ECONOMYNEXT – Sri Lanka’s budget deficit fell 39 percent to 1,217 billion rupees in the 11 months to November 2024, with total revenues rising 32 percent and current spending kept in check, official data show.
Tax revenues went up 34 percent to 3,370 billion rupees, and not tax revenues rose 14 percent to 280.5 billion rupees.
Total revenues were up 32 percent to 3,664 billion rupees.
The budget for 2024 targeted a 34 percent rise in total revenues and a 40 percent rise in tax collections.
Total revenues had risen to 11.6 percent of projected gross domestic product by November from 10 percent last year. A full year target of 13 percent was projected in the budget.
Current spending was flat at 4,276 billion rupees by November 2024, against 4,292.8 billion rupees a year ago.
The current account deficit of the budget (total revenues less current spending) also fell to 59 percent to 625 billion rupees.
Sri Lanka moderately increased state salaries and pensions in 2024 but bigger increases are expected in 2025, after the currency collapse in 2022.
Interest costs fell absolutely by 9 percent from 2,145.2 billion rupees. Interest costs are easing amid debt restructuring and also deflationary policy by the central bank, where currency appreciation was allowed.
Countries with inflationary central bank policy and depreciating currencies experience generally high nominal interest rates which peak to even higher levels when stabilization policies are deployed to stop external crises.
In 2024 the central bank missed its inflation target helping bring greater monetary stability to the country.
Sri Lanka’s budgets deteriorated from the 1980s as the country was denied a credible anchor for money in the wake of the Second Amendment to IMF articles in 1978, leading to operating frameworks with severe anchor conflicts being deployed, critics have said.
Capital spending went up 21 percent to 605.9 billion rupees.
The overall deficit was down 39 percent to 1,231 billion rupees, without bank recapitalization costs.
The primary balance of the budget, which is total spending less interest costs was 927.9 billion rupees, better than the 331.4 billion rupees last year.
The primary balance target under the last IMF program was only 300 billion rupees.