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Monday June 3rd, 2024

Sri Lanka meets 4.0-pct primary deficit target for 2022

ECONOMYNEXT – Sri Lanka has likely met the primary deficit target for 2022, based on preliminary data, officials said as President Ranil Wickremesinghe oversees the most difficult revenue correction in history following a currency crisis which ended in default.

Sri Lanka is managing budgets without printing money, State Minister for Finance Ranjith Siyambalapitiya told reporters in Colombo.

Sri Lanka’s revenue and grants for 2022 is estimated at 1991 billion rupees.

Total revenues would be around 1976 billion rupees or close to 95 percent of 2,084 billion rupees set in an interim budget. Non-tax revenues would be 226 billion rupees.

Current spending is estimated at around 3,595 billion rupees giving a current account deficit, of around 1,618 billion rupees or 6.8 percent of estimated gross domestic product.

The overall deficit could be around 10.4 percent of GDP (about 2,500 billion rupees).

Central Bank Governor Nandalal Weerasinghe told a business forum hat Sri Lanka had met the primary deficit target of 4.0 percent of GDP.

The target was in an interim budget and a staff level agreement with the International Monetary Fund.

When money is printed by intermediate regime central bank (soft-peg or flexible exchange rate) to supress rates triggering a currency crisis interest rates tend to soar as brakes and applied and targeting an overall deficit is pointless.

As a result the IMF usually targets non-interest based spending involved in a primary deficit.

Interest costs are estimated at around 1,635 billion rupees for 2022, giving a primary deficit of around 870 billion rupees or about 3.8 percent of GDP.

The 2022 budget numbers are bloated due to effective lending to the Ceylon Petroleum Corporation linked to a 700 million US dollar credit line from India, officials said.

Without that the correction in non-interest spending could be even higher.

President Ranil Wickremesinghe and his team has brought back classical fiscal consolidation involving spending based consolidation or expenditure restraint abandoned earlier in favour of revenue based fiscal consolidation – an unusually leftist or ‘progressive’ strategy of expanding the government.

Wages are frozen for the moment. President Wickremesinghe has said that a state wage hike could be considered at the end of 2023. Since wages eventually adjust for currency depreciation lasting changes in spending comes from reducing the sizes of the state.

Revenue based fiscal consolidation sans spending restraint in recent years involved expanding the size of the government to 20 percent of GDP and pushing up revenues to a nice round number like 15 percent to keep pace. (Colombo/Jan31/2023)

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Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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