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Cash management at the General Treasury has been challenging even before the COVID-19 pandemic’s impact, with deficit ballooning by end-April against the original estimate and higher in comparison to the performance a year earlier.
According to the Mid-Year Fiscal Position Report 2020 released last week, cash inflows to the General Treasury by way of revenue and other receipts have seen a decline of 34.3% during the first four months of this year, as compared to the corresponding period of 2019.
The Report was released in terms of Section 10 of the Fiscal Management (Responsibility) Act, No. 3 of 2003 by Prime Minister Mahinda Rajapaksa, who is also the Minister of Finance.
“During the first four months of 2020, cash inflows to the General Treasury amounted to Rs. 457.7 billion, as against the estimate of Rs. 755.0 billion, a decline of 34.3%, and was sharply lower compared to Rs. 696.8 billion recorded in the same period of 2019,” the Report said.
The decline was attributed to the lag effect of revision of taxes to the economy with the outbreak of the COVID-19 pandemic in mid-March.
The cash outflows, including both recurrent and public investment, amounted to Rs. 897.9 billion in the first four months of 2020, as against the estimate of Rs. 1.126 trillion, a 6.8% decline, and compared to Rs. 963.5 billion in the same period of 2019.
As against the original estimate of Rs. 371 billion, the total cash deficit as at end April 2020 was Rs. 440.2 billion, 65.1% higher, compared to Rs. 266.7 billion as at end of April 2019. This was mainly due to the combined effect of the decline in cash inflows to the General Treasury by 34.3% and the increase in operational expenditure by 10.6% from Rs. 723.7 billion to Rs. 800.2 billion, resulting in the expansion of closing negative cash and bank balance to Rs. 304.4 billion as at end of April 2020, compared to Rs. 130.2 billion as at end April 2019.
The total borrowing limit approved by the Vote on Account for the first four months of 2020 amounted to Rs. 721.0 billion, within which the utilisation of Government borrowings for the period from 1 January to 30 April was Rs. 629.9 billion.
Total domestic and foreign borrowing limits to finance cash flow operations and development projects during the period amounted to Rs. 509.9 billion and Rs. 120 billion, respectively.
The Report said that approximately 80.9% of domestic borrowings consisted of short-term borrowings in the first four months of 2020. Treasury Bonds, Treasury Bills and 34 FCBU were the main sources of domestic borrowings of the Government.
Accordingly, around 37% of the total domestic borrowings were raised by way of Treasury Bonds, while the remainder 34% and 21 percent were raised by Treasury Bills and Foreign Currency Banking Units (FCBU) in the first four months of 2020.
Further, the proceeds from the Syndicate Loan issued during the first four months of 2020 were utilised to finance the foreign currency debt service payments. The net borrowings as at end April 2020 stood at Rs. 359.9 billion.
