social expectations, avoiding short-term political impulses that undermine long-term national interests.
For a small nation, foreign policy cannot be symbolic or personality driven. It must be purposeful, pragmatic and directed towards the security and prosperity of the people.
Sri Lanka’s history demonstrates that the island has never been isolated. From ancient ties with India and Southeast Asia to Arab, Persian and Chinese maritime networks, the island prospered when connected to the wider world. We must realise that “geography creates opportunity, but geography alone does not create prosperity.” Institutions, infrastructure and policy determine whether geographic advantage becomes economic success.
Colombo’s emergence as a cosmopolitan trading hub and Galle’s role as a resupply station for Indian Ocean shipping in colonial times , illustrate how deeply Sri Lanka has been embedded in global commerce for centuries.
Lessons from Asia’s High Performers
Kariyawasam highlighted the experiences of Japan, South Korea, Taiwan, Singapore and Vietnam. Their paths differ, but their success rests on common foundations:
• investment in human capital and infrastructure
• attraction of investment and technology
• strategic engagements with both China and Western economies
The lesson for Sri Lanka is not imitation but continuous adaptation and constructive integration with the global economy.
India: Sri Lanka’s Closest Major Partner
India’s transformation into a global economic power presents Sri Lanka with both opportunity and responsibility. India is already Sri Lanka’s largest source of tourists and a major investor. Kariyawasam states, “The larger question is how effectively Sri Lanka can participate in and benefit from India’s growth.”
A partnership should encompass modern, more open pathways for trade, investment, logistics, energy, technology, digital services, education and professional mobility—And asymmetry between the two economies must be handled with maturity and foresight, seeking special and differential treatment .
China remains a significant economic partner. Sri Lanka must avoid viewing this relationship through a zero sum lens. The goal should be productive and transparent engagement, ensuring better terms of trade and meaningful technology transfer.
Equally Important relations must be nurtured with the United States, European Union, United Kingdom, Japan, Australia, ASEAN and the Gulf.
All these relationships can be vibrant partnerships that does not lead towards , dependency but mutually beneficial pragmatic arrangements .
Global geopolitics is becoming more volatile. Trade tensions, wars, sanctions, supply chain disruptions, climate change and technological competition increasingly shape national security. We must realise, “foreign policy cannot be separated from economic policy.”
Sri Lanka’s recent economic crisis demonstrated the importance of international confidence, access to finance and resilient supply chains. Energy security, food security, cybersecurity and digital infrastructure are now core elements of national strategy.
Strategic Agency: The Guiding Principle
Sri Lanka must avoid becoming an arena for great power competition. Strategic agency means making decisions based on national interest, expanding Sri Lanka’s choices, not restricting them.
India is essential. China is important. The United States, Europe, Japan, Australia, ASEAN and the Gulf are important. The objective is a web of partnerships that strengthens resilience and autonomy.
1. Location: Sri Lanka’s geography is a long standing advantage. Ports such as Colombo, Hambantota, Trincomalee and Galle can become specialised hubs—if connected to logistics, manufacturing, services and exports.
2. Digital Connectivity: Submarine cables, data centres, cloud services and cybersecurity are now as important as physical geography. Sri Lanka can turn its location into both a maritime and digital advantage.
3. Tourism and Natural Heritage: The focus should shift from tourist numbers to value creation—wellness, heritage, ecotourism, cruise tourism, education and MICE tourism.
4. Human Resources and Demographics: High literacy is no longer enough. Skills in technology, engineering, AI, logistics and advanced manufacturing are essential, especially with an ageing population.
5. Migrant Workforce: Migrant workers are a strategic asset, not merely a source of remittances. Bilateral labour agreements, skills recognition and diaspora engagement should be central to foreign policy.
Requirements for Sustained Prosperity
Please note that “foreign policy can open doors. Domestic institutions determine whether we can walk through them.”
Sri Lanka does not need a larger state—only a more capable one. Policy continuity, professional institutions, predictable regulation and reduced corruption are essential. Geography does not change; long-term national interests do not change. Intentional relationships built over decades should not be reinvented with each election cycle.
