Sri Lanka savings rate drops in 2016 after state overspending

ECONOMYNEXT – Sri Lanka’s domestic savings rate dropped to 22.6 percent of gross domestic product in 2015 from 24 percent a year earlier as state overspending increased sharply, official data show.

Sri Lanka’s state, with a top heavy political establishment and bloated public service overspent 246 billion rupees in 2015, up from 127 billion rupees in 2015 as the current account deficit of the budget increased from 1.2 percent of gross domestic product to 2.2 percent.

Private savings at 24.8 percent was higher than national savings of 22.6 percent as the state dragged down the domestic savings rate.

Within private savings are also included state enterprises. The net position of non-financial enterprises are not known as an overall public sector deficit or surplus figure is not published.

In East Asian countries surpluses in state enterprises are a key factor in their high savings rates.

Central government di-saving comes from the inability of the rulers manage their day to day expenses with the total tax and non-tax revenues it gets and runs a deficit in the current account of the budget.

Sri Lanka national savings also dropped to 27.8 percent of GDP in 2015 from 29.5 percent. National savings includes current transfers from the rest of the world which is mainly remittances.

In 2015 current transfers were marginally down to 7.5 percent of GDP, down from 7.8 percent. (Colombo/Apri28/2016)

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