Harsha limited on cause of 13 limit on expenditure

Fact Check

In parliament, MP Harsha de Silva makes two central claims: (1) primary expenditure is capped at 13% of GDP, which limits spending even when revenue increases; and (2) he attributes this current limit to the recent renewal of the IMF agreement, which he says was signed by the acting Minister of Finance.

To verify this claim, FactCheck.lk examined the Medium-Term Fiscal Framework (MTFF) published in the Fiscal Strategy Statement, the Letters of Intent (LOIs) signed between the Government of Sri Lanka and the IMF, and the Public Financial Management (PFM) Act, No. 44 of 2024. The LOIs outline all formal commitments made under the IMF programme.

Claim 1: The MTFF outlines a primary expenditure limit of 13% of GDP. More significantly, the 13% limit is legally mandated by Section 15(1) of the PFM Act, which was passed in June 2024. Thus, the MP is correct that such a cap exists and currently limits government spending, even in the face of increased revenue.

Claim 2:  To trace the requirement for this 13% limit, FactCheck.lk examined all four LOIs submitted to the IMF up to the date of the MP’s statement, dated March 2023, December 2023, June 2024, and March 2025. None of these documents specified a 13% limit on primary expenditure. Therefore, there is no evidence (subject to Additional Note 1) that the 13% limit was a formal requirement of the IMF programme.

 

Even if there had been an informal understanding with the IMF on limiting expenditure, it would have predated the present government. The 13% cap was incorporated into law in June 2024, under the Ranil Wickremesinghe government. This legal provision now binds the present government and does not reflect a new or externally imposed commitment beyond existing law.

Therefore, we classify the MP’s statement as PARTLY TRUE.

Additional note 1: The March 2023 LOI to the IMF refers to plans to introduce a Public Financial Management (PFM) law, which legally mandates the 13% limit, by December 2023. The bill, which became part of a prior action on the IMF programme, was eventually passed into law in June 2024.

Additional Note 2: The 13% cap on expenditure was critiqued by independent analysts before it was adopted (For more, click here). However, Parliament passed the bill without a division.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.