📈 Budget 2027: Call to Reform Local Government Finances

A severe financial mismatch persists in Sri Lanka's local authorities despite national revenue recovery post-crisis. Ahead of Budget 2027, experts urge systemic reforms for Municipal Councils, Urban Councils, and Pradeshiya Sabhas. • Overall Revenue Disparities: Locally generated recurrent revenue grew nominally from Rs. 28.1 Bn (2019) to Rs. 56.7 Bn (2024), but inflation dropped its real value to Rs. 27.4 Bn (in 2021 prices). Local own revenue relative to central tax collection fell from 3.1% (2020) to 1.5% (2024). • Breakdown by Local Tier: Expenditure covered by own-source revenue varies sharply by region: • Municipal Councils: ~86% (rates/taxes account for 41% of own revenue) • Urban Councils: ~77% • Pradeshiya Sabhas: ~56% (rates/taxes account for just 12%) • Reliance on Grants: Government transfers financed ~65% of total local expenditure in 2024, highlighting heavy dependence on central funds due to outdated property registers and narrow tax bases. • Proposed Reforms for Budget 2027: • Modernize property valuation and collection via digital systems • Introduce formula-based, transparent equalisation grants for poorer regions • Establish a national local-government fiscal information database to link tax collection directly with local service delivery