Sri Lanka state revenue gap wide, despite higher taxes in April

June 20, 2011 (LBO) – Sri Lanka’s state revenues rose 18.4 percent to 284.9 billion rupees in the four month to April 2011, but day-to-day spending had also expanded faster, creating a revenue deficit wider than budgeted for the whole year, official data shows. This left a yawning revenue deficit of 75.4 billion rupees, higher than the 53.4 billion rupees projected for the whole year.

A revenue deficit or a gap in the current account of the budget indicates that the state has to borrow for day to day running, and the entire capital investment has to be financed from debt.

The budget for 2011 expected the revenue deficit to be brought down to 53.4 billion rupees from 118.8 billion rupees a year earlier. But in the first four months of last year the revenue gap was higher at 86.3 billion rupees.

The state capital spending was 98.2 billion rupees up 17.2 percent from a year earlier, in line with budget projections.

This left a budget deficit of 173.6 billion rupees before grant funding of 2.7 billion rupees and 170.9 billion rupees after grants, a gap of about 2.7 percent of gross domestic product.

If current trends continue the annual deficit would be around 8.0 percent of GDP, higher than the projected 6.8 percent.

Data also show