Sri Lanka's government finances had been busted in 2008 with revenues 95 billion rupees below target, 118 billion rupees being printed by the central bank, while foreign financing turned negative, a local media reported citing the latest official data show.
Accusing the Sri Lankan government of always over-estimating revenue and under-estimating expenditure, Lanka Business Online (LBO) said, in the 2008 budget, Sri Lanka originally projected revenues of 750.7 billion rupees, current expenditure of 712.8 billion rupees and capital expenditure of 331.2 billion rupees.
In November, with only one month to go ,the revised out-turn was presented to Sri Lanka's lawmakers as 709 billion rupees of revenue, 743.3 billion in current expenditure and 278.1 billion as capital expenditure.
The provisional data released in the central bank annual report now show that the finance ministry has only raised 655.2 billion rupees in revenue (95.5 billion rupees below target) and current expenditure was 743.7 billion rupees (30 billion above target), said LBO.
Capital expenditure was 252.4 billion rupees or 78 billion rupees below target, whilst a projected 37.8 billion surplus in the current budget (total revenues less current expenditure) turned into a record 88.4 billion rupee deficit, the news report further said.
The overall budget deficit was also higher at 340.8 billion rupees, up from an originally projected 293.4 billion rupees, added LBO.
Meanwhile the central bank had printed 118.4 billion rupees to finance the deficit, triggering a balance of payments crisis as it defended a dollar peg, according LBO.
Rapid acquisitions of domestic assets (money printed to buy treasury securities) by a central bank results in either currency depreciation or an equivalent loss of foreign reserves, if the exchange rate is not allowed to fall, LBO added.
Sri Lanka has now turned to an IMF bailout with the interventions ended to conserve foreign reserves and new taxes being imposed to shore up revenues and reduce money printing, LBO said.
