ECONOMYNEXT – Sri Lanka has sought parliamentary approval to spend 53 billion rupees more (about 0.4 percent of gross domestic product) on roads and a bridge in 2017, which will be mostly foreign financed, a minister said.
Highways Minister Lakshman Kiriella said 51.5 billion rupees in funding sought by a supplementary estimate to increase annual spending was committed by China, the Asian Development Bank and the Japan International Co-operation Agency and it will not expand domestic borrowings.
The Treasury will have to contribute only 2.5 billion rupees from taxes or domestic borrowings.
The ministry needed 31.2 billion rupees for the expressways with 30 billion rupees coming from a Chinese loan and 1.2 billion rupees from domestic sources.
About 29 billion rupees allocated for the Southern Expressway in the budget for 2017 had been paid to the contactor by July, he said.
Funds for the outer circular road has also been exhausted by July, he said.
Kiriella sought 15.8 billion rupees for a national and provincial road projects funded by the Asian Development Bank and China. Domestic funding will be 1.3 billion rupees.
Money allocated for the full year 2017 had been paid to contractors by July, he said.
Another 6.0 billion rupees was needed for a payment to start work on a new bridge over the Kelani River, funded by the Japan International Co-operation Agency.
If contractor are not paid in time, Sri Lanka will have to pay 5 percent penalty interest and the projects could also be delayed, Kiriella said.
The Highways Ministry had sought 300 billion rupees for projects in 2017 but only 116 billion had been allocated to the ministry he said.
Of that 104 billion rupees had been spent by July, he said.
Sri Lanka expected to run a budget deficit of 625 billion rupees in 2017 or 4.6 percent of estimated GDP, with 332 billion rupees coming from foreign financing.
The extra spending almost fully financed by foreign borrowing is close to 0.4 percent of GDP. Sri Lanka’s interest rates are affected only by domestic borrowing.
It is not clear yet whether the budget deficit target will increase by 0.4 percent as a result of this and other supplementary estimates.
The Treasury has the option of raising more taxes, or revenues slowing down other projects or tightening current spending to meet the target.
Sri Lanka is also planning several asset sales. (Colombo/Aug22/2017)