• Improvement due to multiple new taxes and despite contracting economy 
• State expenses surpass Rs. 2 t despite rationalisation attempts

The Government has managed to net Rs. 1 trillion in revenue in the first seven months of this year, reflecting a robust 37% growth from a year earlier.

As per the latest Central Bank data, January to July 2022 Government revenue amounted to Rs. 1,093 billion as against Rs. 799.8 billion in the corresponding period of last year.

Tax revenue has improved due to Surcharge Tax, increased Value Added Tax (VAT) rates and Telecommunication Levy, imposition of Social Security Contribution Levy and high inflation.

The increase also comes amidst the sharp contraction in the economy so far this year. Forecast is for the economy to contract by 9% in 2022.

In the first seven months, total expenditure and net lending increased by 17% to Rs. 2.1 trillion from the corresponding period of last year.

The increase is despite the expenditure rationalisation attempts, and mainly attributed to the escalation of additional expenditure on relief measures to alleviate the ripple effects of the pandemic on poor and vulnerable  segments of the population, unfavourable market  developments emanating from increased domestic  interest rates, and escalating cost of goods and services  owing to high inflation and large depreciation of the exchange rate, among others.

The overall Budget Deficit in the first seven months was Rs. 1 trillion same as a year ago.

The CBSL in its “Recent Economic Developments - Highlights of 2022 and Prospects for 2023” publication released ahead of Budget 2023 presentation cautioned that any settlement in the near term payments of the Government that were  in arrears over the past two years and thus far in 2022  could result in further deterioration of fiscal balances  unless a substantial flow of Government revenue is  realised in the period ahead.

During the seven months ending July 2022, domestic financing decreased to Rs. 1,053.4 billion compared to Rs. 1,204.6 billion a year ago. Foreign financing recorded a net repayment of Rs. 43.3 billion during the period from January to July 2022, compared to the net repayment of Rs. 190 billion in the first seven months of 2021.

Sri Lanka’s debt spree persists