FCCISL welcomes progressive measures in Budget; highlights areas for further consideration

FCCISL President Keerthi Gunawardane

The Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) yesterday commended the Government on the recently unveiled National Budget 2025, which outlines a comprehensive strategy aimed at revitalising the nation’s economy. 

The FCCISL in its statement acknowledged several forward-thinking proposals that promise to foster economic growth and stability. However, it also identifies certain areas that may require re-evaluation to ensure they align with the country’s long-term objectives.

Positive proposals

Digital economy advancement: The allocation of Rs. 3,000 million to accelerate digital economy development is a commendable step. The introduction of the Sri Lanka Unique Digital Identification (SL-UDI) and the establishment of an apex Digital Economy Authority are poised to enhance efficiency and global competitiveness. The Government’s ambition to elevate the digital economy to over $ 15 billion, constituting 12% of the national economy within five years, is both ambitious and attainable. 

Support for Small and Medium Enterprises (SMEs): The proposal to establish a development bank dedicated to SMEs, coupled with a stimulating loan scheme, reflects a strong commitment to nurturing entrepreneurship and innovation. This initiative is expected to bolster local industries and generate employment opportunities. 

Legal and regulatory reforms: The introduction of eleven new legislative measures, including the Investment Protection Act and the Public-Private Partnership Investment Management Act, is anticipated to create a more conducive environment for business operations and attract foreign investments. 

Areas for further consideration

Fiscal deficit concerns: The budget projects a fiscal deficit of 6.7% of GDP, which exceeds the 5.2% target preferred by the International Monetary Fund (IMF). This deviation could pose challenges to fiscal consolidation efforts and may impact investor confidence. It is imperative to explore avenues for enhancing revenue generation and rationalising expenditures to bridge this gap. 

Taxation adjustments: While the increase in personal income tax relief is a positive move, the removal of exemptions on gains and profits from services provided to foreign clients may deter service exporters. Balancing tax policies to ensure competitiveness while maintaining revenue streams is crucial. 

Public sector salary revisions and more employment in public sector: The proposed increase in public sector salaries, amounting to an estimated Rs. 325 billion, underscores the Government’s commitment to improving public service remuneration. However, implementing this increment in phases, starting with Rs. 5,000 and 30% of the remaining amount from April 2025, with the balance spread over subsequent years, necessitates careful fiscal planning to prevent undue strain on public finances. In addition the announcement of more job opportunities in the public sector (not clear in which areas) can be justified for the improvement of sectors like Education or Health. If this is to improve the other Government services while we are spending lot of money for digital economy then we are increasing our total cost for everyone.  

The FCCISL remains optimistic about the potential positive impact of the National Budget 2025 on Sri Lanka’s economic landscape. We are committed to collaborating with the Government and other stakeholders to ensure the successful implementation of these initiatives, fostering a resilient and prosperous economy for all Sri Lankans.