ECONOMYNEXT – Sri Lanka’s tax revenues have surged 25 percent to 798.5 billion rupees up to June 2022 amid high inflation and non-tax revenues also brought in 119 billion US dollars, up 63 percent from a year ago, official data shows.
Sri Lanka’s economy is expected to inflate to around 23.8 trillion rupees in 2022 from 16.8 trillion in 2021 as the currency depreciated and prices soared in an ‘inflationary blow off’ which is technically known as High Inflation Financial Repression (IFR).
In the first half of 2022 nominal GDP was already 10.7 trillion rupees, up from 8.6 trillion last year. Sri Lanka’s inflation hit 54.6-pct in the 12 months to June 2022.
Revenue is coming despite import controls.
In an interim budget for 2022, full year tax revenues of 1,852 billion rupees were expected.
Current spending grew 20 percent to 1,571 billion rupees up to June, giving a current account/revenue deficit of 653 billion rupees.
The revenue deficit of the budget fell to 2.7 percent of GDP based on projected GDP down from 3.5 percent last year. However interest costs will pick up later in the year.
An interim budget forecasted full year current spending to 3,620 billion rupees, without salary hikes with value added tax also hiked.
State wages will eventually have to be hiked as inflation bites. Sri Lanka has a bloated public sector due to giving non-existent jobs to unemployed graduates to satisfy the demands of the Janatha Vimukthi Peramuna and Rajapapsa era vote buying.
Capital and net spending grew 36 percent to 250.2 billion rupees.
The overall budget deficit grew 16 percent to 902.2 billion rupees from 780 billion a year ago. As a share of GDP the deficit was down to 3.8 percent of GDP from 4.6 percent.
Central bank credit injected to the economy was 1,000 rupees in the six months, bigger than the deficit. It includes debt repayments and sterilized interventions of imports.