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Sunday December 3rd, 2023

Sri Lanka budget deficit illegal, fiscal rules should be relaxed: Harsha

ECONOMYNEXT – Sri Lanka’s budget deficit for 2024 of 7.6 percent of gross domestic product violates a fiscal management responsibility law, and the law should be amended for the year to make it legal chairman of the parliament’s Public Finance Panel Harsha de Silva said.

The deficit is 9.1 percent of GDP with bank bailout costs.

“This is against the Fiscal Management Responsibility A “which states we have to maintain the budget deficit at 5 percent,” de Silva told parliament Monday.

The law had previously been changed to increase state enterprise raise the ceiling on guaranteed debt including to the Road Development Authority, which had no revenue to speak of and understated the debt.

Transport Minister Bandula Gunawardana who was Deputy Finance Minister when the law was brought in 2003 by an administration run by current President Ranil Wickremesinghe as Prime Minister has said Treasury officials had misled legislators into raising the ceiling.

De Silva said the law had been breached several times, with various amendments brought in 2013, 2016 and 2021.

“We have to bring an amendment stating that ‘yes, the law says 5 percent, but we expect a 6.5 or 7 percent budget deficit’; we can’t openly violate the law.”

The limit was only met by late Finance Minister Mangala Samaraweera, he said.

Samaraweera, however, could not give the benefit of a lower deficit to the public or the then administration, due to the policy rate enforced by inflationary open market operations.

Sri Lanka’s rupee depreciation and economic crises; the deficit lie

In 2018, when the budget deficit was brought down from 5.0 to 5.1 percent of GDP according revised numbers, (5.5 to 5.3 before fresh econometrics) the central bank printed 247 billion rupees to mis-target interest rates, triggering a 1.1 billion US dollar BOP deficit, busting the rupee from 151 to 184 to the US dollar in the process.

Under IMF program rates can be or are encouraged to be cut by printing money when inflation falls due to a so-called monetary policy consultation clause, which is at direct conflict with a reserve target, leading to missed targets, collapsing currencies and the ouster of reformist finance ministers. (Colombo/Nov20/2023)

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Sri Lanka UGC wants to boost number of IT-related degrees

ECONOMYNEXT – Sri Lanka’s University Grants Commission is of the view to boost the number of Information Technology (IT) related degrees in state universities with an aim to pave the way for a digital economy.

Sri Lanka’shigher education system has been producing more graduates in Arts stream while the degrees in highly demanded IT and other engineering services are being looked at only now.

“We do have a high demand for engineering, science, AI, computer and electronical engineering

studies,” Chairman of University Grants Commission, Sampath Amaratunga, told reporters at aa media briefing on Friday

“However, while avoiding neglecting the humanities, we should develop new IT skills.”

Amaratunga confirmed that a student who studied in any stream could obtain an IT degree, including students who studied in the arts stream.

The UGC data show that out of 18,490 engineering technology stream students who sat for their Advanced Levels (A/L) in 2022, 10634 were eligible for university.

“Even streams like agriculture should be encouraged to use technology,” Amaratunga said. (Colombo/Dec 2/2023)

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Sri Lanka leader inaugurates Climate Justice Forum at COP28 in Dubai

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe launched Climate Justice Forum (CJF) at the ongoing 2023 United Nations Climate Change Conference (COP28) held in Dubai in a move to gather support for vulnerable nations hit by climate-change led disasters.

This year’s climate summit held in Dubai’s EXPO2020 features a raft of issues for countries working to find common ground in tackling climate change, including whether to phase out fossil fuels and how to finance the energy transition in developing countries.

Wickremesinghe inaugurated the Climate Justice Forum at COP28 on Saturday and emphasized the critical importance of addressing climate issues with a sense of justice and equity.

The President had been in talks with many nations vulnerable to climate change disasters including African and South American countries to get their support for the CJF.

The move is to compel advanced and developed countries to look into the poor nations hit by the climate changes and help them to get over economic and debt burdens by either investing more in green energy initiatives or writing off debts to ease financial pressure.

Sri Lanka, which is now facing an unprecedented economic crisis, has seen increasing losses and damages, both human lives and physical properties due to climate change-led disasters like floods, drought, and earth slips.

In his speech at the COP28 forum, Wickremesinghe on Friday said the Climate Justice Forum will provide a platform for constructive and proactive engagements. (Dubai/Dec 2/2023)

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Sri Lanka IMF review goes to executive board on December 12

ECONOMYNEXT – The first review of Sri Lanka’s International Monetary Fund program is scheduled to go the lender’s Executive Board for consideration on December 12.

Sri Lanka officials were expecting the review to be completed in December as soon as official creditors gave their assurances.

According to the notice Sri Lanka had missed one performance criterion and has requested modifications.

Sri Lanka has outperformed on a number of quantity targets including inflation. In addition to quantity PCs there was also one non-accumulation of arrears.

There would also be re-phasing of access. The review was originally expected around September with another review based on December data, leading to September and March disbursements.

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