Government’s budgetary implementation slower than usual - World Bank report

Colombo, Oct. 11 (Daily Mirror) - The government's implementation of the budgeted amounts remained unusually slow during the first seven months of the year, a decline of 19.8 per cent compared to the corresponding period of last year, according to a World Bank report.

By July this year, only 22.2 per cent of the annual budgeted amount has been spent, a 19.8 per cent decline.

It is attributed to the passage of the appropriation act in March 2025 and the slower-than-expected recommencement of bilateral projects following restructuring.

The report says revenue overperformance and weak capital budget execution led to a strengthening of the primary balance surplus over January-July 2025.

Total revenue increased by 26.5 per cent, mainly driven by taxes on imports (such as value-added tax on imports, excise taxes on motor vehicles, and trade taxes) as vehicle imports gained momentum.

Primary expenditure (expenditure minus interest payments) rose by 7.2 per cent (y-o-y), as a result of a higher wage bill, due to resumed public sector hiring and implementation of the salary increases proposed in the 2025 national budget and increased welfare costs.

"However, this was partially offset by the higher-than-usual under-execution of the capital budget," the report says.

As a result, the primary surplus increased by 87.5 per cent (y-o-y) over January-July 2025.

The removal of restrictions on vehicle imports in February 2025 resulted in a 13-fold increase (y-o-y) in personal vehicle imports to US$506.1 million by July, surpassing the cumulative vehicle imports over the past five years (2020–24).

The increase in imports of vehicles and general consumer goods (reflecting improved household consumption) more than offset the decline in fuel imports (as global oil prices fell and domestic supply of renewable energy increased), leading to a 11.8 per cent (y-o-y) increase in the import bill during the first seven months of 2025.