Sri Lanka is expecting to grow tax revenues by an optimistic 22.9 percent to 1,132 billion rupees, compared to a provisional growth of 12.2 percent in 2012 and an actual growth of 12.2 percent in 2011.
In 2011 tax revenues were 8.0 percent or 80 billion rupees below budget at 920.9 billion rupees. But non tax revenues rose 27.1 percent to 134.1 billion rupees.
In 2013 Sri Lanka had upped taxes on exported raw produce including many agricultural goods. Import levies were raised and value added tax extended to the retail trade, while special interest groups got more VAT exemptions.
The administration is expecting current spending to rise 13.9 percent to 1.26 trillion rupees. In 2012 current expenses rose 0.5 percent to 1.13 trillion rupees, according to provisional data presented to parliament.
For 2013, state worker salaries were raised moderately, which could help keep current spending in check. But the public sector is being expanded with more unemployable graduates being recruited into the tax spender net.
Analysts say, rather than expanding the public sector, it should be cut through attrition allowing better salaries to be paid.
In 2013 the state is expending to run a current account deficit (the gap between total revenues and current expenses) of only 9.4 billion rupees a target which is usually taken with a pinch of salt by most observes.
Last year a 1.8 billion rupee current account gap eventually ballooned 3,100 percent to 58 billion rupees according to the provisional out-turn.
However capital spending moderated by 12.3 percent to 426.9 billion rupees to help keep the budget deficit at 485 billion rupees or 6.4 percent of GDP including grants. Without grants the deficit was 6.2 percent as targeted.
In 2013 the state is expecting to up capital spending by 21.3 percent to 518 billion rupees, giving a budget deficit of 527 billion rupees (6.1 percent) before grant funding and 507.4 billion rupees or 5.8 percent of GDP after grants.
The government is expecting to cut foreign borrowings 55.7 percent to 86 billion rupees from 194 billion rupees in 2012. There are no commercial borrowings listed in the budget.
Instead domestic borrowings are expected to expand by a steep 64.5 percent to 421.4 billion rupees or 4.8 percent of GDP, up from 256 billion rupees or 3.4 percent of GDP in 2012.
The domestic borrowings may require interest rates to be relatively high to crowd out private borrowings and consumption. The budget also lists foreign purchases of rupee denominated Treasury bills as 'domestic borrowings'.
This year 62 billion rupees are expected from the sale of T-bills to foreign investors, down from 100 billion rupees in 2012.