- Coronavirus disruptions and ill timed tax cuts remain key reasons
- Budget deficit increases to Rs.974.8bn during eight months
The government’s revenue shortfall during the first eight months through August is measured at Rs.298.6 billion compared to the same period in 2019, amid the coronavirus toll on the economy and the tax cuts introduced in December 2019.
The latest data published by the Finance Ministry and the Central Bank showed that the Sri Lankan government has managed to collect Rs.908.9 billion in revenue and grants from January through August compared to Rs.1, 206.5 billion in the year earlier period.
The tax revenue was Rs.801.3 billion compared to Rs.1,105.4 billion collected during the same eight months in 2019.
This is predominantly due to the slowdown in the economy, particularly since mid-March through May as the economy was closed for activities due to virus fears.
The tax cuts announced to spur the economic activities were ill timed due to the outbreak of coronavirus, as most businesses carry out limited operations since the outbreak in March.
However, it was encouraging to see July and August tax income increasing to almost previous year’s levels.
Meanwhile, the Treasury data showed that the total expenditure of the government, including lending minus repayments, have declined to Rs.1, 883.7 billion during the eight months from Rs.1, 927.1 billion in the same period in 2019.
The recurrent expenditure rose from Rs.1, 500.5 billion to Rs.1, 670.4 billion while the capital expenditure plus lending minus repayments fell from Rs.426.6 billion to Rs.213.3 billion.
As a result, the “overall budget deficit increased to Rs.974.8 billion during the eight months ending August 2020 from Rs.720.6 billion recorded in the corresponding period of the previous year,” the Central Bank said.