Sri Lanka’s budget deficit dramatically reduced to 361 billion rupees by April 2024, down from 824.2 billion rupees, according to official data.
This improvement is attributed to increased tax revenues and a decrease in interest expenses.
Revenue collections surged by 48 percent, reaching 1,216 billion rupees by April 2024. This figure surpasses the 35 percent annual growth anticipated in the budget, driven by higher value-added and income tax rates as well as a rebound in economic activity nearing pre-crisis levels.
Sri Lanka is gradually recovering from a severe economic downturn exacerbated by what critics describe as ill-advised macroeconomic policies since the establishment of its central bank in 1950. These policies included inflation-inducing rate cuts that triggered currency crises and necessitated IMF programs, compounded by tax reductions.
Critics argue that the practice of providing "policy support" while neglecting monetary stability has become prevalent in the current era of inflation and external defaults, influenced by the so-called Saltwater-Cambridge doctrine. Despite this, Sri Lanka is now showing signs of growth without such "policy support," thanks to the central bank's efforts to ensure monetary stability.
In the first quarter, the country experienced nominal growth of 8.3 percent (with real growth at 5.3 percent), supported by market rates. Inflation, as measured by the consumer price index, remained around 3 percent for 21 months, undershooting the 5-7 percent inflation target and laying a robust foundation for continued growth.
Tax revenue increased by 51 percent to 1,117 billion rupees, while non-tax revenues grew by 27 percent to 98.3 billion rupees.
