Sri Lanka’s budget deficit saw a significant decrease in May 2024, falling to 366.8 billion rupees from 1,014.7 billion rupees in the same period last year. This improvement is attributed to increased tax collections and a reduced interest bill, according to official data.
Tax revenues surged by 45% to 1,491.3 billion rupees up to May 2024, while non-tax revenues rose by 38% to 125.5 billion rupees. Total revenues increased by 44% to 1,616 billion rupees. Current spending decreased by 7% to 1,792.8 billion rupees.
Interest costs dropped by 13% to 921.1 billion rupees, benefiting from a debt restructure and lower interest rates amid a stable monetary policy, which has positively impacted the exchange rate.
The reduction in current spending has been achieved through a hiring freeze and restrained wage increases, although future wage adjustments may be necessary unless the public sector is restructured.
The current account deficit, calculated as total revenues minus current spending, decreased to 176 billion rupees in the first five months of 2024, compared to 817 billion rupees a year earlier. Capital expenditure remained stable at 193 billion rupees, similar to last year’s 199.2 billion rupees.
Efforts to cut capital expenditure and suspend foreign projects following a 2022 debt default have helped reduce the deficit. However, resuming foreign projects post-debt restructure may impact the deficit.
The overall deficit decreased to 366.8 billion rupees, down from 1,014 billion rupees last year. Despite challenges, improved monetary stability since September 2022 has fostered economic recovery, even with higher taxes. The central government debt-to-GDP ratio was reduced to 89.3% by May 2024, excluding guaranteed debt.
