Sri Lanka’s deficit plan could face risks: finance ministry

Chandi Dharmaratne

June 30, 2010 (LBO) – An expansion of the public service, losses in state enterprises, high oil price and lower than expected global growth could put a government deficit reduction plan at risk, a finance ministry report said. Sri Lanka is planning an 8.0 percent of gross domestic product budget deficit for 2010 down from 9.9 percent (10.4 percent with grants) for 2010.

Revenues are expected to grow 16.9 percent primarily from an economic revival and current expenditure is expected to grow only at 5.6 percent.

The government has delayed a state salary hike till next year. Salaries and pensions are the biggest current expenditure item of the government, alongside interest on debt.

But new recruitments to the public service “in excess of the targeted retirements,” and poor performance of state enterprises could put pressure on fiscal plans, a finance ministry report said.

The state has expanded the public service from 1.1 million persons in 2005 to 1.3 million in 2009. Last year 57.6 cents out of every tax rupee collected from the people were spent on salaries and pensions. Last year 21,000 people retired.

But Sri Lanka passed the entire burden of adjustment was placed on to the private sector in 2009