Trust is a strategic asset. Sri Lanka must be known as a country that honours commitments and maintains predictable policies. This is vital not only for diplomacy but also for investment and long term partnerships.
Sri Lanka does not need to choose between India and China, or between Asia and the West. The task is to identify what each relationship can contribute to national development while protecting sovereignty and freedom of decision making.
Sri Lanka’s geography is an inheritance, but prosperity is not guaranteed. The world is changing rapidly—great-power competition, technological disruption, and climate vulnerability demand a foreign policy that is pragmatic, adaptive, and anchored in national interest.
Sri Lanka must build partnerships without dependencies, maintain strategic agency without isolation, and integrate with the global economy while strengthening domestic capacity.
“We cannot change where Sri Lanka is. We can, however, determine what Sri Lanka becomes because of where it is”
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The floods that inundated several parts of Colombo on November 06, 2026 have once again exposed the vulnerability of Sri Lanka’s commercial capital to heavy rainfall. This incident highlights the urgent need for a comprehensive assessment of the capacity and adequacy of the existing urban drainage system, particularly its ability to withstand increasingly intense rainfall events under changing climatic conditions. The flooding of several key areas brought economic and social activities to a standstill, underscoring the need to strengthen Colombo’s urban flood resilience through improved drainage infrastructure and effective stormwater management.
According to reports approximately 129 mm of rainfall were recorded within few hours. Officials claimed that the existing drainage system had originally been designed to accommodate approximately 30 mm of rainfall per hour. This claim has been contested. Meanwhile, some argue that Colombo’s drainage capacity has been significantly enhanced through several infrastructure development projects implemented in recent years and attribute the recent flooding primarily to blockages in the drainage network.
However, attributing urban flooding entirely to heavy rainfall would be an oversimplification. While extreme weather can trigger flooding, the severity and duration of its impacts are often determined by inadequate infrastructure, poor maintenance, unplanned urban development and weaknesses in urban water management.
Beyond Heavy Rainfall: Understanding the Real Causes
One of the most likely causes of drainage failure in a city is the accumulation of solid waste and debris in drainage channels. Plastic bottles, polythene, discarded food containers and household waste frequently obstruct roadside drains, culverts and canals. Absence of a proper garbage collection system can even be another contributing factor. Silt deposition at the bottom of drains due to soil washed away from urban construction sites is another issue. Even a properly designed drainage network can become ineffective when it is blocked by waste materials. Recent discussions following the Colombo floods also identified improperly disposed waste as a contributing factor to blocked drains and canals. Regular maintenance, responsible waste disposal and stronger enforcement of environmental regulations are therefore essential.
The second major concern is insufficient drainage capacity. Urban drainage systems must be designed according to rainfall intensity, catchment characteristics, land-use patterns and expected future development. When rainfall exceeds the system’s design capacity, water cannot be discharged quickly enough, resulting in surface flooding. Hence, it is important to reassess the historical design criteria in light of climate-induced changes in rainfall patterns and changes in land use.
Urban Development at the Cost of Nature
Rapid and poorly planned urbanisation is another significant contributor to urban flooding. Colombo city and its surrounding areas have undergone considerable transformation through residential development, commercial buildings, road construction and infrastructure expansion. Unfortunately, this development has often come at the expense of natural drainage systems, wetlands, marshlands and open spaces.
Natural landscapes absorb and temporarily store rainwater, allowing it to infiltrate into the ground or gradually flow into waterways. However, when these areas are replaced by concrete buildings, asphalt roads and paved surfaces, the proportion of rainwater entering drainage channels increases considerably. This increased surface runoff places additional pressure on existing drainage infrastructure.
Studies indicate that the total wetland extent in the Colombo Region declined by approximately 40% betwseen urbanisation and land-use changes. The reduction of these green spaces and natural water-retention areas is an important factor contributing to increased flood vulnerability.
Poor Connectivity and Coordination: A Network-Wide Problem
An effective drainage system is an interconnected network comprising roadside drains, culverts, canals, retention areas, pumping stations, gates and final discharge points such as rivers or the sea. If one section of this network is blocked, damaged or undersised, the performance of the entire system can be affected.
