Deputy finance minister Anil Jayantha Fernando
Sri Lanka’s 2027 budget will focus on capital market development, investment and restructuring state-owned enterprises, the deputy finance minister has said, even as the government’s spending plans keep close to Rs 700 billion for the military and police, more than double the allocation for education.
Anil Jayantha Fernando told an investor forum organised by the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE) that the government wanted to move beyond stabilising the economy towards economic transformation, and would allocate Rs 2 trillion for capital expenditure , prioritising roads, railways, rural connectivity and logistics.
However, the 2027 Appropriation Bill presented to parliament on 7 October sets capital expenditure at Rs 1.75 trillion, 5.4 per cent less than was allocated for last year, while increasing recurrent spending. The difference between the two figures has not been explained. The budget will be presented by the Sri Lankan president, Anura Kumara Dissanayake, who holds the finance portfolio, on 12 November.
Fernando said the finance ministry had reviewed 12 proposals from the SEC and agreed to most of them, some of which are expected to feature in the budget. He said government revenue had exceeded 16 per cent of gross domestic product by the end of 2025, surpassing the target of 15.4 per cent set for 2030, but warned that cutting corporate and personal income tax rates prematurely could undermine revenue. Reductions in indirect taxes could be considered once revenue targets were secured.
The government is planning a new State-Owned Enterprises Act to provide a common legal framework for restructuring state institutions. Fernando said Sri Lanka had 527 state-owned enterprises, though only a few were engaged in commercial activity. Some could be diversified, others merged, and some incorporated as companies with greater autonomy, while the state would withdraw from ordinary trading and hotel operations but could keep a role in energy.
He said a single window platform for investors was nearing completion, but acknowledged that bureaucratic procedures and resource constraints were delaying public investment projects. He named global trade tensions, instability in the Middle East, natural disasters and climate change as risks to the economy.
Sri Lankan soldiers sowing paddy in the North-East. File photograph
The Appropriation Bill allocates Rs 458 billion to the defence ministry and Rs 230.5 billion to public security, a combined Rs 688.5 billion for the armed forces and police, against Rs 328 billion for education. The public security allocation has risen by more than 19 per cent in a year.
Much of Sri Lanka’s military remains stationed in the North-East more than 17 years after the end of the Tamil liberation war, where it continues to occupy Tamil land and run farms and businesses, as displaced Tamil families protest for the return of their homes.
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