Sri Lanka’s first 4-month budget deficit declines

Sri Lanka’s budget deficit for the first four months of 2016 declined to Rs.233.44 billion from Rs.271.52 billion year-onyear (YoY) on the back of higher tax collection, the Finance Ministry data showed. The total revenue for the period increased to Rs.472.69 billion from Rs.395.12 billion YoY. The tax revenue contributed significantly, increasing to Rs.441.21 billion from Rs.360.62 billion YoY, while the non-tax revenue declined slightly. On the expenditure side, the recurrent expenditure increased to Rs.559.70 billion from Rs.522.54 billion YoY, while the capital expenditure increased to Rs.146.44 billion from Rs.144.19 billion YoY.

The government salary expenditure increased 4 percent YoY to Rs.188.60 billion due to converting casual workers to permanent employees and the remaining allowance increase from the populist interim budget.

The pension payments increased 16.6 percent YoY to Rs.56.01 billion due to the payments now reflecting the salary levels in an increasingly ageing population of the country. Servicing both domestic and foreign debt cost Rs.196.68 billion, increasing 15.6 percent YoY. The tax revenues fell short of the projected Rs.495 billion. The income tax revenue increased to Rs.64.86 billion from Rs.55.69 billion YoY.

The Treasury said that this was due to implementing the automated online tax payment portal and the efforts to create a better tax culture. Value-added tax (VAT), of which increased rates took effect only in May, increased 10.90 percent YoY, nonetheless in the first four months, to Rs.79.92 billion. While the import VAT remained stagnant, the domestic VAT increased 16.9 percent YoY to Rs.51.34 billion. The excise duties increased 15.5 percent YoY to Rs.148.46 billion due to the rate hikes, with the taxes from vehicle imports down 10.6 percent YoY to Rs.59.43 billion and the duty on liquor up 25.9 percent YoY to Rs.42.19 billion.

The excise on tobacco increased 12.8 percent YoY to Rs.28.76 billion, while the excise on petroleum increased 614.7 percent YoY to Rs.17.22 billion. The import duty revenue increased 73.9 percent YoY to Rs.48.44 billion on the back of increased tax rates as well. Due to an increase in the basket of goods coming under its influence, the Special Commodity Levy revenue increased 6.1 percent YoY to Rs.21.12 billion.

The Nation Building Tax revenue increased 24.4 percent YoY to Rs.16.74 billion due to the increased service activities, while the Ports and Airports Development Levy collection increased 56.7 percent YoY to Rs.27.41 billion due to the rate hikes.