In Colombo, the drainage network involves multiple institutions, including the Colombo Municipal Council, the Sri Lanka Land Development Corporation, the Urban Development Authority and other relevant agencies. Their responsibilities extend across different components of the urban water-management system. Hence, the drainage system should be maintained in a well-coordinated manner to ensure that it functions efficiently. Establishing a single authority to handle the entire drainage system is another option. Integrated drainage planning must therefore consider the entire catchment, from the point where rainwater falls to the location where it is safely discharged.
Building a climate-resilient city requires a shift from reactive disaster management to proactive risk reduction. Clearing blocked drains after a flood is necessary, but preventing future floods requires much more an integrated approach including planning and building climate-resilient infrastructure and the protection of natural ecosystems.
Individuals and business entities can also contribute to urban flood mitigation by adopting measures such as rooftop rainwater harvesting, green roofs and rain gardens to temporarily retain stormwater. These interventions reduce surface runoff, ease pressure on urban drainage networks and help minimise peak flows during intense rainfall events.
A modern city should not be measured solely by its skyscrapers, highways and commercial developments, but also by its ability to withstand natural hazards while protecting the commercial activities, lives and livelihoods of its people.
(The writer is a water resources engineer)
Continue Reading Opinion The real challenge of rebuilding Sri Lanka – II Published
Why economic growth, investment confidence, effective public administration, and responsible budget management matter for improving people’s lives
by Prof. Ranjith Bandara, PhD (Qld.) Emeritus Professor of Economics, University of Colombo, Sri Lanka
8. Spending Money Is Not the Same as Achieving Results
Good budget management does not mean spending every allocated rupee simply because the financial year is coming to an end.
Such an approach can encourage unnecessary purchases, poor-quality construction, and wasteful expenditure. Similarly, unspent funds do not always represent failure. Sometimes expenditure is lower because procurement costs have declined or unnecessary activities have been avoided. The real question is whether public money has achieved its intended purpose. This is the principle behind performance-based budgeting.
Under this approach, government performance is judged not only by how much has been spent, but also by what has been delivered.
Consider a road development project.
Its success should not be measured simply by the amount spent on construction.
We should also ask whether travel time has fallen, transport costs have declined, farmers have gained better market access, and surrounding communities have benefited.
The same principle should apply to other sectors.
In education, the focus should include better learning facilities and educational outcomes.
In healthcare, it should include improved access, better services, and more effective treatment.
In agriculture, it should include higher productivity, lower production losses, and better incomes for farmers. The purpose of public expenditure is not merely to spend money. It is to improve people’s lives.
The government should introduce stronger arrangements for monitoring development expenditure and assessing results. Every major project should have a realistic implementation timetable, a clearly identified responsible institution, and measurable financial and physical targets.
Ministries and departments should publish quarterly progress reports. These reports should explain not only how much money has been spent, but also what work has been completed. Projects falling behind schedule should be identified early. The reasons for delays should be examined, and corrective action should follow.
Senior officials should be accountable for project performance. At the same time, they should receive the professional support and administrative safeguards needed to carry out their responsibilities. The objective should not be to punish officials simply because expenditure is low.
It should be to identify genuine obstacles, remove unnecessary delays, and deliver development benefits more efficiently. The government must also evaluate proposed investments carefully before introducing additional projects.
There is little value in repeatedly announcing new projects while existing ones remain unfinished. This leads to a fundamental question. When billions of rupees are allocated for development at the beginning of the year, what measurable benefits can the government show the public at the end of that year? If there is no convincing answer, the large figures announced in a budget speech have little meaning for ordinary citizens.
9. What Should We Expect from the 2027 Budget?
The 2027 Budget provides an opportunity to move beyond short-term relief and establish a stronger foundation for national development. The government should certainly address the financial difficulties faced by households.
Salary increases, targeted social protection, and improvements in essential public services can help reduce hardship. However, these measures must form part of a wider economic strategy.
