Sri Lanka domestic borrowings spike, revenue deficit wide up to May 2015

ECONOMYNEXT – Sri Lanka’s domestic borrowings were sharply up, and the deficit in the current account was also wide amid high spending on salaries and subsidies, despite a sharp recovery in tax revenues in five months to May 2015, official data showed.

State revenues climbed 18 percent to 502 billion rupees in the first five months of the year, with tax revenues climbing 18.5 percent to 457 billion rupees, a pre-election fiscal report showed.

Non-tax revenues were up 16.6 percent to 44.9 billion rupees.

Tax gains were helped by alcohol excise, where illegal alcohol made with smuggled ethanol was halted by the new administration. Rising car imports also brought in more taxes.

Tax revenues was only 33.4 percent of the annual estimate, but taxes generally improve towards the end of the year.

Recurrent expenditure was 652.8 billion rupees, or 41 percent of the annual estimate of 1552 billion rupees. There were no comparison figures given for 2014.

Sri Lanka stopped releasing monthly fiscal data in the last stages of the ousted Rajapaksa regime, and the new regime has maintained the fiscal secrecy.

The gap between total expenses and recurrent expenses or the current account deficit was 150.8 billion rupees, higher than the annual estimate of 47.3 billion rupees.

With capital expenditure of 159.7 billion rupees or 33 percent of the annual target, the overall budget deficit was 310.5 billion rupees, or about 2.75 percent of forecasted gross domestic product or 62 percent of the annual target.

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If the trend does not improve Sri Lanka is heading for a deficit of 6.6 percent of GDP, though usually year-end adjustments are made.

Domestic borrowings at 367 billion rupees were sharply higher than the annual target of 248 billion rupees. Domestic borrowings were a negative 57.4 billion rupees amid a net foreign borrowing.

Since April, when rates were cut after a bond maturity at sharply higher yields following a controversial bond auction, foreign investors in rupee bonds have also been pulling out some of their money.

 

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