Sri Lanka makes trillion rupee mini-budget till August under Presidential powers
ECONOMYNEXT – Sri Lanka’s Finance Ministry has prepared a mini-budget of 1,043 billion rupees from June to August 2020, citing authority given to the President under the constitution to spend money in the absence of appropriations approved by parliament.
A total of 644.1 billion rupees has been allocated for current spending for June-August, and 398.8 billion rupees for capital spending including debt repayments.
For March-May 713 billion rupees was allocated for current spending and 511 billion rupees for capital spending.
The total allocation of 1,043 billion rupees for June-August 2020 is down from 1,224 billion rupees in March-May.
The Ministry of Finance which repays loans was allocated 546 billion rupees down from 682 billion rupees in the previous three months.
The Department of Treasury operations had been allocated 486 billion rupees (down from 628 billion rupees) made up of 224 billion rupees in current and 262 billion rupees in capital spending.
“Due to the current crisis situation, state revenues had regressed, and fiscal space had reduced due to rising costs from Covid-19 and climate related damage,” the Treasury said.
“In addition constitutional limits on borrowings are also requiring a strong need to manage spending.” Moneys should only be spend on continuing existing subjects and projects.”
Sri Lanka’s Parliament was dissolved in March, and a similar mini-budget was made from March to May, with one month remaining on a vote-on-account approved by the parliament till April 2020 with a debt ceiling.
Sri Lanka’s elections had been delayed amid a Coronavirus crisis, and the opposition had called for parliament to be recalled to approve new spending and borrowing authority.
The administration had rejected the calls and has claimed authority under article 150 of the constitution.
The Ministry of Defence had been allocated 107.26 billion rupees.
The Ministry of Health 43.1 billion rupees.
The Ministry of Roads and Highways 31.9 billion rupees, Transport Services Management 19.7 billion rupees, Ministry of Education 16.5 billion rupees.
The Ministry of Public Administration had been allocated 154 billion rupees, which includes 69.8 billion rupees for pensions.
Sri Lanka is facing revenue shortfalls due to economic activities slowing due to curfews imposed to contain Coronavirus and import controls imposed after money printing by the central bank put pressure on the currency.
Though Sri Lanka has made major gains in containing the Coronavirus, the lack of a credible monetary regime has hit the economy, critics say.
The lack of a credible monetary regime had hit triggered balance of payments troubles even when there is no crisis and the economy is growing strongly (2011/2012) or recovering from a previous similar crisis triggered by money printing (2015/2016 and 2018).
Sri Lanka’s credit rating has also been downgraded to ‘B-‘ from ‘B’ in 2020 after a fiscal ‘stimulus’ in the form of tax cuts were followed by monetary ‘stimulus’ in the form of rate cuts and liquidity injections putting pressure on the currency.
In 2018 liquidity injections and rate cuts also triggered a downgrade despite gains made in the fiscal front. (Colombo/June05/2020 – Update II)