Sri Lanka’s fiscal outlook bleaker than ever

With the impact of COVID-19, Sri Lanka’s fiscal outlook is bleaker than ever, making it extremely tough for the Treasury to meet public expenses and maintain cash-flows with limited cash balance from total allocations made in the revised Vote on account that was sanctioned by the President on March 6.

In a bid to save resources, the Finance Ministry has already placed restrictions on expenditure and funds being diverted towards the fight against COVID-19, official sources said.

The caretaker government’s revenue collection has dwindled as most economic activities came to a standstill with the country’s revenue collection authorities working remotely.

Total revenue from January to April 2020 was around Rs. 423 billion while expenditure shot up to Rs.753.1 billion during this period leaving a deficit of around Rs. 330 billion, provisional data revealed.

The allocation made for public expenditure from the revised Vote on Account for the March – May period had been Rs. 420 billion.

Under these circumstances, the Treasury is now left with around Rs. 90 billion for the day-today functioning of the caretaker government.

With higher required spending and tighter liquidity conditions, the fiscal authority has no option other than to go for domestic borrowings for more deficit- financing from this month or to revise the Vote on Account again under the warrant of the President, the sources said.

According to the Vote on Account passed in November last year, the borrowings limit was Rs. 721 billion which has already been exhausted to meet unforeseen and essential relief expenditure incurred during the COVID-19 crisis up to now.

A sum of around Rs. 100 billion is needed monthly for the salaries and incentives of public servants, state corporations, boards, banks and insurance.