• Fri. Nov 26th, 2021

Sri Lanka’s 2021 fiscal deficit forecast revised to 2020 levels; Aim to curtail fiscal deficit to 8.8% of GDP in 2022

Sri Lanka’s government has revised the fiscal deficit projection to 11.1 percent of GDP in 2021 from the original 8.9 percent target with large shortfalls in income tax, Customs Import Duty, and Excise duty collections.

However, the Finance Minister, Basil Rajapaksa expects the budget deficit to be contained 8.8 percent of GDP from the revised estimate of 11.1 percent of GDP in 2021with several new revenue proposals.

In the eights months of the year, revenue from income tax increased by 4.6 percent to Rs. 175.2 billion in the first
eight months of 2021 from Rs. 167.4 billion in the same period of 2020.

The total government revenue realization in the first eight months of 2021 was 48.3 percent of the estimated revenue of Rs. 1,951 billion for 2021. The Income-tax revenue realization fell short of Rs.58.3 billion from the estimates. Further, Customs Import Duty and Excise (Special Provisions) Duty is also well below the initial estimates

Total government expenditure increased by 9.5 percent to Rs. 2,062.4 billion in the first eight months of 2021, compared
to Rs. 1,883.7 billion in the same period of 2020 mainly due to the increase in recurrent expenditure on salaries and
interest payments. However, this was below the initial estimations by Rs.288.3 billion as the government spent Rs.445.8 billion less in the capital budget than it initially expected.

Overall, the budget deficit in the period rose to Rs. 1.12 trillion from Rs. 974.8 billion in the same period of 2020.

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