As Sri Lanka concludes debt restructuring agreements, and the focus shifts to enhancing growth, the new President’s maiden budget speech has hinted at the policy pathway that can be expected. And it is encouraging. President and Finance Minister Anura Kumara Dissanayake Budget 2025 in Parliament last week (17th February), and the proposals relating to trade and competitiveness reforms demonstrated remarkable consistency with budgets of recent administrations, with commitments to trade reforms and expanding trade relations. It has helped.

Notably, the President focused on the need for Sri Lanka to better integrate regionally, to enter strategic partnerships, and expand our trade agreements. There were no specifics offered about what priorities the new government has vis a vis trade agreements (for instance, bilateral versus plurilateral/mega-regional), or how the government plans to pick up existing/recent negotiations. But these sentiments will help allay pre-election worries by some that his government would tend towards protectionism (and even autarky), and may prioritize domestic policies and turn away from international engagement, reversing the gains made by his predecessor Ranil Wickremesinghe.

In regional engagement efforts, a priority for the new government must necessarily be to expand and deepen trade and investment links with India. For this, the early conclusion of a comprehensive agreement that covers not only goods but also services, investment, technology cooperation, and other strategic areas, is vital. Once the negotiations on the agreement recommence, priority attention should be given to resolving long-standing trade facilitation issues and smoothening non-tariff barriers faced by both sides. A valuable feature of the previous rounds of negotiations on the India-Sri Lanka ETCA (‘Economic and Technology Cooperation Agreement’) was that it provided a regular mechanism for resolving existing trade issues, making early wins, and building confidence.

In his Budget 2025 proposals, President Dissanayake announced that a new Export Development Plan would be formulated, alongside efforts to improve national quality, standards, and certification agencies, digitize trade facilitation and encourage private investment in setting up and running industrial parks. He reiterated a commitment to introducing a new Customs Act. He announced that a new National Tariff Policy would be formulated, cleverly framing it not as a ‘liberalization’ measure, but as a measure to boost exports by bringing down the cost of inputs and raw materials.

To be clear, all these initiatives are not brand new – versions of it had been initiated by previous governments, since 2015. But implementation was fraught with delays, administrative obstacles, and hamstrung by narrow interest lobbying. Yet, the good news is that the groundwork for this latest round has been laid by efforts of the past. Execution of these new plans will hinge on putting the right implementation mechanisms in place, bringing in expertise from outside, and building partnerships between private sector and government implementers. Boosting exports and FDI, and improving trade and competitiveness, are essential for Sri Lanka to build prosperity beyond stability.

Anushka Wijesinha is Co-Founder and Director of Centre for a Smart Future, an interdisciplinary public policy think tank. He was formerly the Advisor to the Minister of Development Strategies and International Trade and Chief Economist of the Ceylon Chamber of Commerce. Anushka also consults for the World Bank, Asian Development Bank, International Trade Centre, and UNCTAD.