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Sri Lanka Budget Gap Narrows in 1Q 2010
Source: lankabusinessonline.com
Source Date: Monday, June 14, 2010
Focus: Electronic and Mobile Government, ICT for MDGs, Knowledge Management in Government
Country: Sri Lanka
Created: Jun 21, 2010

Sri Lanka's budget gap has narrowed in the first quarter of 2010, with revenues picking up and the government also keeping a lid on current expenses from a year earlier, official data show.
Total revenues were up 26.3 percent to 182.7 billion rupees in the three months to March and current expenses were up only 1.6 percent to 247.5 billion rupees.
The government resisted a temptation to go for an 'election budget' in November 2009 and has so far held back a public sector salary hike which is the largest expenditure and cashflow item in the budget.

Last year 58 percent of taxes extracted from the people was given as salaries and pensions to state workers. Instead of simply raising salaries, which is needed, the state in recent years has also expanded an already bloated public sector. Last year Sri Lanka's budget deficit hit 9.8 percent without grants and 10.2 percent including grant funding. The high spending Sri Lanka state has been identified as the major reason for economic instability, inflation and low growth in the island which creates poverty among ordinary people outside the state.

The current account or revenue deficit of the budget, which is the gap between total revenue and current expenses, was 64.8 billion rupees, down from 99.1 billion rupees in 2009, one of the worst years for fiscal management in Sri Lanka. The revenue deficit is estimated at 1.1 percent of projected gross domestic product for 2010, and is lower than last year's 2.05 percent of GDP gap for the first quarter. Sri Lanka has run a current account deficit in the budget from 1987. However in a pro-forma budget released to the public earlier in the year the finance ministry expected only a revenue deficit of 1.9 percent for the full year. A formal budget is due to be presented to parliament later this month.

Capital expenditure was maintained at 58.1 billion rupees in the quarter around the same level as the 58.4 billion rupees in 2009. The overall budget deficit without counting grant financing came at 121.7 billion rupees or 2.2 percent of GDP for the quarter, an improvement from last year's first quarter gap of 2.8 percent of GDP. The deficit with grant financing was only marginally higher at 122.9 billion rupees, also down from 157.5 billion rupees a year earlier.
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