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Sri Lanka narrowly misses fiscal deficit target 5.4% of GDP for 2016

Sri Lanka narrowly misses fiscal deficit target 5.4% of GDP for 2016

COLOMBO: The Sri Lankan government has narrowly missed its fiscal deficit target of 5.4 percent of Gross Domestic Product (GDP) for 2016, accruing a deficit of 5.6 percent of GDP, official Treasury data shared by the Finance Ministry with the press, showed. The deficit had been contained to 4.4 percent of GDP as recent as end-October, indicating that there has been some fiscal slippage in the final two months of last year.

The budget deficit for 2015 was 7.4 percent GDP, falling from a 4.4 percent of GDP projection due to unsustainable public sector wage increases. The deficit for 2017 is forecasted to be 4.6  percent of GDP. The primary deficit, which indicates the difference between revenue and recurrent expenditure, fell to 0.7 percent of GDP from 2.7 percent of GDP YoY.

This year it is expected to have a 0.4 percent of GDP surplus in the primary balance. Government revenue in 2016 increased 13.6 percent year-on-year (YoY) to Rs. 1,660 billion, or 13.6 percent of GDP. Of this, tax revenue increased 7.52 percent YoY to Rs. 1,458 billion, or 11.9 percent of GDP. Both Inland Revenue Department and Sri Lanka Customs collected Rs. 40 billion and Rs. 38 billion more, respectively. Total expenditure amounted to Rs. 3,185 billion or 19.2 percent of GDP, down from 20.5 percent of GDP YoY.

Debt servicing accounted for Rs. 1,441 billion in spending, up from Rs. 1,373 billion YoY, while non-debt servicing expenditure amounted to Rs. 1,154 billion, a cut down from Rs. 1,174 billion YoY. Capital expenditure increased marginally from last year to Rs. 590 billion, while salary payments increased to Rs. 581 billion from Rs. 562 billion YoY.