COLOMBO: Sri Lanka’s budget deficit up to October was contained at Rs.547.53 billion or 4.41 percent of gross domestic product (GDP) with higher revenue holding back higher expenditure to improve the situation from Rs.612.24 billion or 5.47 percent of GDP year-on-year (YoY), the Treasury data showed. The deficit target set for 2016 was 5.4 percent of GDP. The primary deficit for the first 10 months of last year fell to Rs.109.85 billion from Rs.238.22 billion YoY. Revenue collection in October was the second best so far this year, following a high of Rs.165.94 billion in September.
The Treasury collected Rs.153.32 billion in revenue, up 15.16 percent YoY in October, pushing revenue for the first 10 months in 2016 up to Rs.1,333.86 billion or 10.74 percent of GDP from Rs.1,092.03 billion YoY. Since revenue collection is generally the highest in the final two months of a year, the Treasury seems to be on track to meet its revised estimate of collecting Rs.1,576 billion in revenue in 2016. The International Monetary Fund (IMF) requires that the government collect Rs.1,428 billion in tax revenue for the year to remain eligible for the upcoming tranches of the US $ 1.5 billion loan.
The tax revenue up to October was recorded at Rs.1,199.94 billion. The value-added tax (VAT) increase was finally legislated in end-October, which would also help the Treasury surpass the IMF as well as internally revised estimates. However, whether revenue could reach the Rs.1,822.97 billion figure that was approved in the 2016 budget, which had envisioned nine months of VAT collection for the year, remains to be seen.
On the expenditure side, spending increased to Rs.195.39 billion in October from Rs.172.53 billion YoY, which was slightly above the average monthly spending last year, with the month featuring as the fourth highest month of spending. Interest payments and to a lesser degree public investments, accounted for the increase. Expenditure increased to Rs.1,881.39 billion or 15.16 percent of GDP from Rs.1,705.08 billion YoY for the first 10 months of the year. The recurrent expenditure amounted to Rs.1,443.71 billion of the total, up from Rs.1331.05 billion YoY.
The interest payments increased to Rs.510.39 billion from Rs.453.45 billion YoY and the pension payments increased to Rs.142.99 billion from Rs.128.59 billion YoY. Following the setting up of a new fertilizer subsidy scheme with the aim of reducing wastage, the government transfers for fertilizer subsidies in October fell to Rs.20.87 billion from Rs.27.35 billion YoY and a clear pattern can now be seen between farmer fertilizer spending and the two main agricultural seasons.
Meanwhile, the country’s current account balance for October was Rs.17.96 billion, which pushed the current account deficit for the first 10 months of 2016 down to Rs.111.05 billion, which were both better than Rs.15.18 billion and Rs.239.02 billion deficits, respectively. The country’s financing for the first 10 months of 2016 fell to Rs.547.53 billion from Rs.612.24 billion YoY. Net foreign financing increased to Rs.291.64 billion from Rs.34.93 billion YoY, while net domestic financing fell to Rs.255.89 billion from Rs.577.32 billion YoY.