26 October 2016 12:02 am
The island nation has agreed to reduce its budget deficit to 5.4 percent of the Gross Domestic Product (GDP) this year and 4.7 percent of GDP next year, as per the conditions laid out under a US$ 1.5 billion International Monetary Fund (IMF) loan.
“We will cut the expenditure through reducing the government expenditure and better financial management,” Deputy Finance Minister Lakshman Yapa Abeywardena told reporters in Colombo.
A document by the Finance Ministry showed the government has planned to cut defence budget by 8.5 percent, higher education and highways by a fifth, and health by 9.5 percent.
The document did not give specific details on how the government plans to cut recurrent and capital expenditure on each ministry.
This year’s total expenditure is estimated at Rs.3.7 trillion. A delay in Value-Added-Tax (VAT) hike is likely to put pressure on the government’s ambitious goal of achieving the 5.4 percent of the GDP budget deficit target this year.
The plan to increase the VAT to 15 percent from 11 percent was suspended in July after two Supreme Court rulings. However, the Finance Ministry yesterday said the amended bill will be debated in the parliament today before a voting.