ECONOMYNEXT – Sri Lanka has disclosed a 14.1 percent of gross domestic product deficit for 2020, in Finance Ministry accounts audited by the Attorney General amid a controversy over a smaller deficit claimed on inconsistent accounting principles.
The Finance Ministry had claimed an 11.1 percent of GDP deficit for 2020, claiming that arrears of 2019 were settled in 2020, deviating from a cash-basis accounting principle applied in preparing budget data in the past.
The 2019 deficit of 6.8 percent of GDP was slightly changed to 7.0 percent based on 30 billion rupee revision to total revenues to 1,907 billion rupees from 1,939 billion rupees last year.
Sri Lanka’s budget numbers have hit a major data controversy after a new administration put back payments in arrreas made in 2020 back to 2019, deviating from a principle of cash basis accounting.
Cash basis accounting gives a true borrowing number which is consistent with the deficit, not counting currency depreciation.
Opposition legislators warned that the accounts presented in parliament and also reported in the Central Bank annual report would not be acceptable to the Attorney General.
The central bank had made a disclosure separating the changes.
In accounts reported to the AG however a larger 14.1 percent deficit of 2,115 billion rupees had been disclosed.
There could be small variations in the way budgets are reported by either the central bank or Treasury. It may be due to how capital expenditure is presented – such as whether on-lending are reported as a net figure, whether provincial council revenues are included or not, and whether grants are lumped with revenues or reported as a financing item seprately.
Some changes may also happen due to revisions of final data. Such changes in accounting treatment usually amounts to around 0.1 or 0.2 percent of GDP.
The AG has qualified the accounts on a number of issues, some dating back from prior years but not the deficit, which is broadly consistent with the last year. (Colombo/June17/2021)