Sri Lanka budget gap contained by June 2018, despite weak revenues

Sri Lanka’s tax revenues grew 3 percent to 845.3 billion rupees in the six months to June 2018, and current spending grew at a faster 8 percent to 995.6 billion rupees, but the budget deficit was down in real terms, official data show.

Total revenues with non-tax revenues of 75.3 billion rupees (up 32 percent) grew 5 percent to 920.8 billion rupees, and current spending of 995.6 billion generated a revenue deficit of 74.8 billion rupees, for the half year, up from 42 billion rupees a year earlier.

Capital expenditure and net lending was down 5 percent to 276 billion rupees, giving an overall budget deficit of 345.8 billion rupees after grants of 4.96 billion rupees.

The deficit was up 5 percent in rupee terms but in terms of projected gross domestic product it was down to 2.4 percent of GDP from 2.5 percent a year earlier. Annualized for 12-months, the deficit was 4.8 percent of GDP down from 5.5 percent during the same period last year.

Up to May Sri Lanka had given tax exemptions to fuel, losing revenues. Fuel taxes will add to revenues in the second half.

Meanwhile interest costs rose 12 percent to 391.5 billion rupees making it one of the fastest growing items on the budget. Media reports said some of the subsidy payments to banks on senior citizen loans were in arrears by the first quarter of 2018.

Currency depreciation, which adds to financing costs for foreign debt is not added to the budget in the way fiscal accounts are computed now.

Depreciation on installment repaid during a year is a cash cost to the budget.