Sri Lanka heads for record deficit despite better revenues in June

Sept 07, 2009 (LBO) – Sri Lanka’s state revenues fell 6.15 percent in June from a year earlier, implying an annualized deficit of 10.8 percent of gross domestic product for 2009, but the gap has narrowed from previous months, the latest official data show. In the 6-months to June the state took away 289.7 billion rupees from the people in the form of tax and non-tax revenues.

It spent 432.6 billion as day-to-day expenditure (344.1 billion in 2008), causing a record current account deficit of 142.9 billion rupees for the half year (35.4 billion rupees in 2008), indicating perhaps the worst fiscal performance in the country’s history.

The current account deficit for the full year 2008 was only 88.4 billion rupees. A prudent government is expected to at least balance the current budget and manage day-to-day expenses within total revenues.

A deficit in the current account of the budget implies a dis-saving in the public sector of the economy (2.9 percent of GDP) and unchecked consumption of the state.

Sri Lanka’s state spending habits are epitomized by a 110 plus coterie of ministers and a bloated public sector that is taking away around 53.0 percent of revenu