Abstract
1. Introduction
Sri Lanka’s economic recovery
between 2022 and 2025 is a case of structural continuity following a systemic
collapse. When Wickremesinghe assumed the roles of President and Minister of
Finance in mid-2022, the nation was in economic freefall, marked by record
inflation, currency depreciation, and external default (IMF, 2025a). By 2024,
inflation had fallen from nearly 70 per cent to below 2 per cent, GDP growth
had returned to positive territory, and foreign-exchange reserves had more than
doubled (Central Bank of Sri Lanka, 2023).
Anura Kumara Dissanayake’s NPP
government inherited this stabilised macroeconomic environment. His first
budget, presented in February 2025, maintained the same IMF-prescribed fiscal
targets: a primary surplus of 2.3 per cent of GDP and revenues approaching 15
per cent of GDP (IMF, 2025a; Ministry of Finance, 2025). The central question
addressed in this paper is whether Dissanayake’s fiscal program represents a
departure from or a continuation of Wickremesinghe’s stabilisation framework.
2. Methodology
This research adopts a
comparative policy analysis based on four main fiscal sources: the Fiscal
Management Reports (FMRs) 2022–2024 and the Budget, Economic and Fiscal
Position Report (BEFPR) 2025 (Ministry of Finance, 2023; 2025). These
primary documents are triangulated with IMF country reports, the Central
Bank of Sri Lanka Annual Report 2023, and the Public Financial
Management Act No. 44 of 2024 (Parliament of Sri Lanka, 2024). Comparative
analysis focuses on three axes—macroeconomic performance, fiscal structure, and
institutional design—to determine continuity between the two administrations.
3. Wickremesinghe’s Crisis
Management and Institutional Reforms
Between 2022 and 2023, total
revenue rose from below 8 per cent to 9.8 per cent of GDP following the
reinstatement of VAT, PAYE, and higher corporate tax rates (Ministry of
Finance, 2023). The fiscal deficit narrowed from 10.2 per cent of GDP in 2022
to 6.8 per cent in 2023, while the primary balance turned positive (IMF,
2025b).
Monetary stabilisation
complemented fiscal consolidation. The Central Bank of Sri Lanka Act No. 16
of 2023 institutionalised price-stability objectives, resulting in a
dramatic fall in inflation from 70 per cent to 1.5 per cent by October 2023
(Parliament of Sri Lanka, 2023).
State-owned enterprises (SOEs)
were restructured through cost-reflective pricing. The 2024 Budget Speech
reported that 52 SOEs moved from a collective loss of Rs 727 billion in 2022 to
a profit of Rs 313 billion in 2023 (Parliament of Sri Lanka, 2023). Simultaneously,
the Domestic Debt Optimisation (DDO) program extended maturities and lowered
servicing costs, while negotiations with bilateral and private creditors
advanced debt restructuring of about US$ 25 billion by late 2024 (IMF, 2025a;
Reuters, 2025a).
Perhaps the most enduring reform
was legal. The PFMA No. 44 of 2024 replaced the Fiscal Management
(Responsibility) Act 2003, introducing binding primary-balance targets,
mid-year and pre-election fiscal reports, and a multi-year debt-reduction
strategy (Parliament of Sri Lanka, 2024). The Fiscal Management Report 2024
anticipated this shift, and the BEFPR 2025 was the first report issued
formally under the PFMA (Ministry of Finance, 2023; 2025).
4. Outcomes of the
Wickremesinghe Era
Quantitatively, the results were
significant. Inflation declined from 70 per cent to 1.5 per cent, GDP growth
averaged 4.3 per cent from late 2023 onward, and reserves climbed above US$ 5.5
billion by early 2024 (IMF, 2025a; Central Bank of Sri Lanka, 2023). The fiscal
deficit narrowed, and the primary balance turned surplus. SOEs shifted into
profitability, and the PFMA ensured fiscal discipline would survive changes in
government.
This phase marked the end of
crisis firefighting and the birth of an institutional framework for sustained
fiscal management. Wickremesinghe’s reforms laid both the legal and
macroeconomic foundation on which subsequent governments would be compelled to build.
5. Continuity under Anura
Kumara Dissanayake
Dissanayake’s assumption of the
finance portfolio in September 2024 occurred after the economy had stabilised.
