ECONOMYNEXT – Sri Lanka’s tax revenue were up 39 percent to 2,918.3 billion rupees in the nine months to September 2024 from a year ago, while the budget deficit was down 40 percent, official data show.
Tax revenues were going in line with a 40 percent projection in the budget, though collections can be lumpy and unevenly distributed across months.
Non-tax revenues were up 30 percent to 229.7 billion rupees.
Current spending rose only 3 percent, amid expenditure restraint and also a flat interest bill, both made possible by the stability and confidence coming from deflationary monetary policy and currency appreciation.
Total revenues were around 9.3 percent of GDP for the nine months, up from 7.6 percent last year. Sri Lanka is targeting at least 13 percent of GDP revenues this year.
The current account deficit of the budget (total revenues less current spending) which is in deficit in Sri Lanka, fell 58 percent to 516.3 billion rupees, which is around 1.6 percent of projected GDP.
Capital expenditure rose 14 percent to 463.2 billion rupees. Sri Lanka is gradually coming out of default and project financing will eventually expand the capital budget.
Interest expenses was virtually flat rising only 1 percent to 1,754.9 billion rupees, as Treasuries yields continue to come down amid the stability coming from deflationary monetary policy.
The primary balance (interests costs less the overall deficit) was a surplus of 784.9 billion rupees, higher than the 123.8 billion rupees last year.
While monetary stability can bring down interest rate as long a inflationary rate cuts are not made, the salary bill can go up.
Total expenditure was up 4 percent in nominal terms to 3,897.8 billion rupees, while it was down to 12.4 percent of projected GDP from 13.5 percent last year.
The central government debt was 91.6 percent of projected GDP by September down from 100.6 percent last year.
Foreign debt was down absolutely to 10,980 billion rupees by September 2024, compared to 11.6 billion rupees in December. Foreign debt can fall due to currency appreciation and repayment of instalments by converting rupee debt to forex.
Since the end of a civil war, Sri Lanka printed money through open and direct market operations, losing the ability to repay foreign debt in rupees (except in 2012, 2017 and part of 2019), leading to rise in foreign borrowings and eventual default.
From 2022 September Sri Lanka got the ability to settle foreign loans out of rupee cashflows again.
(Colombo/Sept25/2024)
