New Delhi

Sri Lanka's government has unveiled its ambitious 2024 budget, aiming for a lower-than-anticipated deficit while projecting a significant surge in revenues crucial for sustaining its International Monetary Fund (IMF) bailout program, Reuters reported on Monday.

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The fiscal deficit target for 2024 is set at 2.85 trillion Sri Lankan rupees ($8.73 billion), representing 9.1 per cent of GDP, higher than the revised 8.5 per cent in the current year but below the IMF-backed 12 per cent target.  

According to Reuters, President Ranil Wickremesinghe, also the finance minister, underscored the budget's role in laying the foundation for Sri Lanka's recovery. He stated that the budget aims to establish the groundwork for Sri Lanka's recovery and emphasised that the nation cannot persist as a community reliant on external support.

The government's projections include total tax revenue of 4.1 trillion rupees for 2024, a substantial increase from the current year's 2.85 trillion rupees. The Goods and Services Tax receipts contribute significantly to this surge.  

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The budget outlines a record expenditure of 6.98 trillion rupees in 2024, a 33 per cent increase from 2023, with a focus on doubling capital expenditure and allocating 450 billion rupees for bank recapitalisation.  

"The budget deficit is lower than anticipated, but if we add the allocation for bank recapitalisation, the deficit increases,” Reuters quoted Dimantha Mathew, Head of Research at First Capital Research as saying.

Sri Lanka's economy faced a severe setback in 2022, contracting by 7.8 per cent, leading to a default on foreign debt and the worst financial crisis since Independence in 1948. President Wickremesinghe, addressing the parliament, revealed that the island nation plans to allocate 3 trillion rupees for repaying international sovereign bonds in 2024. This is dependant on the finalisation of ongoing debt restructuring talks with bondholders. To accommodate this, Wickremesinghe proposed raising Sri Lanka's debt ceiling by 3.45 trillion rupees to 7.35 trillion rupees.

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The central bank anticipates a growth rate of 3.3 per cent in 2024, coinciding with presidential elections. In alignment with IMF requirements, the government aims for a primary account deficit of 0.6 per cent of GDP, marginally smaller than the 0.7 per cent projected for 2023.  

The IMF stipulates that the nation must achieve a primary surplus of 2.3 per cent by 2025 and reduce its debt-to-GDP ratio to 95 per cent by 2032. As of end-December, the debt-to-GDP ratio stood at 113.8 per cent.

(With inputs from Reuters)

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