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Unprecedented cash-flow calamity looms amidst COVID-19 crisis
Sri Lanka is on the verge of an unprecedented financial (cash-flow) calamity arising out of an unfolding revenue shortfall, confronting the Treasury during these crisis times.
The most pressing issue at hand was the rapid exhaustion of the Rs. 715 billion allocated for recurrent expenditure from the revised 3-month Vote on Account (VOA) for the period March to end May. The total provided for in the revised VOA — money which comes from the Consolidated Fund on the direction of the President — is more than Rs. 2000 billion which included Rs. 150 billion for capital expenditure and Rs. 360 billion for loan repayments.
Revenue in the past few months has also dropped from expected targets, provisional estimates revealed.
The Treasury is also facing a regulatory issue in withdrawing more money from the Consolidated Fund for a further period starting from end May, when the earlier revised VOA period ends.
Officials argue that the President can issue another warrant to draw money from the Consolidated Fund for a further three months until a new Parliament is elected. Opposition politicians contend that the only access to new funds is by reconvening parliament and seeking its consent.
Furthermore projected income from taxes amounting to Rs. 2200 billion for 2020 is expected to fall sharply due to various tax relief packages given to withstand the COVID-19 crisis, adding to the Treasury’s funding woes.
In the midst of new expenditure owing to the COVID-19 pandemic, the Treasury is under pressure to meet current 2020 state expenditure estimates like Rs. 650 billion for public servants and security forces, Rs. 850 billion to settle state debt, and Rs. 450 billion for concessionary packages including Samurdhi beneficiaries, pensioners and fertiliser subsidies.