January-October fiscal deficit hits Rs.1.58tn on revenue slippage

Revenue crunch continued to batter the government’s fiscal position amid the mega tax bonanza offered in 2020, which according to some was completely uncalled for. 
The latest fiscal numbers for January through October showed that the budget deficit was in a Rs.1,575.2 billion hole, up from Rs.1,328.2 billion up to September and Rs.1,317.2 billion deficit in the comparable period in 2020. 

While this is yet to be measured in relation to the country’s total output, the government expects the full year deficit to be around 11.1 percent of Gross Domestic Product, at much higher level than it expected at the start of the year.

While the government expects to narrow the deficit down to 8.8 percent in 2022 under its home-grown policy programme to fix the economy, markets expect the deficit to overshoot, particularly due to the recently announced one billion dollar relief package and the ambitious revenue proposals to a lesser degree. 

According to the first ten months’ fiscal data, the government revenue has increased to Rs.1,154.8 billion compared to Rs.1,133.6 billion in the same period in 2020 with a slight uptick in tax revenues. 

But, the data aren’t comparable due to 2020 being an outlier during when the government lost a significant amount of tax incomes due to prolonged lockdowns and other restrictions on economic activities due to the pandemic. 

Hence, it is yet to be ascertained the true impact the tax cuts had on the State revenues as the country hasn’t had a full quarter of operations uninterrupted by virus related impacts, although there was a brief period from January through March 2021 when the actual tax incomes were 99 percent of the total budgeted incomes for that period.

Meanwhile, the total expenditure and net lending increased in the ten months to Rs.2,731.7 billion in 2021 from Rs.2,453.7 billion in the corresponding period in 2020. The government spent Rs.412.8 billion on public investments, up significantly from Rs.292.2 billion in the same period in 2020.