The government budget deficit for the first quarter of this year has contracted by 21 percent on strong revenue growth and slow growth in expenditure.
By Devan Daniel
The Central Bank says total government revenue has improved by 26.3 percent during the first three months of the year to Rs. 182.7 billion from Rs. 144.6 billion during the corresponding period of 2009.
During this period, tax revenue, which amounted to Rs. 150 billion, grew by 12.35 percent from Rs. 133.5 percent. Non tax revenues grew by 194.6 percent to Rs. 32.7 billion from Rs. 11.1 billion. Grants declined by 65.7 percent to Rs. 1.2 billion.
Recurrent expenditure grew by 1.55 percent to Rs. 247.5 billion from Rs. 243.7 billion. Capital expenditure and lending (minus repayments) declined by 0.51 percent to Rs. 58.1 billion from Rs. 58.4 billion.
According to latest data presented by the Central Bank, the budget deficit for the first three months of 2010 was Rs. 121.7 billion, a decline of 21.02 percent from Rs. 154.1 billion during the same period of 2009.
The deficit would amount to 2.23 percent of GDP. The deficit was 3.19 percent of GDP for the same period last year.
Sri Lanka’s budget deficit for 2009 was 7 percent of GDP, which the government overshot to 9.8 percent of GDP. The IMF deferred the third tranche under the US$ 2.6 billion standby facility programme, which was due around March, until the 2010 budget was presented in parliament and the IMF was satisfied that the government was committed to containing the budget deficit.
But a visiting IMF review mission last month said they were satisfied with what the government presented them; the budget figures to be presented later this month in parliament.
According to the appropriation bill, expenditure for this year is estimated at Rs. 974.7 billion, but the revenue estimates would only be announced with the budget proper on June 29.
The government presented a Vote on Account for the first four months of this year, with estimated expenditures amounting to Rs. 362.7 billion. By March, Rs. 305.6 billion had been spent.
Officials have always argued that Sri Lanka tended to overestimate revenues and underestimate spending.
In the 2009 budget, the government estimated revenue at Rs. 854.9 billion. Expenditure was estimated at Rs. 1,191 billion. These were later revised as fiscal management came under pressure during the year because of the heightened war effort which ended terrorism in Sri Lankan, revenue contraction due to the effects of the global financial crisis, high interest payments and faster than expected disbursements of infrastructure related spending. Revenue was brought down to Rs. 725.7 billion and expenditure was revised down to Rs. 1,091 billion.
However, by the year end, actual revenue was Rs. 702.6 billion and expenditure was Rs. 1,201 billion.
The government has been cautioned to contain high budget deficits as increased borrowings could threaten medium to long term economic stability. This would make it difficult for the government to concentrate resources to priority areas, crowd out the private sector and put pressure on inflation as domestic borrowings increase.
source - www.island.lk
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