Austerity spending measures amidst budgetary discrepancies
As the curtain falls on the 2014 budget debate, Sri Lanka is to curtail public spending in the face of declining revenue on a year-on-year basis, official sources revealed.
The Finance Ministry will issue a circular by end January to all ministries and government institutions giving authorisation for incurring expenditure for 2014 with strict guidelines on public expenditure management, a senior ministry official said.Heads of state institutions are to be instructed to cut unnecessary expenditure and overheads including bills for electricity, water, telephone, transport, etc as well as overtime and additional payments for public sector employees.
The government will maintain a 7-year wage freeze on public sector employees under this austerity measures, informed sources said.
While total expenditure was to be in the region of Rs 2.7 trillion in 2014, according to initial estimates in (last year’s) 2013 budget, the 2014 budget technical notes shows estimated expenditure for 2014 was Rs. 2.59 trillion, a reduction of Rs.0.11 trillion compared to the forecasted figure in 2013 budget.
Further according 2014 budget estimates, the total expenditure of the government is set at Rs. 2.54 trillion. An economic analyst said that there was a discrepancy in expenditure patterns in the 2014 budget under two different sections, one in the technical notes and the other in budget estimates.
Government expected total revenue and grants to rise to Rs. 1.46 trillion in 2014 from Rs 1.2 trillion in 2013. Under a pattern of falling revenues, economic experts believe the revenue expectations of the government point to overestimation.
According to the 2014 Appropriation Bill presented in parliament on October 9, the maximum borrowings of the government were amounting to Rs.1.1 trillion whereas in the 2014 budget technical notes it was indicated as Rs. 1.27 trillion. The difference in the same figure was Rs. 0.17 trillion.
Data on expenditure under 57 headings was published in the 2014 budget and the total amount was Rs. 95.7 billion. But the total estimated expenditure in the 2014 budget was Rs. 2.59 billion. Accordingly over 96 per cent of the expenditure was outside the budget, the economic analyst said.
Tax policy measures including a special commodity levy on imports of many basic food items have been introduced to reverse the current state of affairs.
The 2013 budget estimate has forecasted debt repayment for 2014 as Rs. 785.9 billion. However in the 2014 budget technical notes it was cut down by 25 per cent to Rs. 589 billion. The debt repayment installment and interest cannot come down by Rs.196billion, 9 billion less from the initial forecast made in 2013 budget, the economic analyst added.
The country’s total debt was around Rs. 6.52 trillion, or 80 per cent of GDP as at June 2013 and therefore repayment installment and interest would be higher than the value indicated in the 2014 budget, he pointed out.