Sri Lanka budget deficit widens up to June 2019, filled by foreign borrowings

ECONOMYNEXT – Sri Lanka’s budget deficit has widened to 3.4 percent of estimated gross domestic product in by June 2019 from 2.4 percent in 2018 as revenues fell with collapsing imports, but the gap had been filled with foreign debt, keeping domestic rates down, official data shows.

Revenues were down 3.6 percent to 888.0 billion rupees, with tax revenues down 4 percent to 845 billion rupees as imports collapsed in the wake of monetary instability in 2018 which led to a private credit contraction.

Current spending soared 12.5 percent to 1,120.3 billion rupees, tripling the current account deficit of the budget to 1.5 percent of GDP or 232 billion rupees.

Capital expenditure was maintained at 1.9 percent of GDP up, 5.1 percent nominally to 290 billion rupees.

With minimal grants of only 0.6 billion rupees, the overall deficit widened 50 percent to 521.7 billion rupees, or 3.3 percent of GDP up from 2.4 percent a year earlier.

Only 0.7 percent of the deficit (estimated about 110 billion rupees) was financed in the domestic market, down from 1.3 percent last year.

Foreign financing grew to 2.7 percent (about 410 billion rupees) up from 159 billion rupees a year earlier.

The overall deficit implied by the increase in domestic debt was 622 billion rupees. SOE borrowing were down 25 billion rupees from the beginning of the year to 730 billion rupees, giving an overall estimated public sector deficit of about 597 billion rupees. (Colombo/Aug25/2019)