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Spending on ‘lending a hand to the vulnerable’ climbs new highs
View(s):By Kapila Bandara
Sri Lanka is pouring an unprecedented Rs 749 billion for social protection alone to fulfil a priority in the public spending plan, where social infrastructure such as health and education also get historic allocations.
The National People’s Power Government’s maiden budget presented by President Anura Kumara Dissanayake, last Monday, in a backdrop of healthier macroeconomic indicators, increased tax collection (Rs 715b in VAT alone and Rs 1.5 trillion Customs revenue), and proposed 18% tax on casinos, is meant to economically empower all Sri Lankans to democratise the economy and rectify social inequalities.
The 2025 budget reflected the declared commitment to look after the vulnerable, 1.6 million less abled, and seniors amid increased poverty.
A serving of Rs 749b for social protection, as well as Rs 604b for healthcare and Rs 619b for education, all add up to more than Rs 1.9 trillion.
The IMF has repeatedly told previous governments of failure to meet spending targets on social safety nets.
In 2024, the IMF’s indicative target for spending on social safety nets was Rs. 205b (or 0.7% of gross domestic product). In 2023, it was Rs. 187b and only partly fulfilled.
The economic implosion concocted by political leaders, the Central Bank of Sri Lanka’s destructive deficit financing, and by Treasury officials who were gluttons for monetary financing, choked the majority, the poor in rural areas. Children and women suffered the most.
In September 2023, the UN Development Programme’s National Citizen Survey of 25,000 households, done with the Oxford Poverty and Human Development Initiative, found that 12.3m (more than 10.1m rural) Sri Lankans, or six in 10, are multidimensionally vulnerable across 12 indicators, with millions in debt, desperate to feed themselves, no money for medical care, and for education.
In 2023, poverty doubled and nearly 26% fell below the poverty line of US$3.65 a day.
Successive governments, habitually have breached macroeconomic adjustments and structural reforms, after collecting IMF handouts 16 times since 1965. Now, eye deep in debt, deviation is not a choice on the 17th visit to the IMF, which shackled the politicians “to refrain from policies that would be inconsistent with the programme’s objectives’’.
IMF Sri Lanka Mission head, Peter Breuer noted in late November that indicative targets for social spending by end September were not met. This was so from the second review, when the IMF directed the CBSL to focus on a “multi-pronged disinflation strategy’’.
In November, Mr Breuer reminded the then-government that it “has an important responsibility to protect the poor and vulnerable’’ and that efforts must be redoubled. He mentioned in particular, Aswesuma social welfare benefits.
The NPP budget lays a path to inclusive and equitable progress ensuring health, food security and nutrition, protection of children and women, and in accessing social protection mechanisms.
Equitable, quality social services, and social protection systems echo those laid out by the UN “to allow for a decent standard of living for all’’ under the UN Sustainable Development Cooperation Framework signed with Sri Lanka through 2027.
In the 2025 budget, Rs 232b was set aside for Aswesuma. The cash grant for low income families is set at Rs 160.1b and Rs 36.9b is for low income less-abled. For seniors, there is Rs 28.9b financial support, and Rs 4.5b for chronic kidney disease patients.
For treatment of children with neurodevelopmental disabilities including Autism, Rs 200m was set aside, along with Rs 250m for day care for them.
For school stationery, Rs 2b had already been announced.
For pensions and gratuity Rs 479.7bn is set aside, including Rs 311.7bn for 730,000 pensioners. For widows, widowers and orphans of public officers, Rs 77bn is allocated and Rs 44b for gratuity payments. There is Rs 49b for death compensation, and for wounded soldiers.
And Rs 10.96b is set aside for other welfare services including Rs 10b for interest subsidy for seniors from July — 3% additional annual interest on one-year fixed deposits of Rs 1m.
For 265,000 pregnant women, Rs 7.5b is allocated for nutrition and Rs 5b for Triposha. For children and orphans in institutions, Rs 1b is allocated for a monthly allowance.
These are only select highlights of social protection spending.
This economic agenda took shape within boundaries including prior actions, quantitative performance criteria, indicative targets, structural benchmarks, that the IMF laid down.
In 2023, the then government implored the IMF in the first review itself to overlook certain performance criteria that it failed to meet, to modify performance criteria, to adjust the disbursement schedule to suit delays in reforms, and a review of financing assurances from the World Bank, Asian Development Bank and international financial institutions. Still, the Ranil Wickremesinghe government in a memorandum agreed to comply with IMF diktat in its entirety and more. “We will refrain from policies that would be inconsistent with the program’s objectives’’, the government pledged.
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