Sri Lanka could potentially see a unique fiscal year in 2025, with the possibility of two national budgets being presented, according to KPMG Sri Lanka.
The situation could likely arise due to the delay in presenting the 2025 budget, noted KPMG Principal Tax and Regulatory Rifka Ziyad, elaborating on the Vote on Account, which was presented last December to cover the first four months of 2025.
While the official budget (scheduled to be presented on February 17) will include proposals covering expenditure from January 1, 2025, the government is expected to return to the normal budget presentation cycle by the end of the year, according to the tax expert.
“We saw something similar happen in 2015 and hopefully they will come back into the normal cycle at least by this October or November,” Ziyad stated, speaking at a pre-budget webinar organised by KPMG.
As per the firm’s estimation, the total government expenditure for 2025 is projected to reach Rs.4,218 billion, marking a Rs.358 million increase, from Rs.3,860 billion recorded in 2024.
This expenditure includes Rs.1,320 billion allocated for capital expenditure and Rs.2,898 billion for recurrent expenditure, as outlined in the Appropriation Bill for 2025.
KPMG further detailed the estimated breakdown of expenditure for 2025, with the highest allocation of 25 percent going to the Public Administration, Provincial Councils and Local Government Ministry.
Moreover, the Finance, Planning and Economic Development Ministry will be allocated 17 percent of the revenue expenditure, while 12 percent will be allocated to the Health and Mass Media Ministry and 11 percent to the Transport, Highways, Ports and Civil Aviation Ministry.
Furthermore, 10 percent will be allocated to the Defence Ministry and 6 percent to the Education, Higher Education and Vocational Education Ministry, according to KPMG estimates.
“The 6 percent allocation for education marks a nominal increase of 0.3 percent from 2024,” Ziyad noted.
To match this increase in spending, she stressed that the government must ensure that its revenue collection reaches Rs.4,218 billion.
Adding to the complications, the International Monetary Fund too has mandated that Sri Lanka must achieve a primary fiscal surplus of 2.3 percent of GDP, along with a targeted tax-to-GDP ratio of 14 percent by 2026.
Currently, Sri Lanka’s tax-to-GDP ratio hovers around 12 percent, indicating the need for new revenue proposals to meet these targets and achieve a surplus, according to KPMG.
Commenting on the situation, KPMG Tax Principal Suresh Perera stated that the government is likely to position 2025 as a year of fiscal consolidation and development, with an increased focus on improving revenue collection.
While vehicle imports will be a significant contributor to revenue for 2025, he opined that the citizens highly anticipate improvements in education, health and media sectors.
“The public will be watching how allocations for sectors like education, health and media will play out. We will have to see how these allocations will change in the upcoming years,” Perera said.
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