Monday, 28 September 2020 12:04

Sri Lanka’s ballooning budget deficit becomes worrisome

Sri Lanka's nominal government budget deficit has expanded in the seven months to July 2020 to Rs.872.6 billion from Rs.684.1 billion recorded in the corresponding period of the previous year.

The government’s revenue has plunged, even as expenditure has declined slightly during the same period, data released by Central bank showed.

The revenue collection has taken a hit due to the COVID-19 pandemic while the national debt ballooned owing to the continuation of state borrowings, economic and financial analysts said.

During the first seven months of 2020, government revenue declined to Rs.763.2 billon from Rs.1,031.9 billion recorded in the corresponding period of 2019

During the same period, total expenditure and net lending declined to Rs.1, 637.9 billion from Rs.1, 717.1 billion recorded in the corresponding period of 2019.

This was revealed in Central Bank’s weekly economic report highlighting the latest state of economic indicators of the island nation.

In nominal terms, domestic financing increased to Rs.1,067.0 billion in the first seven months of 2020 compared to Rs.571.4 billion in the corresponding period of 2019.

Foreign financing recorded a net repayment of Rs.194.5 billion during the first seven months of 2020 compared to a net borrowing of Rs.112.7 billion recorded in the corresponding period of 2019, Central Bank data showed.

In nominal terms, outstanding central government debt increased to Rs. 14,261.0 billion by end of July 2020 from Rs. 13,031.5 billion as at end 2019.

Total outstanding domestic debt increased by 16.3 per cent to Rs. 7,708.0 billion, and the rupee value of total outstanding foreign debt increased by 2.4 per cent to Rs. 6,553.1 billion by end July 2020.

During the year up to 25th September 2020 the Sri Lankan rupee depreciated against the US dollar (1.8 per cent).

Net Credit to the Government from the banking system has increased by Rs. 47.2 billion in August 2020. Outstanding credit to public corporations increased by Rs. 40.3 billion in August 2020.

Outstanding credit extended to the private sector increased by Rs. 78.3 billion in August 2020.

The reserve money decreased compared to the previous week mainly due to the decrease in currency in circulation.

The total outstanding market liquidity was a surplus of Rs.188.968 billion by end of last week, compared to a surplus of Rs.157.066 billion by the end of the week ending September 17 2020, Central Bank’s latest statistics revealed.

(LIN)

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