‘Fiscal management, a challenge in 2022 Budget’ | Sunday Observer

‘Fiscal management, a challenge in 2022 Budget’

24 October, 2021
Prof. Sirimal Abeyratne
Prof. Sirimal Abeyratne

Sri Lanka never had sound budgetary management, first, due to long-term economic sliding, second, due to postponement of fiscal reforms and third, due to ad hoc fiscal measures on taxation and expenditure sides, said Professor of Economics, University of Colombo, Sirimal Abeyratne. He said on top of all that fiscal management is now hit by the pandemic. It is in this context that we are looking forward to the forthcoming Budget 2022, which is apparently an even more challenging one than those presented in the past. The Budget is a short-term revenue-expenditure plan for the government, which has to be consistent with the government’s long-term policy agenda. In the absence of a long-term policy agenda, the 2022 Budget has confined itself to merely a short-term income-expenditure outlay. 

The main challenge is the growing gap between revenue and expenditure. Revenue is less than half of the expenditure, while about 70% of the revenue is for interest payments, according to last year’s Budget; if you check the total debt service last year it was estimated to be over 140% of the government revenue.

This means that the country has to borrow to cover debt payment and part of the expenditure, Prof. Abeyratne said, adding that the country cannot expect miracles through the 2022 Budget  so it has to be a tight budget with anticipated budget deficits. During crisis times, increase in budget deficit is not unusual, but the fundamental issues of Sri Lankan fiscal management go beyond the current economic crisis.

Therefore, while managing the short-term challenges in the Government Budget, there should be policy reforms addressing the source of the fundamental issues in our fiscal management as well.