ECONOMYNEXT – Sri Lanka’s 2021 budget deficit has been revised up to 9.5 percent of gross domestic product from the initial 8.9 percent target presented to parliament with nominal GDP for the year revised down, official data shows.
The nominal overall deficit remains at 1,565 billion rupees.
The revenue deficit, or the gap between total revenues and current spending, has been revised up to 3.1 percent of GDP from 2.9 percent presented to the parliament.
Current spending has been revised up to 15.4 percent of GDP with provincial council spending of 68 billion rupees and 14.9 percent without them.
Capital spending has been revised up to 6.4 percent from 6.0 percent.
Revenues have been revised up to 12.3 percent of GDP from 11.4 percent or 2,019 billion rupees. Without provincial councils, revenues are set at 11.8 percent or 1,951 billion rupees.
Concerns have been raise whether revenue targets can be met. In April a third Coronavirus wave begam to spread.
Sri Lanka’s state finances were de-stabilized after value added taxes were slashed in November 2019 without parliamentary approval triggering money printing, forex shortages and a balance of payments deficit which was worsened by a Coronavirus pandemic.
Unlike private firms which cut salaries, state workers continued to be paid the same salary requiring money printing.
In 2020, the equivalent of 86 cents of every tax rupee was spent on salaries and pensions leaving hardly any money left for other government services.
The nominal deficit for 2021 of 1,565 billion rupees is expected to be finance with 99 billion rupees of foreign borrowings and 1,466 billion rupees in domestic money.
In 2020 after money printing and currency falls triggered downgrades Sri Lanka had to repay 83 billion US dollars of foreign debt on a net basis.
Sri Lanka also claimed the deficit in 2020 was 11.7 percent after financing a 13.97 percent deficit during the year triggering data controversy.
The finance ministry suddenly pushed back payment arrears to the prior year, also changing the reported deficit in 2019.
No changes were made to any other years to account for arrears which continued to be reported on a cash-basis. (Colombo/June02/2021 – Corrected. An earlier version of this story said the share of salaries and pensions were 78 cents per tax rupee. It has been corrected to 86 cents.)