Treasury tightens government expenditure
Sri Lanka’s Treasury is tightening government spending while anticipating an increase in the final quarter revenue collection as the country is facing a cash flow problem following the 52-day political impasse triggered by President Maithripala Sirisena.
According to recent provisional assessment, the economic loss and financial slippage caused to the country during this period has exceeded Rs.102 billion.
The new Vote on Account presented in Parliament on Friday calculates the entire expenditure for four months at Rs. 1765 billion whereas the Vote on Account approved by the previous cabinet indicated Rs.1735 billion as the total expenditure.
It appears that the Budget Department may have considered a part of revenue slippage in preparing the new Vote on Account, economic analysts said.
The Central Bank has to sell Treasury bills in a bid to repair the damage caused to the credit and financial system by political instability, they disclosed.
But the Government only offered for auction Rs. 18 billion of Treasury bills and accepted bids for the same amount after receiving bids amounting to Rs. 62.86 billion this week, the Central Bank announced.
Stringent debt management is to be followed to meet the Government’s financing needs at the lowest possible cost consistent with a prudent degree of risk, a senior Treasury official told the Business Times.
The development and strengthening of the government securities market will be continued, while enhancing efficiency and maintaining stability, he said.
However printing money will help the government to tackle cash flow problem to a certain extent although printing money increases domestic credit and drives imports, pressuring the exchange rate.
Despite political uncertainty and policy confusion, the Central Bank is confident of managing the economy and massive US $4 billion debt servicing next year by raising funds through prudent financial instruments.
Some of the tax changes and revisions introduced by the previous Finance Minister Mahinda Rajapaksa appointed by the President should have to be approved by Parliament by next January, the senior Treasury official added.
Other changes such as the Telecommunications Levy, which has been implemented, would only have an impact of 0.03 per cent of GDP, he said adding that the Finance Ministry has introduced tax reductions while maintaining the 4.8 per cent budget deficit targeted for 2018.
The Central Bank has revealed that the country’s foreign debt repayment would double to a record $4 billion in 2019 from last year’s level.
The bank is anticipating foreign inflows to settle the $1.5 billion of sovereign bond repayments of two such international bonds within the first four months next year.