ECONOMYNEXT – Sri Lanka is expecting the budget deficit in 2020 to reach 9.0 percent of gross domestic product and tax revenues are recovering with economic activities resuming with Coronavirus control, Treasury Secretary Sajith Attygalle said.
In April amid a Coronavirus lockdown monthly revenues had fallen to 70 billion rupees. In 2019, average revenues were about 150 billion rupees.
“In August tax revenues were 144 billion rupees,” Attygalle told reporters in Colombo. “That means economic activities are happening.”
Sri Lanka has controlled the spread of Coronavirus and except the tourist inflows most activities had bounced back. Preliminary data indicated that exports were again about a billion US dollars in September he said.
In 2019 Sri Lanka collected 1.73 trillion in taxes and was expecting 1,450 billion in 2020 with a deficit of 8.5 percent according to revised projections in June 2020.
Attygalle said the 9 percent deficit included 242 billion rupees of arrears to suppliers coming from 2019, which was about 2 percent of GDP.
About 226 billion rupees had now been settled he said.
“Even with the difficulties we settled these,” Attygalle said. “These are SME suppliers who were in difficulties. The payments will also help economic activities.
“It will also be reflected in bank numbers.”
The government had also cut spending which was helping the deficit he said.
About 115 billion rupees in savings would be made from falls in interest rates in 2020. Private credit turned negative after April amid Coronavirus lockdowns and became positive in August.
Sri Lanka slashed taxes after a President Gotabaya Rajapaksa in an attempt at ‘stimulus’ and cut interest rates and injected money from late February. As the rupee fell steeply in March and April rating Fitch and Standard and Poor’s downgraded Sri Lanka’s rating to ‘B2’.
On September 28, Moody’s downgraded Sri Lanka by two notches to ‘Caa1’.
By 2025 Sri Lanka was planning to cut the deficit to 4 percent and bring down the national debt to 70 percent of GDP, State Minister for Money and Capital Markets Nivard Cabraal said.
He said Moody’s had not taken into account actual developments in the economy. (Colombo/Sept30/2020)