New government gears to tackle cash flow shortfalls

The new Government is facing the immediate challenge of finding additional financial resources to meet increased spending both on health and fiscal stimulus packages amidst volatility in cash flows and balances, economic analysts said.

As an immediate remedy appropriate tools will be activated to manage cash flow and provide liquidity to tackle this issue, official sources divulged.

The country’s manufacturing slowed due to a contraction in new orders while employment and services also recorded a drop owing to reduction in new businesses, business activity and expectations during the past three months, Central Bank purchasing managers index indicated.

Furthermore, Sri Lankan manufacturers and service providers anticipate this trend to go downhill with the imposition of travel restrictions and work from home periods in Sri Lanka.

This will be further worsened by the increasing disruptions to people and goods movement with measures taken to tackle the spread of COVID-19, economic analysts emphasised.

At the same time, revenue collection is decreasing or delayed as the recession reacts to the immediate future, a senior Treasury official, said adding that liquidity management will be critical to enable the government to meet extended obligations.

These challenges highlight the importance of accessing liquidity as quickly as possible to manage unanticipated cash flows.