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Friday June 14th, 2024

Sri Lanka meets 4.0-pct primary deficit target for 2022

ECONOMYNEXT – Sri Lanka has likely met the primary deficit target for 2022, based on preliminary data, officials said as President Ranil Wickremesinghe oversees the most difficult revenue correction in history following a currency crisis which ended in default.

Sri Lanka is managing budgets without printing money, State Minister for Finance Ranjith Siyambalapitiya told reporters in Colombo.

Sri Lanka’s revenue and grants for 2022 is estimated at 1991 billion rupees.

Total revenues would be around 1976 billion rupees or close to 95 percent of 2,084 billion rupees set in an interim budget. Non-tax revenues would be 226 billion rupees.

Current spending is estimated at around 3,595 billion rupees giving a current account deficit, of around 1,618 billion rupees or 6.8 percent of estimated gross domestic product.

The overall deficit could be around 10.4 percent of GDP (about 2,500 billion rupees).

Central Bank Governor Nandalal Weerasinghe told a business forum hat Sri Lanka had met the primary deficit target of 4.0 percent of GDP.

The target was in an interim budget and a staff level agreement with the International Monetary Fund.

When money is printed by intermediate regime central bank (soft-peg or flexible exchange rate) to supress rates triggering a currency crisis interest rates tend to soar as brakes and applied and targeting an overall deficit is pointless.

As a result the IMF usually targets non-interest based spending involved in a primary deficit.

Interest costs are estimated at around 1,635 billion rupees for 2022, giving a primary deficit of around 870 billion rupees or about 3.8 percent of GDP.

The 2022 budget numbers are bloated due to effective lending to the Ceylon Petroleum Corporation linked to a 700 million US dollar credit line from India, officials said.

Without that the correction in non-interest spending could be even higher.

President Ranil Wickremesinghe and his team has brought back classical fiscal consolidation involving spending based consolidation or expenditure restraint abandoned earlier in favour of revenue based fiscal consolidation – an unusually leftist or ‘progressive’ strategy of expanding the government.

Wages are frozen for the moment. President Wickremesinghe has said that a state wage hike could be considered at the end of 2023. Since wages eventually adjust for currency depreciation lasting changes in spending comes from reducing the sizes of the state.

Revenue based fiscal consolidation sans spending restraint in recent years involved expanding the size of the government to 20 percent of GDP and pushing up revenues to a nice round number like 15 percent to keep pace. (Colombo/Jan31/2023)

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Sri Lanka opposition leader proposes Grama Rajya system in addition to 13A

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT — Sri Lanka opposition leader Sajith Premadasa has proposed devolving power to the village level through a Grama Rajya system in addition to implementing the 13th amendment to the constitution.

Speaking at an event in Jaffna on on Wednesday June 12, Premadasa said all provinces will benefit from the 13th amendment.

“Whatever one’s ethnicity, religion, status or region, this country has citizens of equal level. They’re all Sri Lankan citizens.

“There is no division or grouping.  As we give you and every other province what you should be given through the 13th amendment, we must implement a Grama Rajya system,” Premadasa said, addressing a crowd of school children and other attendees.

Premadasa’s assurance of implementing the 13th amendment has already drawn some protest in the south.

A collective of civil society organisations held a protest outside the office of the leader of the opposition in Colombo on Thursday June 12.

Calling itself the ‘Coalition Against Partition of Sri Lanka’, the group carrying national flags marched up to the opposition leader’s office Thursday June 13 morning and demonstrated against the full implementation of the 13th amendment.

“We arrived here today to hand over a missive against devolving police powers, land powers and judicial powers. If Mr Premadasa is inside, come outside,” Jamuni Kamantha Thushara, Chairman of the Citizen’s Movement Against Fraud, Corruption, and Waste, was seen declaring at the site.

“First of all, tell us what we stand to achieve by dividing and giving away the north and east,” said another protestor, warning against bringing the 13th amendment “anywhere here (paththa palaathe)”.

A police officer at the scene the protestors that a secretary to the opposition leader was ready to accept their letter.

“In Kilonochchi, he says the 13th amendment will be implemented. The votes in the north are going to be decisive this election. To win those votes, President Ranil Wickremesinghe, Sajith and Anura Kumara Dissanayake all say they will implement the 13th. We will not allow this country to be divided into nine pieces,” said Thushara.

Ven Balangoda Kassapa Thero, who was arrested on June 06 during a protest against the new Electricity Act, was also seen at Thursday’s protest. The Buddhist monk requested for a debate with Premadasa on the matter of the 13th amendment. (Colombo/Jun12/2024)

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Sri Lanka rupee closes flat at 303.85/95 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed broadly flat at 303.85/95 to the US dollar on Thursday, from 303.80/304.00 to the dollar the previous day, dealers said. Bond yields were down.

A bond maturing on 15.12.2026 closed at 10.00/30 percent, down from 10.20/40 percent.

A bond maturing on 15.10.2027 closed at 10.60/75 percent.

A bond maturing on 01.07.2028 closed at 11.00/15 percent, down from 11.15/40 percent.

A bond maturing on 15.09.2029 closed at 11.80/85 percent.

A bond maturing on 15.05.2030 closed at 11.85/12.05 percent, down from 11.90/12.05 percent.

A bond maturing on 01.10.2032 closed stable at 11.95/12.15 percent. (Colombo/Jun13/2024)

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Sri Lanka sells Rs295bn in 2027 to 2031 bonds

ECONOMYNEXT – Sri Lanka has sold 295 billion rupees in 2027, 2029 and 2031 bonds, data from the state debt office showed.

The debt office sold an offered 60 billion rupees of 15 October 2027 at an average yield of 10.30 percent.

All offered 125 billion rupees of 15 September 2029 bonds were sold at 11.00 percent.

All 110 billion rupees offered of 01 December 2031 bonds were sold at 12.00 percent. (Colombo/May13/2024)

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