Sri Lanka sees budget deficit falling, but strain on economy remains

Author of the article: Reuters Uditha Jayasinghe COLOMBO — The Sri Lankan government will reduce the budget deficit to around 8.8% of gross domestic product in 2022, finance minister Basil Rajapaksa said in his budget speech on Friday, though it missed its deficit target for 2021. The government will also roll out a goods and…
Sri Lanka sees budget deficit falling, but strain on economy remains

Author of the article:

Reuters

Uditha Jayasinghe

COLOMBO — The Sri Lankan government will reduce the budget deficit to around 8.8% of gross domestic product in 2022, finance minister Basil Rajapaksa said in his budget speech on Friday, though it missed its deficit target for 2021.

The government will also roll out a goods and services tax announced in the 2021 budget from January 2022, the minister said.

“We are living through history’s most challenging period in terms of people’s lives, livelihoods, sources of income, and job security,” said Rajapaksa, whose brother, Gotabaya Rajapaksa, is the island nation’s president.

“I strongly believe that, even amidst these challenges, we are equipped with all the necessary strengths to manage the economy and to overcome such challenges.”

The new projected 11.1% budget deficit for 2021 is higher than the 9.5% target set by the government in June which itself was revised up from 8.9%.

“This budget is a credit positive,” Dimantha Mathew, Head of Research for First Capital told Reuters.

“There is a significant amount of taxes coming in and the government is looking to increase revenue by 46% next year while expenditure is expected to rise only by 16%. So the fiscal concerns are being addressed.”

However, he warned that there could be some tightening of the economy due to public and capital expenditure cuts that could see consumer spending being hit. Sri Lanka has a large public sector that makes up about 2 million of the 21 million population.

Sri Lanka’s central bank announced in October that it would keep its 2021 target of 5% growth unchanged. Growth numbers for next year are yet to be announced by the government and no projections were included in the budget speech.

The budget also included support because of the COVID-19 pandemic for specific sectors such as tourism, apparel, plantations, and agriculture as the government looks to boost growth.

In late October, Moody’s downgraded Sri Lanka to Caa1 from Caa2 on debt sustainability concerns and a challenging external environment. Moody’s estimates that revenue will remain around 10% of GDP over the next few years while interest payments will continue to absorb around 60-70% of revenue.

Sri Lanka has to repay $4.3 billion in debt in 2022 and reserves dipped to $2.27 billion at the end of October. ($1 = 201.0000 Sri Lankan rupees) (Reporting by Uditha Jayasinghe, Writing by Alasdair Pal, Editing by Timothy Heritage)

Financial Post Top Stories

Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.

By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

Read More

Total
0
Shares
Leave a Reply

Your email address will not be published.

Related Posts
Canada bans Huawei from 5G network
Read More

Canada bans Huawei from 5G network

Firms that already have Huawei or ZTE gear installed will have to remove it by the end of 2027 Author of the article: Bloomberg News Erik Hertzberg and Brian Platt Publishing date: May 19, 2022  •  19 hours ago  •  3 minute read  •  5 Comments A staff member of Huawei uses her mobile phone at…
NatWest to End Ties to Some Clients Over Pollution: FT
Read More

NatWest to End Ties to Some Clients Over Pollution: FT

Author of the article: Bloomberg News Jim Silver By Jim Silver (Bloomberg) — NatWest Group Plc plans to stop doing business with a group of coal companies and it will end lending to some oil-and-gas majors over their lack of “credible” green plans, the Financial Times reported, citing a company report and James Close, its…
Output at Kazakhstan’s Tengiz oilfield being restored gradually -Chevron
Read More

Output at Kazakhstan’s Tengiz oilfield being restored gradually -Chevron

Author of the article: LONDON — Kazakhstan’s largest oil venture Tengizchevroil (TCO) is gradually increasing production to reach normal rates at the Tengiz field after protests limited output there in recent days, operator Chevron said on Sunday. Production at Tengiz, Kazakhstan’s largest oilfield, was curtailed in the past few days as some contractors disrupted train…