Sri Lanka government’s finances need fixing: Central Bank

March 30, 2007 (LBO) – Sri Lanka’s central bank called for better government budgets to avoid money printing, changes in badly run state firms, more private sector involvement in infrastructure to reduce further build-ups in government debt, in it annual report Friday. Last year the GDP deflator, the broadest measure of inflation at 10.5 percent the highest since the economic crisis in 2001 which meant that nominal growth of the economy was 17.9 percent. Though revenues reached 17.0 percent of Gross Domestic Product in 2006 from 16.1 percent, and tax revenues rose to 15.3 percent of GDP from 14.2 percent, current expenditure was racing ahead.

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“However, the government exceeded its target on recurrent expenditure due to higher than budgeted expenditure on national security, humanitarian relief, salaries and wages, pensions and fuel and fertiliser subsidies,” the Central Bank said.

“Consequently, the recurrent expenditure to GDP ratio increased to 19.5 per cent from 18.7 per cent in the previous year.”

Critics have pointed out that 49 cents out of every tax rupee projected to be collected in 2007 would go towards maintaining Sri Lanka’s bloated public sector which has also absorbed tens of thousands of unemployed graduates.