Inland Revenue struggles to meet ambitious revenue targets
Sri Lanka is grappling with a persistent budget deficit, a problem that has plagued successive governments due to poor financial management.
The country is now poised to miss its 2024 budget revenue targets, further underscoring its reliance on borrowing to cover financial gaps. The Ministry of Finance’s recent findings, coupled with projections from the International Monetary Fund (IMF), paint a troubling picture for the country’s fiscal health.
The 2024 Budget set an ambitious goal to increase revenue by 42 per cent compared to the previous year.
Despite this, the IMF has projected a 14 per cent shortfall, even though revenue has grown. Government estimates show a significant rise in expenditure, with a staggering 66 per cent of the increase directed toward interest payments.
To address these financial challenges, the government has implemented the Public Financial Management Act, No. 44 of 2024, and the Parliamentary Budget Office Act, No. 6 of 2023.
These laws aim to improve public finance management, but the estimated budget deficit for 2024 still stands at 7.6 per cent, while the tax-to-GDP ratio is expected to be 12.1 per cent.
A major concern for the government is the shortfall in tax revenue, primarily from the Inland Revenue Department (IRD).
The Inland Revenue, Sri Lanka Customs, and the Excise Department were tasked with raising Rs. 4,127 billion collectively in 2024, with the IRD expected to generate Rs. 2,024 billion.
However, during the 9-month period (January-September), the department fell short, collecting Rs. 1,498 billion, Rs. 75 billion less than expected.
The looming question is whether the IRD will be able to meet its annual target by the end of 2024.
Sources from the Ministry of Finance have expressed concern, suggesting that it will be difficult to meet the Rs. 2,024 billion goal, despite efforts to encourage taxpayers to fulfill their obligations.
This shortfall has broader implications for Sri Lanka’s fiscal future. The government had committed to the IMF to achieve a revenue target of 13.2 per cent of GDP, but internal projections suggest the revenue-to-GDP ratio might fall below 12 per cent. As a result, there may be a need for future tax hikes, and the government may continue issuing treasury bills to cover the deficit.
Sri Lanka is also facing a growing external resource gap, which is expected to reach US$5.018 billion by 2025. To address this, the IMF has agreed to provide $663 million through its extended credit facility, along with an additional $700 million, finance ministry data shows.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!