Sri Lanka budget under pressure in May, but current gap narrows

August 03, 2012 (LBO) – Sri Lanka’s budget continued to be under pressure in May with the gap between total revenues at 119 billion rupees or 1.6 percent of gross domestic product but the pace of spending increases has slowed from a month earlier, official data showed. State finances performed much worse that last year, with revenues rising 9.1 percent to 386.7 billion rupees (at about half the projected growth rate of 18.3 percent for the full year while current spending rocketed 22.6 percent to 506.4 billion rupees.

The revenue deficit yawned at 119.7 billion rupees up 103.6 percent from last year and far away from a highly optimistic promise of almost balancing the current budget in 2012.

However the current account deficit was slightly lower than the 139.8 billion rupees recorded in May indicating that the gap between revenues and current spending was narrowing slightly.

Some of the cost increases come from higher interest rates, which could be paper losses which has no immediate impact on the economy as no cash flows are involved.

The finance ministry kept up a blistering pace of capital expenditure, spending 189.6 billion rupees up to May up 45.3 percent from a year earlier.

Though a large part of capex is financed by foreign loans, whi