Sri Lanka’s state revenues grow 37%

COLOMBO: Sri Lanka’s state revenues grew 37 percent to 1,586 billion rupees up to October 2022, while current spending also grew 20 percent from a higher base official data showed, but the overall deficit narrowed compared to an inflated GDP.

The budget deficit for the 10 months narrowed to 5.5 percent of projected GDP from 8.6 percent last year.

Non-tax revenues rose 52 percent to 182 billion rupees, data released by the central bank shows.

Current spending also rose 20 percent to 2,778 billion rupees.

The revenue deficit fell to 851 billion rupees up to October 2022 from 1,036 billion rupees a year earlier.

Sri Lanka’s state revenues has started to climb due to high inflation from the second half of 2022 as well as hikes in rates, but expenditure is also going up.

There is wage and hiring restraint for 2022, but interest costs have risen. Interest costs are up partly due to uncertainty over whether the government would also default on domestic debt under pressure from a debt sustainability analysis.

Interest costs for October has not been released separately to calculate what is called a primary deficit.

Capital expenditure grew at a slower 11 percent to 456.3 billion rupees.

The overall deficit after grants fell by 10 percent to 1,305 billion rupees up to October 2022 from 1,447 billion rupees last year.

Sri Lanka’s GDP is expanding in nominal terms after the currency collapsed. The budget deficit for the 10 months narrowed to 5.5 percent of projected GDP from 8.6 percent last year.

An inflating economy reduces total domestic debt as a share of GDP and while tax revenues go up, reducing real debt.