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Three important features of the 2026 budget—now being debated in parliament after President Anura Kumar presented it on November 7—stand out: it attempts to implement a wide range of reforms while reducing the fiscal deficit through higher revenue collection and follows a strategy of private-public partnerships.

The extent to which the reforms would be effectively implemented, the success in containing the fiscal deficit to 4.5 per cent of the GDP and increasing production will determine the economic future of the country.

Criticism

Curiously, the opposition’s main criticism of the budget appears to be that the JVP/NPP government is following the very IMF policies which it vowed to abandon during the election campaign. From the national economic interest perspective, this was a pragmatic and favourable development. It has stabilised the economy that is now poised for growth. However, the effective implementation of reforms is imperative.

The critical issue is whether the objectives of the budget will be achieved through effective implementation of policies.

Private sector

The private sector has welcomed the budget as investor-friendly and one that will further stabilise the economy. At the post-budget seminar of the Ceylon Chamber of Commerce, private sector leaders spoke favourably about the fiscal outcomes, taxation policies, economic expectations and prospects of foreign investment.

John Keells Holdings (JKH) Chairman Kishan Balendra, in his keynote address at the CCC Budget Conference, described the budget as an investor-friendly one that could foster growth.

Key theme

Duminda Hulangamuwa, Adviser to the President on Economic Affairs, told a seminar organised by the University of Colombo that the key theme of the 2026 budget was to mobilise private capital and restore the private sector’s role as the “engine of growth”.

Implementation

The implementation of the proposals and bringing down the fiscal deficit are formidable challenges. The containment of the fiscal deficit to the budgeted figure of 4.5 per cent of the GDP is imperative to ensure fiscal consolidation, stabilise the economy and stimulate growth. The government must ensure that its expenditure is contained within the budgeted figure, unlike the usual tendency of overruns in expenditure. Finance Secretary Dr Harshana Suriyapperuma, who was earlier Deputy Minister of Finance, must ensure financial discipline.

Revenue shortfall

The government must also be mindful of the threat to fiscal consolidation by a shortfall in revenue. A fall in import duties and weaknesses in tax implementation could result in a shortfall in revenue. If this were to happen, there would be a need to impose unpopular taxes, the burden of which will fall on poor people.

Opposition

The opposition has repeatedly criticised the government for continuing with the IMF programme that the JVP/NPP said they would not follow during the election campaign. Its criticism of the government does not acknowledge that the pragmatic change in policy has ensured fiscal stability. The opposition’s criticism should be that the government has been slow to implement the required economic reforms.

On the other hand, the government has received plaudits from the private sector, and investor confidence has risen.

Investor confidence

The upward movement in the share indices of the Colombo Share Market reflects investor confidence. Private sector leaders have indicated their confidence in government policies at various seminars organised by the Ceylon Chamber of Commerce (CCC) and others.

Doing business

The budget speech and statements by government leaders emphasise that doing business is not the government’s role and that it should be left to the private sector. These are welcome statements. While this policy stance gained the plaudits of the private sector, it has disillusioned orthodox Marxists in the government and its far-left supporters and academics. Some of the JVP leaders are of the view that such a policy could lead to internal party tensions. How the President manages these party tensions would be of paramount importance for the country.

Implementation

The ineffective and inadequate implementation of budget proposals for the development of agriculture, rural infrastructure and development projects has characterised fiscal performance for decades. Had the litany of promises to develop the rural economy in past budgets been accomplished, there would have been no need to repeat these projects in this budget. We have to fervently hope that the government will implement the developmental programme it has promised in the 2026 budget. If not, next year or at least by the end of office in 2029.

Summary and conclusion

The containment of the fiscal deficit to the budgeted figure of 4.5 per cent of the GDP is imperative to ensure fiscal consolidation. The government must ensure that its expenditure is contained within the budgeted figure, unlike the past tendency of overruns in expenditure.

The government must be mindful of the threat to fiscal consolidation by the shortfall in revenue. A fall in import duties and weaknesses in tax implementation are likely to result in a shortfall in revenue. If these were to happen, there would be a need to impose unpopular taxes.

We fervently hope that the government will implement the development programme it has promised in the 2026 budget; if not next year, at least by its end of office in 2029. That would be a big step towards a rich and beautiful country for all.