Govt. on course for 5.4% deficit target

• Finance Minister praises revenue collection organisations for 23% increase in earnings 
• Says funds to line ministries only for actionable plans and not expenditure-based allocations like in previous years

At the end of an eventful year Sri Lanka is on course to achieve its deficit target of 5.4%, the Finance Ministry assured in a statement yesterday, attributing this to a 23% increase in public revenue boosted by higher income tax payments. 

Important revenue collecting organisations such as the Excise Department, Inland Revenue Department and Customs were highlighted in the media statement as being responsible for improved performance of public finance, according to Finance Minister Ravi Karunanayake, who was quoted in the statement. 

“Income tax revenue in particular increased and public revenue as a percentage of GDP that was only 11% will increase to 13.5% by the end of the year,” the statement said, adding that overall for the first nine months of 2016 Government revenue had increased from Rs. 959 billion to Rs. 1,180 billion. 

Under additional plans to clamp down on expenditure in 2017, the Finance Ministry will only release funds to line ministries based on the actionable plans that they present rather than providing money based on the previous year’s list of expenses, the statement noted.

“The Government would also work to change the current heavy reliance on indirect taxes by introducing more direct taxes next year and simplifying the tax system.” As outlined in Budget 2017, the Government will change the Pay As You Earn Tax (PAYE) calculations with a new system to be introduced in April. 

The Finance Ministry also praised the Government’s dedication to the fiscal consolidation process, insisting that its commitment had brought the economy to a more sustainable level in 2016. The consolidation process was also supported by an International Monetary Fund (IMF) under an Extended Fund Facility (EFF).     

On 18 November 2016, the Executive Board of the International Monetary Fund (IMF) completed the first review of Sri Lanka’s economic performance under the program supported by a three-year extended arrangement under the $ 1.5 billion EFF arrangement. 

Completion of the review enables disbursement of the equivalent of SDR 119.894 million (about $ 162.6 million), bringing total disbursements under the arrangement to the equivalent of SDR 239.788 million (about $ 325.1 million). A second review is expected in late April before the third tranche is released.  

The Government’s reform program aims to reduce the fiscal deficit, rebuild foreign exchange reserves and introduce a simpler, more equitable tax system to restore macroeconomic stability and promote inclusive growth, the IMF said in a statement.