Govt. to borrow additional Rs.400bn for deficit financing

The Cabinet of Ministers this week cleared a request to increase the government’s credit limit by further Rs.400 billion to Rs.3.39 trillion for 2021, under Appropriation Act No. 7 of 2020, to meet the pandemic-related additional expenditure requirements amid the declining state revenue. 

Finance Minister Basil Rajapaksa on Tuesday sought the approval of the Cabinet of Ministers to increase the government’s borrowing ceiling for the year and to  take the necessary steps to amend Appropriation Act No. 7 of 2020, accordingly. 

“The approved credit limit has to be raised for the year 2021, due to the declining government revenue under the situation that has arisen, due to the COVID-19 pandemic and increased expenditure in several other sectors, including the healthcare expenditure as well as social security protection for those who have lost income and having to make additional provisions for salaries and other expenses, due to the loss of income of institutions, which paid salaries from their income,” the Government Information Department reasoned. 

In the first half of the year, the overall budget deficit expanded by 6 percent year-on-year to Rs.780.2 billion, compared to Rs.735.7 billion in the same period last year. 

The total outstanding government debt during the period rose to Rs.16.54 trillion, from Rs.15.11  trillion recorded at the end of last year, with both domestic and foreign debt pile rising. 

Most economists expect the country’s budget deficit to surpass 10 percent of GDP in 2021, for the second consecutive year.