April 22, Colombo (LNW): Sri Lanka grapples with enduring fiscal hurdles, “State of the Budget Report 2024”, a recent report issued by local economic think tank Verité Research disclosed.
This annual analysis provides a comprehensive examination of the nation’s fiscal landscape, offering valuable insights for informed decision-making in budgetary matters.
Verité Research’s findings reveal a recurring pattern of shortfall in tax revenue, with the government consistently falling short of revenue targets for the past 33 years.
Despite an optimistic projection of Rs. 4,164 billion for 2024 – reflecting a substantial increase from the previous year – the report projects a more conservative estimate of Rs. 3,570 billion, highlighting a projected 14 per cent deficit.
A significant portion of this shortfall, particularly in Value Added Tax (VAT) revenue, underscores the need for more accurate fiscal planning methodologies.
The report identifies overestimations in various revenue streams, including corporate and personal income taxes, Social Security Contribution Levy (SSCL), and Customs import duty.
Compounding these challenges is Sri Lanka’s soaring interest-cost-to-revenue ratio, ranked as the highest globally.
Despite government efforts to reduce this ratio to 64 per cent, projections suggest it may exceed 70 per cent, posing obstacles to economic recovery and debt sustainability.
Such discrepancies not only hinder progress but also raise concerns about Sri Lanka’s adherence to its IMF-backed economic recovery plan.
In light of the Verité findings, the “State of the Budget Report 2024” serves as a vital resource for policymakers, economists, and stakeholders, offering a candid assessment of Sri Lanka’s fiscal predicament.
Addressing these challenges demands concerted efforts to enhance revenue collection mechanisms, improve forecasting accuracy, and pursue prudent fiscal policies to foster sustainable economic growth and stability.
