Fresh queries over Sri Lanka’s creative budget for 2016
ECONOMYNEXT – Sri Lanka’s budget numbers for 2016 have been questioned by a governance activist with emerging information showing that revenues and spending may be overstated by at least one percent of gross domestic product with imputed rents.
Chandra Jayaratne, a former chief of the Ceylon Chamber of Commerce who has pushed for better governance during the Rajapaksa administration has asked whether the budget for 2016 is in "line with Transparent Disclosure and Committed to Principles of Transparency and Good Governance."
Opposition member Bandula Gunewardene has charged in parliament that the education budget has been inflated by at least 120 billion rupees through a mystery number.
Finance Minister Ravi Karunanayake said in a reply in parliament which indicated that imputed rents had been charged for school buildings.
Imputed rents (which are non-existent in reality) is a statistical technique developed in the West to distort both inflation indices and GDP numbers.
Imputed rents would overstate the line items of revenue and grants, total revenue, non-tax revenues, recurrent spending, and total spending for the 2016 budget by about one percent of GDP.
Available information suggests that imputed rents had been inconsistently applied only to the education budget, though Finance Minister Karunanayake’s reply to parliament seemed to suggest that some changes had also been made to Health Ministry numbers.
In an open letter to academics and professionals calling for greater debate Jayaratne questioned whether spending and revenue could contain ‘economic value based estimates’ and whether similar estimates could be applied to capital spending.
If such changes were made, he queried whether such "accounting can be done in any year without specific explanations and notes and without due Transparency and without prior year adjustments…"
Sri Lanka’s budget planned to raise revenues from an estimated 13.0 percent of GDP in 2015 to 16.4 percent in 2016.
The total revenue based on budgeting practices consistently applied up to 2015 would be a maximum of 15.3 percent of GDP not 16.3 percent as presented to parliament and recurrent spending would be 14.4 percent not 15.4 percent of GDP in only the education budget had imputed data.
The current account surplus of 0.8 percent of GDP would remain unchanged at least as a forecast. Most economic analysts who are familiar with Sri Lanka’s fanciful beginning-of-the-year budget numbers however would expect Sri Lanka’s year-end current account deficit out-turn to be between 1 and 2 percent of GDP.
Unless any imputed capital spending has also been included, the overall deficit would be unchanged. (Colombo/Nov27/2015)