Sri Lanka’s National Treasury p o s t e d a n i m p r o v e d performance this August compared to previous months of 2016 backed by increased revenue collection, which would likely help keep the budget deficit lower than approved in parliament. The overall fiscal deficit for August was Rs.52.32 billion, worse than Rs.36.62 billion a year ago but better than the Rs.104.44 billion deficit experienced in July. Revenue collection increased to Rs.149.72 billion from Rs.115.89 billion year-on-year (YoY) and Rs.121.84 b i l l ion co l lected in July and was the highest revenue collected so far this year compared to the second best of Rs.137.27 billion in May.
Expenditure for the month increased to Rs.202.27 billion from Rs.152.55 billion YoY but fell from Rs.226.28 billion in July. Notably, interest payments fell to Rs.44.15 billion compared to Rs.80.73 billion in the preceding month, while the fertilizer subsidy payments increased to Rs.7.47 billion from negligible spending in July. The current account balance fell to a negative Rs.3 billion compared to a deficit of Rs.14.44 billion YoY and Rs.49.38 billion in July.
For the first eight months of the year, the overall deficit was recorded at Rs.485.05 billion compared to Rs.539.95 YoY and against a parliamentary-approved Rs.740.15 billion or 5.9 percent of gross domestic product for the whole of 2016. The Treasury is expecting to hold the deficit down to Rs.659 billion for the year. The current account deficit stood at Rs.146.09 billion compared to Rs.247.17 billion YoY during the same period. Revenue for the eight months amounted to Rs.1.01 trillion, a 21 percent increase compared to Rs.837.36 billion YoY, despite the value-added tax increase only being in effect for two months during the period. The tax was reintroduced in October after solving irregularities in its legitimacy. Government spending so far in 2016 amounted to Rs.1.5 trillion, up from Rs.1.38 trillion YoY. However, the Treasury is hoping to contain spending for the year at Rs.2.22 trillion against the approved spending of Rs.2.58 trillion. Interest payments increased to Rs.414.59 billion from Rs.384.33 billion YoY, while salaries, wages and pension payments increased to Rs.492.47 billion from Rs.470.37 billion YoY. Public investment increased to Rs.348.80 billion from Rs.279.58 billion YoY as the infrastructure projects, which were halted during 2015, were restarted. Total financing for the eight months fell to Rs.485.05 billion from Rs.539.95 billion YoY. Net foreign financing increased to Rs.149.07 billion from Rs.11.74 billion YoY, while the net domestic financing fell to Rs.335.98 billion from Rs.528.21 billion YoY.