Sri Lanka targets budget deficit of 5.5-pct of GDP over next 3-years

ECONOMYNEXT – Sri Lanka is targeting an average budget deficit of 5.5 percent of gross domestic over 2016 to 2018 with public investment at around 6 to 8 percent of GDP, cabinet spokesman Minister Rajitha Senaratne said.

This year the budget deficit was originally forecast at 4.4 percent of GDP but there are also other spending such as a 170 billion rupee bailout (1.7 percent of GDP) of state enterprise for old losses incurred in other periods.

The Finance Ministry has begun preparations for the 2016 budget and it will be on the principle of ‘zero-based budgeting’, cabinet had been told.

Zero based budgeting moves away from a practice adopted by spending agencies of adding 5 or 10 percent to the previous year’s allocation and demanding it for the upcoming year, but requires them to justly all costs from zero.

In the medium term 2016-2018 budgeting period, the state was expecting to keep public investment around 6-8 percent of GDP.

Analysts say to keep public investment at around 8 percent and budget deficit at 5.5 percent, a current account surplus of about 2.5 percent has to be achieved by 2015, but taxing the people further to pay for salary and pension increases to state workers.

Private investment is expected at 22 to 24 percent, in the next three years, keeping total investment at around 30 percent of GDP.