Lanka imposes tax hikes on fags to cut deficit

8 October 2012 03:03 am Views - 3508

Sri Lanka last Saturday increased taxes on tobacco products with a view of bridging the looming budget deficit.

An independent economists in the country pointed out that the government is also likely to raise the prices of alcohol and petroleum products end of this month.

According to Central Bank data, Sri Lanka’s budget deficit had expanded to about 5.6 percent of gross domestic product by July 2012.

Despite an increase in government revenue during the first seven months of 2012, the current expenditure of the government rose significantly compared with the previous year, signaling that the government may not be able to meet its budget deficit target of 6.2 percent of the Gross Domestic Product (GDP).

The government revenue during the first seven months rose 12.6 percent yearon-year (YoY) to Rs.556 billion against the current expenditure, shooting up 19.4 percent YoY to Rs.695.3 billion, the latest data released by the Central Bank showed.

Thus, the revenue deficit during the first seven months in 2012 amounted to Rs.139.3 billion. State capital expenditure also rose 41.6 percent from a year earlier to Rs.286.4 billion.

The government revenue of Rs.556 billion consisted of Rs.490.4 billion as tax revenue, Rs.65.7 billion as non-tax revenue and Rs.8.4 billion as grants.

A compilation of data showed that the budget deficit in the first seven months of 2012 amounted to Rs.425.7 billion, an increase of 48.3 percent YoY and almost hitting the budget deficit target of Rs.468.9 billion set for 2012.

A recent report by Standard Chartered Bank (SCB) said that Sri Lanka is likely to overshoot its budget deficit target of 6.2 percent of the GDP in 2012.

Meanwhile Asian Development Bank (ADB), a key lender to Sri Lanka’s infrastructure projects, recently revised down the country’s economic growth projections for 2012 and 2013 to 6.5 percent and 7 percent respectively.