By:Staff WriterColombo (LNW): For the sixth time in its post-independent history, Sri Lanka has been able to record Rs.48 billion surplus in the primary balance of fiscal accounts during the first quarter of this year, State Minister of Finance Ranjith Siyambalapitiya revealed.
During the first quarter of this year, state revenue was Rs.894 billion while state expenditure stood at Rs.1.26 trillion.
However, Siyambalapitiya yesterday told parliament that Rs.637 billion of the expenditure was for interest payments and hence, he highlighted that the government was able to record Rs.48 billion surplus in the primary balance in the first quarter of this year.
Having an excess in the state revenue more than the entire state expenditure minus the interest payment is known as the surplus in primary balance.
The bigger-than-expected surplus was due mainly to a steep excess in the central government accounts and it had an increase in the collection of income taxes due in April and fall in expenditures of subsidies because of new government payment guidelines.
However Central Bank’s Governor Nandalal Weeerasinghe cannot rejoiced this time like former Governor Dr.Indrajith Coomraswamy as he was instrumental for the first time since 63 years rowrds achieving a record Rs.21.9 billion surplus in the primary balance of fiscal accounts during the first 10 months of 2017
The current surplus comes under the set up of a massive debt default declared by Nandalal in April 2022 suspending external dollar loan repayments and this surplus in the primary account is an eye wash.
The total value of non-payment of foreign loans during the period of April 2022 to April 2023 was US$.4.482 billion. The government has been able to import fuel, LP gas, coal and milk powder spending $ 4,205 during the same period. “Very Many Thanks’ to debt default.
Therefore Central Bank’s pandits including Nandalal cannot get credit for the present surplus in the primary balance of fiscal accounts.
Further Sri Lanka has been asked to achieve a primary surplus of 2.3% of the gross domestic product (GDP) by 2025 by the International Monetary Fund (IMF), and it is a massive task in a short time period.
Even with the surplus in April, the primary budget deficit in the accumulated previous 12 months rose to the equivalent of 2.33 percent of gross domestic product from 2.28 percent the previous month.
The country also outperformed the indicative primary balance target of Rs.56 billion deficit set by the International Monetary Fund (IMF) for the first quarter under the ongoing IMF programme.
After defaulting on its external debt last year, the government moved towards a revenue-based fiscal consolidation in consultations with the IMF. Accordingly, the government started to increase taxes including VAT and PAYE from the latter part of last year.
The country was also restricted from monetary financing (money printing) to finance expenditure except for debt servicing while external borrowings remained limited following the country’s default on external debt last year.
Consequently, the government was forced to cut capital expenditure while only maintaining essential recurrent expenditures including salary payments to public workers, welfare payments and fertilizer subsidies.