President and Finance Minister Anura Kumara Dissanayake’s maiden budget speech showcased several promising proposals on trade and competitiveness, maintaining welcome consistency with previous administrations’ approaches.
By prioritising exports and international trade at the start of his budget proposals, the President signalled a clear focus on growth-enhancement beyond the hard-won macroeconomic stability of recent years. This consistency in policy direction, particularly in trade and competitiveness initiatives, marks a positive development for Sri Lanka.
Renewed attention on exports?
The Government’s proposed ‘National Export Development Plan’ represents a strategic approach to export development, crucial for a trade-dependent economy like Sri Lanka.
This initiative should build upon the efforts of the National Export Strategy of 2018-2022, which featured comprehensive action plans developed through private-public collaboration. The previous strategy had sector-specific approaches and strong private sector ownership, providing valuable lessons in developing the new plan.
To succeed, the new plan must maintain this collaborative approach while incorporating current market trends around sustainability. Technical support from international bodies like the International Trade Centre (ITC) could provide valuable market insights and ensure practical implementation.
The ITC’s experience in developing export strategies across multiple countries would help ground Sri Lanka’s plans in market realities while ensuring achievable and pragmatic sector-wise strategies.
Tariff reform – a strategic shift?
The President’s approach to tariff reform marks an interesting departure from previous attempts. Rather than positioning it as ‘trade liberalisation’, he framed the proposed new ‘National Tariff Policy’ as an ‘export growth’ imperative, emphasising how streamlined and predictable tariffs can provide affordable inputs for exporters.
This strategic framing acknowledges the interconnected nature of imports and exports, where high import costs due to para-tariffs affect both consumer welfare and export production costs. Previous attempts at unilateral tariff liberalisation often faced resistance from sectors dependent on protection. However, the new Government’s focus on export growth and production costs may provide a more palatable narrative for necessary reforms. The groundwork for a new tariff policy was already laid by the reforms undertaken under the World Bank’s Development Policy Operation, and a National Tariff Policy Framework was approved by the Cabinet in June 2024. To support this transition, safeguards such as the Anti-Dumping and Countervailing Measures Acts need stronger implementation capabilities.
This requires building capacity within Government Departments, particularly in international trade law and economics. Reviving the Trade Adjustment Program from 2018-2019 could provide a transparent mechanism for addressing industry concerns about tariff reforms while offering necessary support for firms and workers to adapt.
Regional integration and trade agreements
The President’s commitment to regional integration and expanded trade agreements helps dispel concerns about potential protectionist policies. While specific priorities regarding bilateral versus plurilateral agreements weren’t detailed, a key priority should be concluding an enhanced agreement with India, covering goods, services, investment, and technology cooperation.
With India’s middle class estimated at over 200 million people – ten times Sri Lanka’s population – this presents a significant export opportunity. Immediate attention should focus on resolving existing trade facilitation issues and revisiting the current apparel quota of eight million pieces annually.
Previous negotiations on the Economic and Technology Cooperation Agreement (ETCA) with India provided a valuable mechanism for addressing bilateral trade issues, and this approach should be revived to build confidence between both nations.
Modernising trade support and trade facilitation
The focus the President’s Budget speech placed on modernising the national quality infrastructure (NQI) system shows recognition of how standards and certifications impact export competitiveness, especially for SMEs.
The Government can draw from the earlier National Quality Infrastructure Strategy, developed with support from UNIDO, ITC, and the World Bank, to make standards and certification institutions and systems more business-friendly. This modernisation is crucial for helping Sri Lankan businesses meet international standards and access new markets.
The Budget’s emphasis on trade facilitation, including the National Single Window (NSW) and a new Customs Act, demonstrates continuity with previous reform efforts.
Success will require not just technological advancement but also institutional reform of processes and personnel. The Government’s digitalisation drive under Dr. Hans Wijesuriya’s leadership could provide fresh momentum for the NSW, particularly if it addresses both technical and organisational challenges.
Implementation: the critical factor
While these proposals build on previous foundations, their success depends entirely on execution – historically a weakness of past budgets. However, the trade reforms outlined in Budget 2025 have the advantage of building on existing groundwork rather than starting from scratch. The Government can improve implementation chances by learning from past efforts, leveraging technical expertise, and fostering strong public-private partnerships.
As Sri Lanka seeks to build prosperity beyond stability, effective implementation of these trade reforms becomes crucial for boosting exports, foreign direct investment, and overall competitiveness. The key will be maintaining momentum while ensuring reforms are implemented systematically and with proper stakeholder consultation.
The writer is Co-Founder and Director of Centre for a Smart Future, an interdisciplinary public policy think tank. One of CSF’s thematic pillars is ‘International Trade and Competitiveness’. He was formerly the Advisor to the Minister of Development Strategies and International Trade, Chief Economist of the Ceylon Chamber of Commerce, and Research Economist at Institute of Policy Studies.
