The Sri Lankan government’s expenditure and revenue are set to be stretched in two opposite directions by 16 amendments made to budget 2016 forcing the Treasury to introduce adjustments towards bridging the new deficit, officials said. Under this set up the government is forced to cut down the capital expenditure in the 2016 budget this year [...]

The Sunday Times Sri Lanka

Budget amendments stretch the state expenditure and revenue

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The Sri Lankan government’s expenditure and revenue are set to be stretched in two opposite directions by 16 amendments made to budget 2016 forcing the Treasury to introduce adjustments towards bridging the new deficit, officials said. Under this set up the government is forced to cut down the capital expenditure in the 2016 budget this year to cushion the impact of the amendments made to several expenditure and revenue proposals, they revealed. It will also bring down the expenditure by bridging the gap between savings and revenue.

This underscores the need for realistic revenue estimates which would then provide greater certainty to the path of critical expenditures. The targeted 40 percent overly ambitious rise in the 2016 revenue target cannot be gained due to revenue proposal amendments made in the budget; a senior official said adding that it was a difficult target as the country has only been able to record an average 12 percent revenue growth over the past 20 years. According to a recent statement made by Finance Minister Ravi Karunanayake in parliament, the amendments made to the budget have increased the government’s expenditure by Rs.35.5 billion.

The total expenditure for next year could exceed to Rs.3550 billion from the estimated budgetary expenditure of Rs. 3,138 billion, as a result of those changes made to the budget before and during the committee stage debate in parliament, a senior official revealed adding that this was an increase of Rs. 412 billion. The amendments made in the revenue proposals will exert an impact of at least Rs.70 to Rs.80 billion on the estimated revenue, he said pointing out that re-introduction of tax slashed vehicle permits and the reduction of vehicle emission test levy to Rs. 1500 from Rs. 5000 will alone bring down the estimated revenue by at least Rs. 66 billion.

The Finance Minister has, instead of increasing the income tax to generate more revenue to meet the increasing expenditure, reduced this revenue both for individuals and companies without any justification in the 2016 budget. These discrepancies should be tackled by adjusting revenue and expenditure estimates for 2016 and new estimates should be presented in parliament for approval in accordance with the finance act, he pointed out. A sum of Rs. 4 billion is expected to be saved through the curtailment of fuel and transport expenditure of state institutions including ministries and corporations while the finances allocated to expedite the digitalization program has been suspended with the aim of saving Rs. 3,000 million. However the government will not prune the financial allocations made for development projects as the Treasury would be able to manage the money by releasing payments only after the completion of relevant phases of such projects, a Treasury official said.

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