The budget should clearly explain how the government intends to increase production, create employment, strengthen exports, attract investment, and improve people’s real incomes. It should also identify the practical steps required to achieve these objectives. Sri Lanka needs measurable economic targets, realistic development priorities, and clear implementation arrangements.
Major projects should have publicly available information on their costs, expected benefits, responsible institutions, and completion dates. Progress should be reviewed regularly, and the public should be able to understand what has been achieved.
The government must also recognise the constraints created by public debt and available revenue. Economic development and social protection must be financed responsibly. Otherwise, the country risks undermining the stability it has worked hard to restore.
Equally important is the need to ensure that the benefits of recovery reach people beyond the public service. Farmers, private sector employees, small business owners, self-employed workers, pensioners, unemployed young people, and low-income households must also have opportunities to improve their living conditions. Young people, in particular, need confidence that they can build successful futures in their own country.
Businesses need confidence to invest, expand, and create jobs. Farmers need opportunities to improve productivity and earn reasonable incomes. Households need greater confidence that their earnings will be sufficient to meet essential expenses. Public institutions must become more efficient, transparent, and responsive.
Above all, the government must demonstrate that public funds are being used effectively. A budget should not merely announce what the government intends to do. It should establish how those promises will be implemented, who will be responsible, when results can be expected, and how success will be measured. That is the difference between a budget of promises and a budget of results.
From Budget Promises to Economic Results
Sri Lanka has made meaningful progress since the economic crisis of 2022. Greater stability, renewed growth, and improvements in public finances are important achievements. However, economic stability is only the beginning of recovery. The country still faces serious challenges.
Many households continue to struggle with living costs. Young people need better employment opportunities. Businesses need greater confidence. Farmers and rural communities need stronger economic opportunities. Public institutions must become more efficient and effective.
These challenges cannot be solved through salary increases alone. Nor can they be overcome simply by announcing large development allocations. What Sri Lanka needs is a long-term economic strategy supported by practical action. We need an economy that produces more, exports more, attracts responsible investment, creates better jobs, and steadily improves people’s real incomes. We also need public institutions that are accountable, efficient, and capable of making timely decisions within the law.
The government must ensure that money allocated for development is used effectively, projects are completed, and public investments deliver measurable benefits.
The 2027 Budget should therefore mark a shift in economic management.
From promises to implementation. From allocations to results. From temporary relief to lasting economic progress.
These observations should not be viewed merely as political criticism. They represent important economic and administrative issues that deserve serious and constructive consideration. Ultimately, the goal of economic policy is not simply to produce favourable statistics or impressive budget announcements. It is to create a country where people can find meaningful employment, earn reasonable incomes, meet their essential needs, and live with dignity. The true measure of the 2027 Budget will not be what the government promises, but what it actually delivers to the people.
Sri Lanka’s 2027 Budget Speech is scheduled for November 12, 2026. The Appropriation Bill has already been presented to Parliament, and public expectations are high.
After several years of economic hardship, people are looking for relief. They want better incomes, affordable essential goods, secure employment, and improved public services. Above all, they want confidence in their country’s future. Much of the discussion surrounding the forthcoming budget has focused on the expected increase in public sector salaries. Such increases are welcome. Public servants deserve fair remuneration, particularly after the financial difficulties they have experienced. However, an important question remains.
Can salary increases alone improve people’s living standards and rebuild Sri Lanka’s economy?
Before answering this question, we must recognise the progress made since the economic crisis of 2022. Sri Lanka has regained a degree of economic stability. Foreign exchange reserves have improved, economic growth has resumed, and progress has been made in managing public finances.
According to the World Bank, the economy grew by 4.7% during the first half of 2026. This is an encouraging achievement.
However, economic recovery and improved living standards are not necessarily the same thing. An economy can grow while many families continue to struggle with their daily expenses. This is the central challenge facing Sri Lanka today.
The real test of the 2027 Budget is therefore not how much money the government promises to spend. It is whether those promises can be translated into better living conditions, productive investment, employment opportunities, and lasting economic progress.
