Govt. revenue dips 10%; Expenditure overshoots target by 28%

CB expects improvement in fiscal situation in second half

By Shihar Aneez

(Reuters) - Sri Lanka’s government revenue fell 10 percent in the first four months of the year, while expenditure overshot the target by 28 percent as the world economic crisis pushed borrowing costs higher.
The Ministry of Finance and Planning said in its mid-year fiscal report that he government’s interest bill climbed due to heavy short-term borrowing from domestic markets because foreign capital markets remained inaccessible. “The recessionary pressures in the world economy and related slowing down of the domestic economic activities negatively affected the government revenue collection,” the ministry said. Total revenue collected in the first four months of the year was at 190.1 billion rupees ($1.7 billion), or 22 percent of its budgeted 855 billion rupees for the full year, while expenditure jumped 28 percent to 389.8 billion, or a third of what was budgeted.
“There will be a recovery in the second half with improved imports and new economic activities in the north,” said Nandalal Weerasinghe, chief economist at the central bank.
The island nation fought the final stage of a 25-year war against Tamil Tiger separatists during in the north of the country. On May 18 the government announced the defeat of the rebels including the death of the movement’s founder and other leaders.
“We expect the budget deficit to be at 8.6 percent, more than 7 percent estimated by the central bank,” said Danushka Sanarasinghe, head of research at Asia Securities.
The central bank, on Wednesday revised up its post-war growth target to between 3.5-4.5 percent from 2.5 percent in 2009.

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