Sri Lanka’s budget deficit widens amidst monetary instability

Sri Lanka’s budget deficit widens amidst monetary instability

24 August 2019 11:21 am

Sri Lanka's budget deficit widened in the first half of 2019 as private credit and imports fell, slashing revenues, Central Bank’s weekly review revealed.   

During the first half of 2019, government revenue as a percentage of estimated GDP declined to 5.7 per cent to Rs. 894 billion from 6.4 per cent recorded in the corresponding period of 2018.

During the same period, total expenditure and net lending as a percentage of estimated GDP increased to 9.1 per cent from 8.8 per cent recorded in the corresponding period of 2018.

Overall budget deficit as a percentage of estimated GDP increased to 3.4 per cent in the first half of this year   from 2.4 per cent recorded in the corresponding period of the previous year.

In financing the budget deficit, domestic financing declined to 0.7 per cent of estimated GDP compared to 1.3 per cent in the corresponding period in 2018.

Foreign financing as a percentage of estimated GDP increased to 2.7 per cent from 1.1 per cent recorded in the corresponding period of 2018.

In nominal terms, outstanding central government debt increased to Rs. 12,599.8 billion by end June 2019 from Rs. 11,977.5 billion at end 2018.

Accordingly total outstanding domestic debt increased by 5.7 per cent to Rs. 6,360.3 billion, and the rupee value of total outstanding foreign debt increased by 4.7 per cent to Rs. 6,239.6 billion by end June 2019.

During the year up to 23rd August 2019 the Sri Lanka rupee appreciated against the US dollar (1.8 per cent).

The total outstanding market liquidity was a deficit of Rs. 9.15 bn by end of the week, compared to a deficit of Rs. 15.00 bn by the end of last week.

The reserve money increased compared to the previous week mainly due to the increase in deposits held by the commercial banks with Central Bank.

Import expenditure at US dollars 9,596 million during first half of 2019 decreased by 16.1 per cent (year-on-year) largely due to lower imports of gold (-99.6%), personal vehicles (-60.1%), transport equipment (-32.4%), rice (-94.1%) and fuel (-4.4%).