Sri Lanka’s revenue in January is far below the expected increase of 69 percent due tax increases and not sufficient to meet all current expenditures except those payments pertaining to salaries, pensions, welfare, pharmaceuticals and debt servicing, official sources said.
Sri Lanka’s government revenues were Rs.158.7 billion rupees in January 2023 but expenditure and debt service remained high, In January 2022 total revenues were Rs.104.5 billion without any tax increases according to central bank data,
Comparatively there was an increase of Rs 54.2 billion in January 2023 considering the January 2022 revenue of Rs.104.5 billion where there were no tax revisions at that time, economic analysts said adding that the revenue collection authorities should have been collected Rs.230.83 billion to meet the target.
Without making unnecessary structural adjustment and streamlining the tax administration, the government will not be able to collect the tar getted revenue this year, they said.
The budget has aimed at increasing tax revenue by 69 percent to Rs. 3,130 billion in 2023 from this year’s Rs.1,852 billion while bringing down the budget deficit to 7.9 percent in 2023 from this year’s revised 9.8 percent
President Ranil Wickremesinghe has notified the Cabinet that the Government revenue for the month of January 2023 is far below the monthly expenditure estimates, and instructed all relevant authorities to curtail Government expenditure.
He further noted that the General Treasury too, is finding it challenging to meet all current expenditures except those payments pertaining to salaries, pensions, welfare, pharmaceuticals and debt servicing, the President’s Media Division (PMD) reported.
Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.
Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint, the pointed out
According to a note presented by President Wickremesinghe to the cabinet, public sector salaries cost Rs.87.4 billion.Pensions and income supplements (Samurdhi program) were Rs.29.5 billion Other expenses were Rs. 10.8 billion.Capital spending was Rs.21 billion.
Debt service was Rs. 377.6 billion for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of Rs. 100 billion.
This more recent drop in income from taxation along with a failure to acknowledge and re-structure the mounting debt earlier are the causes behind the current crisis, and not as some believe consequences of current global economic pressures relating to the Covid-19 pandemic and the war in Ukraine.
Equally, this is not a trap set by China to ensnare Sri Lanka, they claimed.
