June 25, 2012 (LBO) – Sri Lanka’s budget has gone off track in the first quarter of 2012, with current spending far outpacing tax revenues, leaving a yawning revenue deficit for the three months that is bigger than the gap for the whole of last year. Current spending by Sri Lanka’s rulers rose 24.2 percent in the first quarter of 2012 to 334.8 rupees, above the annually expected growth of 10.1 percent, while taxes extracted from the people only rose 10.3 percent to 203.0 billion rupees.
Total revenues including non-tax revenues rose only 5.6 percent from a year earlier, against a planned annual increase of 14.4 percent.
For the full year the state hopes to extract 1,000.6 billion rupees in taxes from the people, up an ambitious 23.1 percent from a year earlier.
Last year Sri Lanka planned to increase tax revenues from the people by 19.0 percent to 861 billion rupees, but was actually able to extract an increase of only 12.2 percent, despite strong economic and import growth.
Sri Lanka is now facing a trade contraction, with slowing growth and falling imports. Import taxes are key source of revenue.
The revenue deficit or the current account deficit of the budget (the difference between total reve