1. Salary Increases: Welcome relief, but not lasting solution
Higher salaries can help working people meet their household expenses. This is particularly important for public servants who have experienced financial pressure during recent years.
However, the expected salary increase in 2027 should be understood in its proper context. The salary revision introduced in Budget 2025 was designed to be implemented in three stages. The first stage began in 2025, the second took effect in 2026, and the final stage is scheduled for 2027.
Therefore, the expected increase largely represents the completion of an earlier government commitment rather than an entirely new initiative. Regular salary reviews are necessary. Normal annual increments may not fully compensate workers for increases in the cost of living. However, there is another important consideration.
A higher salary does not always mean a better standard of living.
Consider a simple example. Suppose a public servant earns Rs. 60,000 per month. If the salary increases by Rs. 5,000, the employee receives approximately 8.3% more. This is certainly beneficial.
However, if the prices of goods and services have also increased by around 8% over the same period, the improvement in purchasing power will be very small.
Economists explain this through the difference between nominal wages and real wages. Nominal wages refer to the amount of money a person receives. Real wages indicate what that money can actually buy. For ordinary people, this distinction is extremely important.
A family is not concerned only about the amount appearing on a salary slip. It is concerned about whether that income can cover food, electricity, transport, education, healthcare, and other essential expenses.
Salary increases should therefore be considered as part of a wider policy to improve real incomes.
They must also remain financially sustainable, taking into account government revenue, productivity, public debt, and other expenditure commitments.
The objective should not simply be to increase salaries. It should be to help people live better.
2. Economic Recovery: Why Are People Still Struggling?
Official statistics show that Sri Lanka’s economy has improved. However, they do not always capture the full extent of the difficulties experienced by ordinary households. Recent figures illustrate this concern.
In October 2026, annual inflation, measured by the Colombo Consumer Price Index, stood at 8.3%. According to World Bank estimates, the poverty rate remained at 16.9% in 2025.
The overall unemployment rate was 4.0% in the second quarter of 2026. However, unemployment among young people aged 15–24 was considerably higher, at 17.8%.
Labour force participation was only 50.0% during the same quarter, highlighting the need to expand opportunities for productive employment. Nutrition also remains a concern. According to the Ministry of Health’s 2025 Nutrition Month data, 16.1% of children under five were underweight.
These figures tell us something important. Although the economy has recovered, the benefits have not yet reached everyone equally. Low-income families, pensioners, self-employed workers, and people without secure employment continue to face considerable financial difficulties.
We must also understand the difference between inflation and the cost of living. When inflation declines, it generally means that prices are rising more slowly. It does not necessarily mean that prices are falling. For example, suppose a food item that previously cost Rs. 100 increases to Rs. 200. Even if inflation subsequently declines, the price may remain close to Rs. 200.
This explains why households may continue to struggle even when economic indicators improve.
The government must therefore look beyond national averages and examine the actual circumstances of ordinary people.
Economic recovery becomes meaningful when families can afford a reasonable standard of living.
3. A stronger productive Economy: Foundation of lasting prosperity
Sri Lanka’s economic problem is not simply that salaries are too low.
A deeper problem is that the country has not developed a sufficiently strong, competitive, and diversified productive economy. We need an economy that produces more goods and services, creates better jobs, increases incomes, and competes successfully in international markets. A government can increase salaries, provide subsidies, and introduce tax concessions.
However, these benefits cannot be sustained unless national production, productivity, and income also increase. If government expenditure continues to rise without sufficient growth in economic activity and revenue, the country may eventually face higher taxes, greater borrowing, or renewed financial difficulties.
The 2027 Budget must therefore place greater emphasis on strengthening production and productivity. Agriculture, manufacturing, tourism, information technology, and export-oriented services all have important roles to play. Small and medium-sized enterprises deserve particular attention.
They provide employment, support local economic activity, and create opportunities throughout the country. Yet many businesses struggle with high financing costs, outdated technology, limited access to markets, and administrative difficulties.
