The Institute of Policy Studies (IPS) - Sri Lanka’s government is offering pre-election relief and has set ambitious revenue and investment targets with little room for missteps under the 2019 budget, a think tank said.
“The 2019 Budget offered some pre-election ‘relief’ as anticipated, a consistent downward trend in current spending is set to reverse for the first time since 2015,” Dushni Weerakoon, Executive Director of the Colombo-based IPS think tank, said. “However, the overall direction is clearly one of restraint in order to retain the fiscal consolidation gains made since mid-2016, most notably a surplus on the primary account,” she said. Last month, Sri Lanka pushed fiscal deficit targets for 2019 further into the future under an International Monetary Fund (IMF) program focusing on reforms and balance of payments support. Finance Minister Mangala Samaraweera has described the budget as providing fishing rods for people to earn their living, instead of a pre-election bonanza. The budget provides affordable housing and education financing for youth. However, it also allocates more spending for public sector workers, welfare recipients, and members of the military.
Samaraweera had committed to ensure that all proposals in the budget would be met, after a State-run survey showed that budget implementation was very low, the newspaper “DailyFT” reported.
Weerakoon said the Government had missed both revenue and investment targets for 2018.
“2018 saw a revenue forecast of 15.6 percent of GDP (gross domestic product) materialise to an actual 14 percent, with public investment spending cut as a result to 4.4 percent of GDP from a forecast of 5.4 percent,” she said. 2019 is likely to be a repeat of this familiar exercise.”
“Space to maneuver has been carved out by setting overly ambitious revenue and public investment targets.” She said given the tight macroeconomic conditions expected in 2019, there is little room for error in setting monetary and exchange rate policies to match fiscal policy.
“With domestic financing of the fiscal deficit set to double to 4 percent of GDP in 2019, tight monetary policy conditions will keep the overall growth outlook to a modest 3.5 percent,” she said.
(EconomyNext)