SL records Rs.22bn primary surplus for first time in 63 years

• Finance Ministry credits achievement to efficient management of govt. coffers
• In post-independent SL, budget surplus was first recorded in 1954
• Treasury officials hopeful of positive development aiding efficient management of debt
• State revenue in first 10 months of 2017 up 10.4 percent YoY to Rs.1473bn

For the first time since 63 years, the government has been able to a record Rs.21.9 billion surplus in the primary balance of fiscal accounts during the first 10 months of 2017, the Finance and Mass Media Ministry said yesterday.

The primary balance in the first 10 months of 2016 was a negative Rs.37 billion.

The ministry in statement credited the achievement to the efficient management of government coffers.

“In the post-independent Sri Lankan history, a budget surplus was first recorded by 0.5 percent of the GDP in year 1954. Later in 1956 this budget surplus increased to 2.2 percent of the GDP,” the statement said.

Sri Lanka has also recorded current account surpluses from 1955 to 1970 and later from 1973 to 1994. Since then up to now overall budget deficit, deficit in the current account and the deficit in the primary balance were in negative growth, continuously. 

The Treasury officials are of the opinion that the favourable situation in the primary balance is a sign of positive growth in economic development, and it would further enhance the country’s capacity to manage the debt repayment efficiently. 

Having an excess in the state revenue more than the whole state expenditure minus the interest payment is known as the surplus in primary balance.

The state revenue in the first 10 months of 2017 when compared with the first ten months of 2016 has increased by 10.4 percent to Rs.1473 billion in 2017. It was Rs.1333 billion during the same period in 2016. 

The tax revenue during the same period has increased by 14.2 percent to Rs.1470 billion in 2017.

Also the state expenditure has increased by 9.5 percent from Rs.1881 billion to Rs.2060 billion. 

The interest expenditure during the first ten months of 2017 alone is Rs.609 billion apart from the domestic and foreign debt repayment of Rs.856 billion.

Sri Lanka during the last two years brought in several decisive measures such as an increase in Value Added Tax and the introduction of new income tax laws aiming to boost government revenue under an International Monetary Fund  Extended Fund Facility (EFF) programme. 

However, despite these fiscal side improvements, some slippage in the budget deficit is likely in 2017, mainly as a result of weather-related fiscal costs and higher interest payments.

“This could have an adverse impact on achieving the envisaged fiscal consolidation path, while complicating the conduct of monetary and exchange rate policies,” Central Bank Governor Dr.  Indrajit Coomaraswamy told last week during the launch of Central Bank’s Road Map on monetary and financial sectors.

Sri Lanka was targeting a fiscal deficit of 4.7 percent of Gross Domestic Product in 2017.