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Sri Lanka to grow 3.6-pct in 2021, deficit could reach 10.8-pct: ICRA

ECONOMYNEXT- Sri Lanka’s economic growth would recover to 3.6 percent in 2021, from a contraction in 2020, while the budget deficit may hit 10.8 percent, from 11.1 percent in 2020, ICRA, a rating agency has said.

Revenues may recover to 9.6 percent of gross domestic product in 2021 from 9.2 percent in 2020 but expenditure would remain around 20.4 percent from 20.3 percent, the agency said.

Sri Lanka has projected revenues of 2.0 trillion rupees for 2021 but it may not be able to reach the target.

Capital expenditure may be curtailed from the projected 1.0 trillion levels, the agency said.

“The government’s fiscal policy is now closely aligned with Modern Monetary Theory (MMT),” ICRA said.

“This means we can expect the treasury to rely less on the market borrowings while lean more towards financing spending via short-term direct borrowings from the Central Bank.

“In the meanwhile, impaired access to foreign markets may bring down the foreign currency denominated debt.”

Debt stock is expected to reach 993 percent of GDP in 2021, the agency said. (Colombo/Feb26/2021)

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