Government policy should help these enterprises become more productive and competitive. Rural economic development is equally important. Farmers need better irrigation, storage facilities, transport, modern technology, and access to markets. Rural entrepreneurs need opportunities to add value to their products and increase their incomes.
Sri Lanka must also address another fundamental economic question.
How will the country earn the foreign exchange it needs?
Borrowing dollars is not the same as earning dollars.
Foreign borrowing may help meet immediate financial requirements, but it creates future repayment obligations. A sustainable economy must earn foreign exchange through exports, tourism, services, and other productive activities.
Sri Lanka should strengthen its traditional exports while developing opportunities in information technology, professional services, digital industries, and knowledge-based activities.
Workers’ remittances through formal channels also remain an important source of foreign exchange. However, these opportunities require skilled workers, modern infrastructure, investment, and consistent government policies.
A productive economy cannot be built through budget announcements alone. It requires a clear national development strategy, realistic targets, and effective implementation.
4. Investment confidence: Can development take place without it?
Domestic and foreign investment is essential for economic growth. Investment creates businesses, employment, technology, and new sources of income. However, investors need more than invitations, speeches, and promises. They need confidence.
They need stable policies, clear regulations, a fair tax system, reliable institutions, and an efficient public administration. This raises an important question.
Does Sri Lanka provide a sufficiently predictable environment for investors to make long-term decisions? Delays in obtaining approvals, unexpected policy changes, uncertainty over contracts, and difficulties in dealing with government agencies can discourage investment. Existing investors also deserve attention. Their legitimate concerns should be heard and resolved through transparent and lawful procedures.
A country cannot expect to attract substantial new investment while failing to address the problems faced by those who have already invested. Political communication also matters.
There is a difference between the language used by political leaders while in opposition and the responsibilities they carry after forming a government. Exposing corruption and investigating wrongdoing are essential. These efforts must continue without political interference. However, fighting corruption must also be accompanied by a clear and positive economic development programme.
Investors should hear not only about past failures and investigations, but also about future opportunities, policy stability, the rule of law, and the government’s economic direction. They need to understand where the country is heading.
Accountability and investment confidence are not competing objectives. Both are necessary for sustainable development. The challenge is to strengthen them together.
5. Public administration: Accountability and confidence to act
An efficient public service is essential for national development. Higher salaries may improve employees’ financial wellbeing, but they will not automatically improve the quality of public administration. Public officials also need professional skills, modern technology, clear responsibilities, and the confidence to make lawful decisions. One concern deserves particular attention.
Some senior public officials may be reluctant to exercise their lawful authority because they fear that administrative decisions could later become the subject of investigations or legal proceedings. This concern can arise in procurement, contract approvals, project implementation, and other development-related activities. If such fears become widespread, government work may slow down.
Projects may be delayed. Approvals may remain pending. Investors may lose confidence, and the public may experience unnecessary difficulties.
However, the answer is not to weaken investigative institutions. Independent investigations are essential for preventing corruption, abuse of power, and misuse of public resources. What is needed is a fair and transparent administrative system. Officials who deliberately violate the law must be held accountable.
At the same time, officials who act honestly, reasonably, and within their legal authority should receive appropriate professional safeguards and fair treatment. Clear procedures, proper documentation, transparent procurement rules, and accessible review mechanisms can help achieve this balance.
The government should also strengthen professional training and reduce unnecessary administrative complexity. Public officials must clearly understand both their responsibilities and the limits of their authority.
Good governance does not mean preventing officials from making decisions. It means ensuring that decisions are lawful, transparent, timely, and responsible. Sri Lanka needs a public service that is accountable for its actions and confident enough to perform its duties.
6. Development, inflation, and tax burden
Sri Lanka needs investment in infrastructure, energy, transport, irrigation, education, and healthcare. Well-planned public investment can increase productivity and support economic growth.
Better roads can reduce transport costs. Reliable electricity can improve industrial production. Modern irrigation can help farmers increase output. However, not every large development project will produce these benefits. Projects must be selected carefully. Their economic returns, financial costs, environmental effects, and long-term sustainability should be evaluated before implementation.
