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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka budget under pressure in May

Sri Lanka budget under pressure in May

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1Sri Lanka budget under pressure in May Empty Sri Lanka budget under pressure in May Fri Aug 03, 2012 7:50 am

ddindika

ddindika
Manager - Equity Analytics
Manager - Equity Analytics
Sri Lanka's budget continued to be under pressure in May with the gap
between total revenues at 119 billion rupees or 1.6 percent of gross
domestic product but the pace of spending increases has slowed from a
month earlier, official data showed.

State finances
performed much worse that last year, with revenues rising 9.1 percent to
386.7 billion rupees (at about half the projected growth rate of 18.3
percent for the full year while current spending rocketed 22.6 percent
to 506.4 billion rupees.
The revenue deficit yawned at 119.7 billion rupees up 103.6 percent from
last year and far away from a highly optimistic promise of almost
balancing the current budget in 2012.

However the current account deficit was slightly lower than the 139.8
billion rupees recorded in May indicating that the gap between revenues
and current spending was narrowing slightly.

Some of the cost increases come from higher interest rates, which could
be paper losses which has no immediate impact on the economy as no cash
flows are involved.

The finance ministry kept up a blistering pace of capital expenditure,
spending 189.6 billion rupees up to May up 45.3 percent from a year
earlier.

Though a large part of capex is financed by foreign loans, which does
not pressure the domestic economy, there has been a tendency in recent
months to borrow from banks to finance capital expenditure.

From mid 2011 Sri Lanka's economy came under pressure mainly from bank
credit taken to finance energy price manipulations and central bank
credit (printed money) used to manipulate interest rates.


The rupee fell from around 110 to 134 rupees over the past year.
The overall budget deficit rose to 309.3 billion rupees in the first
five months of the year, compared to a target of 468 billion rupees for
the full year.

If the deficit continues unchecked at this level Sri Lanka could end up
with a budget of 9.9 percent of GDP. However authorities are insisting
that a deficit of 6.2 percent will be kept.

Last year a central government budget deficit target of 6.2 percent of
GDP was kept by running off-budget energy subsidies though state
enterprises to the tune of 1.75 percent of the economy.

The IMF has said that state energy enterprises could run an additional deficit of 1.0 percent.

Up to May the fiscal deficit implied by the increase in debt stock was
696 billion rupees, partly due to the effect of a steep depreciation.

http://www.lbo.lk/fullstory.php?nid=2048222603



Last edited by GMNet on Fri Aug 03, 2012 8:20 am; edited 1 time in total (Reason for editing : Excess space removed)

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