By Sri Lanka’s 2025 Budget Could Lead to Bigger Deficit and Slower Recovery, Warns Moody’s
Moody’s, a major credit ratings agency, has warned that Sri Lanka’s budget for 2025 may cause a bigger fiscal deficit and slower recovery than expected. This comes after the country introduced its new budget, which is part of the plan to recover from its economic crisis and start paying back its debt by 2028.
The budget mostly follows the guidelines of a $2.9 billion program with the International Monetary Fund (IMF), including a goal of having a small surplus in the government’s primary account. However, the planned deficit of 6.7% of the country’s total economy (GDP) is higher than the IMF’s target of 5.2%.
The budget includes spending 21.8% of GDP, focusing on welfare and infrastructure, while government income (revenue) is expected to be just 15.1% of GDP. Moody’s pointed out that Sri Lanka still faces challenges, like high debt costs, low income from taxes, and social issues that make recovery harder. Even though the country is aiming for 5% growth this year, the path to long-term recovery will be difficult.
