July 8, 2009 (LBO) – Sri Lanka state revenues fell 9.6 percent while day-to-day expenditure zoomed 34.5 percent driving the revenue deficit up an unprecedented 528 percent to 118.2 billion rupees, the latest official data has revealed. The government had managed to increase capital expenditure by 9.0 percent to 74.6 billion rupees in the period.
The overall deficit was up 113.7 percent to 199.6 billion rupees compared to last year.
As a percentage of gross domestic product (GDP) the deficit had doubled to 4.0 percent from 2.0 percent in the same period last year.
Though it could indicate an anualised 12.0 percent of GDP deficit, the government has already raised some taxes, including the ‘nation building tax’ which are likely to bring more cash during the rest of the year.
A part of the expense increase came from higher domestic interest costs. Interest rates have risen in recent years as the Central Bank countered an inflation bout triggered by money printed to finance the budget in earlier years.
In the last quarter of 2008 interest rates also rose as the Central Bank tried to unsuccessfully defend a dollar peg. After the rupee was floated interest rates have already started to fall.
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