Fiscal deficit 14% in 2020: Harsha

Tuesday, 4 May 2021 00:35 -     - {{hitsCtrl.values.hits}}

  • Disputes 11.1% in CB Annual Report, says expenses made last year shifted to 2019  
  • Says figures changed on Fin. Min. directive 

Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva yesterday contended that Sri Lanka’s budget deficit for 2020 was 14% and not 11.1% as stated in the Central Bank (CB) Annual Report as the Finance Ministry had recorded expenses made last year as arrears in 2019. 

De Silva, drawing from data published in the latest Central Bank Annual Report, said in a Twitter thread, the Monetary Authority was directed by the Finance Ministry to shift expenses to 2019 and termed it as: “Fraudulent cash accounting. Auditor General cannot approve. Very sad.”

He went on to say that the Central Bank “has squarely placed the responsibility of ‘doctoring’ the figures with the Ministry of Finance. Can’t blame the CBSL as in its 2019 Annual Report (it) correctly reported the figure which has now been changed in 2020.” 

The former State Minister attached two screenshots, one of which showed the 2019 Annual Report indicating Rs. 1,016,483 and a second summary of Government fiscal operations for 2020 which showed the previous figure expanded to Rs. 1,439,088.

“The Govt. of #SriLanka follows cash accounting method. That means amount received or spent is recorded at that point immaterial of what period it was for. Every year it is done this way. This year for the first time they have doctored it for political reasons. Fraudulent,” he tweeted. 

The country’s fiscal deficit as a percentage of GDP in 2020 increased to a high of 11.1% from 9.6% in the previous year. Last year’s figure is also unprecedented considering the fact that the average between 2016 and 2018 was around 5%.

The previous highest budget deficit in recent history was 10.8% in 2001, whilst in 2009, which saw the end of the 30-year conflict, the figure was 9.9%. The country recorded a high budget deficit of 15.6% in 1988.

In absolute terms, the deficit of Rs. 1.66 trillion in 2020 was entirely financed most by domestic sources.

In its Annual Report for 2020, the Central Bank said at the turn of the year 2020, fiscal policy was focused on reviving a stagnant economy. However, with the economic fallout from the COVID-19 pandemic, the fiscal outcome deviated from expectations, as reflected in the decline of the Government revenue and a rise in Government recurrent expenditure, thereby widening the budget deficit and raising the outstanding Central Government debt.       

As per the Government’s medium-term fiscal framework, a budget deficit of 9.4% has been forecast for 2021 and to be progressively reduced to 7.5% next year, 5.6% by 2023, 4.7% in 2024, and 4% by 2025.