State- revenue reached pre-pandemic levels in the first five months of the year by recording 17.5 percent year-on-year (YoY) growth in the period, according to the Central Bank data.

In the five-month period, the government revenue rose to Rs.811.9 billion from Rs.630.1 billion a year ago supported by increases in tax rates and one-off retrospective surcharge tax on large companies. The non-tax revenue nearly doubled to Rs.101.3 billion from Rs.60.8 billion a year ago.

Meanwhile, the government expenditure was up by 14.5 percent YoY to Rs.1.45 trillion with recurrent expenditure rising to Rs.1.27 trillion from Rs.1.1 trillion a year ago.

Consequently, the fiscal deficit expanded by nearly 11 percent in the period.
According to the government’s latest projections, state revenue is expected to increase to 9.1 percent of GDP this year from 8.6 percent last year, while state expenditure is expected to reach 18.9 percent of GDP from 16.2 percent last year. The budget deficit Is expected to come down to 9.9 percent of GDP this year from 12.2 percent last year.

After May this year, the government increased the rates of several key taxes including income taxes, VAT, telecommunications levies and betting and gaming levies. In addition, a new 2.5 percent tax on importers, manufacturers, service providers, wholesalers and retailers has also come into effect.
However, the government increased its expenditure by further 20 percent to Rs. 4.67 trillion in an Amendment to the Appropriation Bill for 2022, approved in parliament early this month.

According to Publicfinance.lk, the government requires a 107 percent increase from its 2021 revenue levels to achieve the approved budget deficit for the year.