COLOMBO (EconomyNext) – Sri Lanka’s state revenues rose 21 percent from a year earlier to 492 billion rupees in the first months of 2015, while expenses grew at a slower 12.5 percent, Deputy Economic Policy Minister Harsha de Silva said.
Sri Lanka has collected 32 percent of the estimated 2015 revenue of 1,592 billion rupees compared to 28 percent or 406 billion rupees in 2014.
"There is a clear improvement in government revenue," de Silva told parliament.
Sri Lanka’s new administration has closed at least three distilleries connected to the members of the ousted Rajapaksa regime which was involved in selling non-tax paid alcohol made with smuggled ethanol.
The firms were selling ‘extra-special’ arrack at around 680 rupees to retailers when the total tax component was 653 rupees, sources familiar with the matter say. Some of the ethanol was declared as having been used to make perfume.
Sri Lanka has set off a consumption boom with a further policy rate cut amid higher state recurrent expenditure and a recovery in private credit, with inevitable consequences leading to balance of payments trouble and run down of foreign reserves.
However low interest rates and rising consumption is also bringing in more revenues, particularly from vehicle imports.
Meanwhile with imports of especially motor vehicles rising, and a consumption boom being set-off by the new administration discouraging savings available for investment with another rate cut, state revenues have picked up from the import side as well, helping fund some of the spending.
Recurrent expenditure rose 12.2 percent to 623 billion rupees for the period, de Silva said with state salary increments, pensions and subsidies.
The current account deficit of the budget has narrowed in the first five months to 130 billion rupees from 148 billion a year earlier.
But unlike in 2014 there was lower foreign borrowings, leading to pressure on domestic credit markets. A steeper rise in rates was avoided by a run-down of foreign reserves.
De Silva said capital expenditure was also lower than last year with questionable projects being halted.
Sri Lanka is forecasting a budget deficit of 4.4 percent of gross domestic product, though the International Monetary Fund has warned that it may grow to as much as 6.7 percent.