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Snap
poll puts island's fiscal position in reverse gear
This was among the unexpected expenditures incurred by the government that has forced it to revise its estimates of expenditure, revenue and government borrowing for 2004 approved by the Parliament in November 2003, it said in its first Pre - election Budgetary Position Report 2004. It was issued under the Fiscal Management (Responsibility) Act No. 03 of 2003 under which the Secretary to the Ministry of Finance is required to present to the public, within three weeks of the proclamation of a general election, a Pre-Election Budgetary Position Report on the island's fiscal position. The increased recurrent expenditure is likely to be partly offset by the reduction in capital expenditure by around Rs. 7 billion owing to the political instability and the delays in foreign funding resulting from the snap poll. The election has also delayed moves to improve revenue collection as a result of which revenue for 2004 are expected to fall by Rs. 12 billion to Rs. 319 billion, the Finance Ministry said. The increased expenditure and reduced revenue are likely to widen the budget deficit for 2004 to 7.3 per cent of GDP from 6.8 per cent. Delays in donor funding has also forced the government to increase domestic borrowings by 33 percent to be Rs. 87 billion. Some of the new risks that have arisen with the snap poll could slow down economic growth, raise interest rates, adversely affect the stability of the rupee, and increase the fiscal deficit and the levels of government borrowings, the Finance Ministry warned. However, it said on the positive side, the international economy is expected to improve, with stronger growth particularly in the US and Japan contributing to strengthening exports, inward remittances, investments, and tourism. |
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