Sri Lanka’s 2010 budget to be presented in Parliament on June 29 will be sans revenue proposals while it is unlikely that it will include the polls promise of a pay increase of Rs. 2,500 for state sector employees.
The budget estimate of more than Rs 1700 billion (Rs 1.7 trillion) will be without any new revenue proposals.
Treasury sources said the dilemma faced by planners was whether to include the Rs. 2,500 a month wage hike in the 2010 budget to be presented in parliament on June 29 or to make provision to meet part of this promise in the 2011 budget to be presented in November.
“It would be easier to present this in the 2011 budget as it could be funded through new revenue proposals,” one source said, adding that if it was to be included in the 2010 budget that would widen the budget deficit as the pay hike had to be given from January 2010.
“We’ll need at least Rs 1.5 billion for the wage-hike spending and already the budget deficit is very high,” the source said, noting that the government was also conscious of maintaining budget deficit targets.
Meanwhile, a senior Finance Ministry official said spending this year was set to rise from targeted figures and this was expected to push the budget deficit to over 8% of GDP.
An earlier estimate of spending for 2010 was Rs. 1,262.5 billion (Rs 1.2 trillion) but that has increased to Rs 1.7 trillion, the official said, adding that in the budget the expected revenue would be an estimated Rs. 824.6 billion.
The government hopes to raise at least Rs. 976 billion from domestic borrowings, Rs 301.8 billion from foreign funding and the balance from grants to bridge the gap.
The rising deficit would be a bone of contention in the current discussions an IMF team is having in Colombo till May 21. While all budget deficit targets have gone haywire, it is believed that the IMF had some weeks ago agreed to a revised deficit target of 7.5%, compared to 6% decided in the mid-2009 Stand-by Arrangement facility. However whether the IMF will agree to further adjust it to 8% remains to be seen.
The June budget, which has been a talking point in the public domain as it has been delayed twice, will be a normal budget listing out expenditure and revenue for January to December 2010 (includes monies already spent and how it was funded) and explain how the spending would be funded. “But it won’t have new revenue proposals. The expenditure will be funded through existing taxes and other already announced revenue measures (in 2009),” the official said.
However economists said this did not preclude the government from resorting to revenue measures from new taxes through gazette notifications, to meet spending targets particularly expenditure by new ministries.
The government last year presented a Vote-on-Account (VoA) to cover spending from January to April 2010 and initially announced that another VoA would be presented for May-July but changed that schedule and said funding for May-July will be drawn from the Consolidated Fund.
The presentation of the budget estimates will be followed by the customary debate and the vote on
July 9.
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