FinMin tells spending agencies to focus on fiscal discipline for 2025 budget

The Finance Ministry yesterday instructed all spending agencies to prioritise fiscal discipline and prudent management as the country prepares its 2025 national budget. 

In the guidelines issued for the 2025 budget estimates, part of the Medium-Term Fiscal Framework 2025-2027, the ministry emphasised that the budget would be designed to ensure fiscal responsibility while strategically allocating public funds to maximise efficiency and value for money.

The 2025 budget will align with Public Financial Management Act No. 44 of 2024.

The Finance Ministry acknowledged a significant improvement in the fiscal position compared to the past two years but warned against complacency. 

“The prevailing economic stability is intrinsically connected to the maintenance of fiscal discipline and the continuity of the macroeconomic reform path. Any deviation from this path could easily push the country into a vicious cycle towards rapid economic downturn,” the ministry stated in a circular.

Noting the Treasury is building cash buffers and fiscal resilience to address the future challenges, both domestic and external, the Finance Ministry emphasised the need for vigilance to safeguard Sri Lanka’s economic recovery.

The 2025-2027 medium-term fiscal targets include increasing government revenue to 15.1 percent of GDP in 2025 and 15.3 percent in 2027, through new revenue-enhancing measures, strengthening tax administration, broadening the tax base and improving compliance through digitalisation.

Government expenditure will be maintained at 20 percent of GDP from 2025, with a focus on optimising public returns on spending. Capital expenditure is set to gradually rise to over 4 percent of GDP, while primary expenditure will be kept below 13 percent of GDP.

The strategy aims to maintain a primary budget surplus of 2.3 percent of GDP and a budget deficit below 5 percent of GDP from 2025 onward. 

Additionally, emphasis will be placed on implementing legislative and institutional reforms to enhance fiscal management and increasing revenues from the state-owned enterprises through expenditure rationalisation.