There is little value in starting expensive projects that fail to deliver meaningful benefits. Public investment can help reduce production costs over time, but it does not automatically control inflation. Price stability also requires responsible monetary policy, sound public finances, competitive markets, and reliable supplies of essential goods.
Exchange-rate management is another important consideration. A reasonably stable rupee helps businesses plan their activities and reduces uncertainty about import costs. However, attempting to maintain an artificially strong currency can weaken export competitiveness.
Lasting exchange-rate stability must be supported by stronger exports, improved productivity, investment, adequate foreign reserves, and confidence in economic management. Taxation also deserves careful attention.
Many households and businesses hope for tax relief. This expectation is understandable given the financial difficulties they have experienced. However, substantial tax reductions without adequate alternative revenue could weaken public finances and create new economic risks. The better approach is to make taxation fairer and more efficient.
This means widening the tax base, reducing tax evasion, improving tax administration, controlling wasteful government expenditure, and providing carefully targeted relief where financially possible.
The government must balance people’s immediate needs with the country’s long-term financial stability.
7. Budget Management: Why Are Allocated Funds Not Being Spent?
One of the most important issues that deserves attention in the 2027 Budget is the government’s ability to use public funds effectively. Preparing a budget and allocating money are only the beginning.
The real challenge is to convert those allocations into completed projects and practical benefits for the people. Sri Lanka has repeatedly faced difficulties in implementing development expenditure.
Every year, large sums are allocated for roads, schools, hospitals, irrigation systems, and other public investments. These announcements naturally create public expectations.
However, allocating money does not mean that development has taken place. If projects are delayed and funds remain unused, the expected benefits are also delayed. Recent expenditure figures highlight this problem. During the first six months of 2026, approximately Rs. 1,719 billion had been allocated for capital expenditure and net lending for the full year.
By the end of June, only about Rs. 280 billion had been spent. That represented just 16.3% of the annual allocation. During the same period, overall government expenditure reached 39.2% of annual allocations, while recurrent expenditure reached 45.9%.
The comparable first-half figure for capital expenditure and net lending in 2025 was 17.5%. These figures suggest that slow implementation of development-related expenditure is not a problem confined to a single year. Of course, expenditure is not always distributed evenly throughout the year. Large construction projects may require substantial payments during the later months. Therefore, the first six months alone cannot determine the final performance of the year. Nevertheless, such low expenditure levels deserve serious examination.
Why does this matter to ordinary people?
The consequences extend far beyond government accounting. Suppose funds are allocated to improve a hospital, but construction is delayed. Patients must continue without the facilities they were promised. If money is allocated for a school building but the project does not begin, students lose opportunities to study in better conditions. If irrigation projects remain incomplete, farmers may be unable to increase production.
If rural roads are delayed, transport costs remain high and farmers continue to face difficulties reaching markets. These delays also affect the wider economy.
Development projects create demand for construction materials, transport, engineering services, machinery, and labour. They provide business opportunities for contractors, suppliers, and smaller enterprises. When projects are postponed, these opportunities are postponed as well.
Employment creation can slow down, businesses may lose expected income, and communities must wait longer for improvements. Weak budget implementation is therefore not merely an administrative problem. It can become a serious economic problem.
Why does development expenditure remain slow?
There is no single explanation. Some projects begin with inadequate planning. Others face procurement delays, difficulties acquiring land, or problems obtaining environmental and other approvals. Poor coordination between ministries, departments, and government agencies can create further obstacles.
Some institutions may lack the technical expertise or experienced personnel needed to implement complex projects. Delays in releasing Treasury funds and restrictions arising from fiscal pressures may also affect implementation. Another possible reason is hesitation among officials responsible for approving contracts and financial commitments.
Where concerns about future investigations discourage lawful decision-making, the government must provide clearer procedures and appropriate professional safeguards. However, it would be unfair to blame public officials alone. The entire system requires examination, from project selection and planning to procurement, funding, implementation, monitoring, and evaluation.
Responsibility must be shared by political leadership, administrative institutions, and the officials responsible for individual projects. (To be continued)
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