SL fails to achieve fiscal targets despite tight budgeting
At a time of the coronavirus socio –economic panic, Sri Lanka’s financial position is not so rosy even with the Treasury’s commitment to maintain public expenditure at a manageable level, the Finance Ministry’s Pre-election Budgetary Position Report has revealed.
The country budget deficit target of 4.4 per cent of GDP in 2019 went haywire to 6.5 per cent of GDP and ending up with over 8 per cent of GDP in actual estimates.
At the same time, the realised government revenues in 2019 at Rs. 1,899 billion was almost 20 per cent (Rs. 456 billion) less than the estimated revenue of Rs. 2,357 billion.
This was driven mainly by a 20-25 per cent shortfall in revenue from taxes on goods and services with Value Added Tax (VAT) and taxes on external trade driven by the decline in the imports of intermediate goods and almost a 50 per cent decline in the import of motor vehicles, the report disclosed.
The unsettled dues from government to the private sector has created multiple issues in the economy with unpaid claims stemming from 2019 fiscal performance amounting to around Rs.132.4 billion.
The government operates on a Vote on Account and has been able to raise Rs. 303 billion of revenue during the first two months of 2020.
Expenditures have remained broadly at around Rs. 428 billion including the payments made on the outstanding dues of 2019 as well.
With the new Vote on Account authorised by the President, funds amounting to Rs.21 billion have been released to settle pharmaceutical bills, fertiliser bills and construction contractors payments with priority being given to SME contractors and suppliers of items such as text books, rations etc.
Cost of debt financing of both domestic and foreign debt is estimated to be around Rs. 9,000 billion in 2020.
The foreign debt servicing in 2020, alone amounts to US$4.5 billion of which $2.8 billion is required for the first half of 2020.
The government raised almost Rs. 311 billion through Treasury Bills, Bonds, development bonds and loans during this period in 2020.
The Foreign Currency Term Financing Facility 2018 with China Development Bank (CDB) has been upsized at more favourable terms to $1,000 million.
The loan facility has been given with the extension of the tenure to 10 years in 2020 from eight years in 2018 with a 3-year grace period, and a decrease in the margins over 6-month USD LIBOR. The first tranche of $500 million has already been drawn, the report said.