Govt. aims to cut deficit, have non-traditional budget in 2022
COLOMBO – Sri Lanka aims to make a ‘significant reduction’ in the runaway fiscal deficit in 2022 and have a ‘non-traditional budget’, Presidential Secretary P. B. Jayasundara, said as the country faces severe monetary instability due to artificially low interest rates.
“This is not a traditional budget. From the mingling I had with the finance minister and finance ministry officials, I have an understanding that he (finance minister) will make this as a transformation budget,” Jayasundara told a media briefing at the Presidential Media Centre on Tuesday (2).
“The budget will focus on increasing the country’s revenue as a whole based on the President’s ‘Vistas of Prosperity and Splendour’, he said referring to President Gotabaya Rajapaksa’s election manifesto.
Treasury Secretary Attygalle said a new economic growth is expected along with the normalization of the country.
“We are planning to reduce the budget deficit by a significant level. Maintaining a higher budget deficit is against the state’s fiscal policy,” Attygala said, adding that the budget will curtail non-priority spending while maintaining funds for government’s development projects unhindered.
“The government’s policy is to reduce the budget deficit to 4.5-5% (of the GDP). We are getting into that path of reducing the budget deficit by a significant portion while maintaining the government expenditure and development activities,” he said.
Sri Lanka’s budget deficit last year hit close to 14% of GDP, which was reported at 11.1% through number juggling, which is at its worst in 37 years, after a reckless tax cut in December 2019, shortly before a coronavirus pandemic hit.
Money printed to finance the deficit and keep rates artificially low has depleted foreign reserves and also effectively transferred a part of the central government foreign debt to the central bank, which is now having negative net reserves.
The monetary instability has raised fears of external debt default, with the central bank finding it difficult to provide dollars (convertibility) to the money printed for current imports, let alone repay debt.
The budget document is seen as President Gotabaya Rajapaksa administration’s first economic blueprint to spell out the economic policy through 2024 amid the county facing a risk of sovereign debt default, a claim rejected by Jayasundera.
Finance Minister Basil Rajapaksa will deliver the 2022 budget on November 12 and it is expected to be one of the trickiest budgets in Sri Lankan history amid sharp revenue shortfall.