Sri Lanka’s 2017 fiscal target will be more challenging: Moody’s

Mar 02, 2017 (LBO) – Sri Lanka’s ambitious 2017 fiscal deficit target will be even more challenging to achieve as drought-related government spending will add to the challenge of achieving fiscal targets, Moody’s said.

Moody’s said in a statement that although drought relief measures provide affected families with income, they will increase government spending at a time when Sri Lanka’s fiscal strength is low.

On Saturday, the government announced that it will continue to provide compensation to households affected by the country’s worst drought in 40 years.

The government will provide 10,000 rupees ($65.95) per acre of unusable, dried out rice paddies and compensation for other crops for a period of four months.

The compensation is in addition to 82 million rupees of drought-related spending so far.

Moody’s said drought-related government spending will add to the challenge of containing public expenditures as specified under Sri Lanka’s current IMF Extended Fund Facility program.

“The government projects a 17.0 percent increase in overall spending this year, after a decline of 0.7 percent in 2016 and annual average increases of nearly 12.0 percent from 2010 to 2015.” Moody’s said.

“The increase in planned spending this year largely reflects higher growth-enhancing infrastructure outlays, leaving limited room to cut current expenditures.”

Full statement is reproduced below.

Sri Lanka’s Drought-Related Costs Add to Challenge of Achieving Fiscal T...