Sri Lanka legislative change would promote fiscal irresponsibility: legislator

Mar 15, 2013 (LBO) – Proposed changes to law aimed at restraining excessive spending by Sri Lanka’s rulers will promote fiscal irresponsibility and also understate the actual budget deficit, a legislator has warned. Disclosures made under the fiscal responsibility law showed that 83 billion rupees in new guarantees or about 1.1 percent of GDP had been issued in the first three quarters of 2012 alone.

The budget deficit as a share of GDP is estimated to have fallen to 5.8 percent from 6.2 percent a year earlier.

The International Monetary Fund has also raised concerns regarding the growing sovereign guarantees, and the debt to GDP ratio which is hovering around 80 percent levels, though budget deficit numbers are seen to be falling.

It is not clear how the rating agencies would view the change to the law, which allows higher levels of sovereign guarantees and extends the correction period.

Sri Lanka has a bloated state sector to which tens of thousands of unemployable able bodied graduates educated at tax-payer expense are recruited each year.

State enterprises also make losses in the region of 2.0 percent of GDP which are financed with bank borrowings.

Critics say due to sustained pr