Beyond the facade: A strategic critique of 2026 Budget

GDP ratio peaked at 13.0%, then declined in the 2026 Budget to 12.4%.

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President and Finance Minister Anura Kumara Dissanayake

Recurrent expenditure exceeded projections, particularly in subsidies and transfers, which rose from Rs. 754 billion (2024) to Rs. 1,015 billion (2025), and are now Budgeted at Rs. 1,215 billion for 2026. Interest payments also increased, reflecting growing debt servicing pressure. The Budget deficit widened from Rs. 1.448 trillion in 2025 to Rs. 1.7 trillion in 2026. This reflects both revenue underperformance and expenditure rigidity, especially in salaries, subsidies, and interest. Domestic borrowing surged from Rs. 2.895 trillion to Rs. 3.630 trillion. Heavy reliance on bank financing (Rs. 1.8 trillion in 2026) raises concerns about crowding out private credit and inflationary risks.

The Government’s push to raise estate worker wages—reportedly up to Rs. 1,700-2,000 per day—has been framed as a long-overdue correction to decades of exploitation. But the timing, lack of productivity linkage, and absence of sectoral reform suggest this is more political theatre than economic strategy. While some estates offer Rs. 50 per kilo above the norm as incentive, most wage hikes are flat, not tied to output or quality. Sri Lanka’s tea prices are already under pressure due to global surplus and declining demand. A wage hike without quality or branding reform will increase unit costs, making Sri Lankan tea less competitive. Many estate companies operate on thin margins. Without subsidies or tax relief, they'll either cut jobs, reduce investment, or pass costs to buyers—raising retail prices and risking market share.