Treasury struggles with Fiscal Position Report
View(s):The Finance Ministry is grappling to finalise the mid-year 2013 Fiscal Position Report in the face of an unexpected increase in state expenditure and a shortfall in tax revenues.
The Treasury has no alternative other than pruning capital expenditure on social infrastructure, especially in health and education to achieve the budget deficit target of at 5.8 per cent of gross domestic product in 2013, a senior official said.
Financial allocations made in the 2013 budget for various institutions coming under the purview of ministries including health and education have been re-scheduled in order meet the financial requirements of key ministries such as Economic Development and Urban Development, he added.
Due to rising expenditure and lower revenue, the Ministry is facing a problem in submitting the report in time to parliament, a senior official said. The report must be presented in June.
The report will not compare the budget’s actual performance with its original budgetary targets and it will provide a comparison with the previous year’s levels, he disclosed.
Several economists told the Business Times that this type of financial reporting hides the growing crisis in the government’s budget from the people.
They noted that the Finance Ministry should take remedial action such as ‘austerity measures’, to avoid the impending crisis without any delay.
Economist and Member of Parliament Dr. Harsha de Silva said the UNP rejected the last report tabled in Parliament because it did not contain most of the information that the government was legally bound to provide.He said for instance the government is bound to report to Parliament estimated versus actual revenue and expenditure and explain any shortfall in the report which was not done.
In fact with the most recent amendment to the Fiscal Management Act, the government postponed to 2020 the legal obligation to reduce the budget deficit to 5 per cent by end of 2012, he revealed.
Tax revenues have fallen to 11.1 per cent of GDP for 2012, perhaps the lowest in the world for a similar-size economy.
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