Despite an increase in government revenue during the first seven months of 2012, the current expenditure of the government rose significantly compared with the previous year, signalling that the government may not be able to meet its budget deficit target of 6.2 percent of the Gross Domestic Product (GDP).
The government revenue during the first seven months rose 12.6 percent year-on-year (YoY) to Rs.556 billion against the current expenditure shooting up 19.4 percent YoY to Rs.695.3 billion, the latest data released by the Central Bank showed.
Thus, the revenue deficit during the first seven months in 2012 amounted to Rs.139.3 billion. State capital expenditure also rose 41.6 percent from a year earlier to Rs.286.4 billion.
The government revenue of Rs.556 billion consisted of Rs.490.4 billion as tax revenue, Rs.65.7 billion as non-tax revenue and Rs.8.4 billion as grants.
A compilation of data showed that the budget deficit in the first seven months of 2012 amounted to Rs.425.7 billion, an increase of 48.3 percent YoY and almost hitting the budget deficit target of Rs.468.9 billion set for 2012.
Meanwhile, total domestic debt of the government in the first seven months also rose to Rs.3185.7 billion against Rs.2755 billion in the first seven months of 2011. Total foreign debt during the seven months amounted to Rs.2975.3 billion up from Rs.2220.2 billion in the first seven months of 2011.
Total outstanding government debt for the first seven months amounted to Rs.6161 billion as opposed to Rs.4975.2 billion in the first seven months of 2011.
A recent report by Standard Chartered Bank (SCB) said that Sri Lanka is likely to overshoot its budget deficit target of 6.2 percent of the GDP in 2012.
“We forecast a deficit of close to 7.0% due to losses at state-owned enterprises (SOEs), electricity subsidies and the impact of the drought.
Fiscal consolidation may prove challenging in the near term given that growth is expected to slow in H2-2012 and tax collection on external trade has fallen short of targets. Higher interest payments and the increase in non-interest expenditure on wages and welfare spending this year have also contributed to fiscal slippage,” the report by SCB noted.
Sri Lanka has revised its economic growth rate from original 8 percent to 7.2 percent and recently Central Bank Governor Ajith Nivard Cabraal said the growth might further lag to 6.8 percent.