The 2025 budget presented a program consistent with IMF parameters and PFMA
obligations (Ministry of Finance, 2025). Revenue was projected at 15 per cent
of GDP, expenditure at 21.8 per cent, and the primary surplus at 2.3 per cent
(IMF, 2025a; Reuters, 2025b).
Major debt restructuring was
completed in December 2024, leaving the NPP government to manage, not design,
the process (IMF, 2025b). The PFMA’s reporting and surplus rules remained
intact, and the 2025 budget continued to use the same fiscal anchors as its
predecessor.
Crucially, the NPP did not
reverse the revenue measures or energy pricing policies established under
Wickremesinghe. Instead, its budget reframed these within a narrative of social
justice and redistribution. The language of the 2025 BEFPR emphasised
“equity and participation” while preserving the austerity-based discipline of
the previous administration (Ministry of Finance, 2025).
No attempt was made to alter the
Central Bank’s independence or to monetise deficits. The IMF and credit
agencies confirmed that Sri Lanka remained on track with EFF benchmarks (IMF,
2025b; Reuters, 2025b).
6. Discussion
Dissanayake’s fiscal governance
represents continuity masked by ideological rebranding. Wickremesinghe’s
reforms—particularly the PFMA and IMF program—bind the NPP government to a
pre-determined fiscal path. While the NPP emphasises inclusion and equity, its
budget figures demonstrate alignment with Wickremesinghe’s targets.
The political economy of
continuity is clear: Wickremesinghe absorbed the political cost of tax hikes
and price increases to restore macro-stability. Dissanayake benefits from the
fiscal space created by those measures, allowing him to redirect narratives
without undermining the structure. As the IMF Third Review (2025a) observes,
Sri Lanka has already recovered 40 per cent of its output loss since 2018, a
result attributable to policy continuity rather than rupture.
7. Conclusion
The trajectory from Ranil
Wickremesinghe to Anura Kumara Dissanayake illustrates an unusual case of
fiscal continuity in Sri Lankan politics. Wickremesinghe’s period (2022–2024)
was defined by stabilisation under external supervision and institutional reform.
The PFMA 2024 enshrined discipline into law, and the IMF EFF established a
long-term macroeconomic roadmap.
Dissanayake’s 2025 budget
operates entirely within this structure. The difference is rhetorical and
distributional rather than structural. The NPP government positions itself as a
socially conscious executor of a technocratic legacy. In substance, its empire
is built upon the foundation that Wickremesinghe laid during Sri Lanka’s most
severe economic crisis.
Future research should examine
whether the PFMA’s discipline and IMF benchmarks can endure political cycles
and whether the NPP can maintain social equity without fiscal slippage. For
now, the empirical evidence supports the thesis that Sri Lanka’s present
stability is the product of policy continuity rather than innovation.
References
Central Bank of Sri Lanka (2023) Annual
Report 2023. Colombo: Central Bank of Sri Lanka.
International Monetary Fund
(2025a) Sri Lanka: Third Review under the Extended Arrangement under the
Extended Fund Facility. IMF Country Report No. 25/56. Washington, DC: IMF.
International Monetary Fund
(2025b) ‘IMF Executive Board completes the third review under Sri Lanka’s
extended fund facility arrangement’, IMF Press Release No. 25/53, 28
February. Washington, DC: IMF.
Ministry of Finance (2023) Fiscal
Management Report 2024: Fiscal Strategy Statement 2024 and Budget, Economic and
Fiscal Position Report 2024. Colombo: Ministry of Finance, Economic
Stabilization and National Policies.
Ministry of Finance (2025) Budget,
Economic and Fiscal Position Report 2025. Colombo: Ministry of Finance,
Planning and Economic Development.
Parliament of Sri Lanka (2023) Budget
Speech 2024: A Prelude to the Stable Future. Colombo: Parliament of Sri
Lanka.
Parliament of Sri Lanka (2024) Public
Financial Management Act No. 44 of 2024. Colombo: Government Press.
Reuters (2025a) ‘IMF’s Executive
Board approves third review of Sri Lanka’s $2.9 billion bailout’, Reuters,
28 February. Available at: https://www.reuters.com.
Reuters (2025b) ‘Sri Lanka
secures staff-level IMF agreement on fourth review of bailout’, Reuters,
25 April. Available at: https://www.reuters.com.
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