ECONOMYNEXT – Sri Lanka’s revenues grew 6 percent from a year earlier to 622.4 billion rupees, while current spending grew at a faster 9 percent to 686 billion rupees, expanding the current account deficit, but a 20 billion rupee primary surplus had been posted, official data show.
Tax revenues rose 3 percent to 570.5 billion rupees, with a downturn in import duties after taxes were taken off fuel, and some tariffs were reduced for trade liberalization, a finance ministry report said.
Excise taxes on fuel were resumed after prices were hiked in May.
Non-tax revenues rose to 51.9 billion rupees from 34.7 billion rupees, with a central bank profit transfer. A central bank profit transfer will expand money supply, resulting in reserve losses, or a fall in the rupee if the currency is not defended or the liquidity is mopped up.
Analysts have said Sri Lanka should halt all central bank profit transfers until sufficient foreign reserves are re-built.
Current spending grew with the salary bill going up to 210 billion rupees from 197 billion a year earlier, though there was no formal salary increment since a massive hike in 2015 which de-stabilized the budget, interest rates and the currency.
Interest payments rose to 271.5 billion rupees from 243 billion, driving current expenses up, while unspecified other spending rose to 141 billion rupees from 125 billion.
The current account deficit of the budget expanded to 63.6 billion rupees from 37.0 billion rupees up to April. In real terms the current account defect was expanded to 0.4 percent of forecasted gross domestic product from 0.28 percent last year.
Capital spending was 187.4 billion rupees, down from 196.8 billion rupees a year earlier, keeping the overall deficit for the four months at 251 billion rupees, up from 233 billion rupees last year.
In real terms the overall deficit remained at 1.7 percent of GDP.
Almost the entirely of the deficit was financed domestically with 243.4 billion rupees of net domestic financing up from 218.8 billion a year earlier. Foreign financing was 7.2 billion rupees, up from 14.3 billion rupees.
Sri Lanka recorded a primary surplus of 20.9 billion rupees (all spending other than interest costs) for the first four months of the year. (Colombo/July03/2018)