Sri Lanka records Rs.48 bn primary surplus in 1Q

For the sixth time in its post-independent history, Sri Lanka has been able to record Rs.48 billion surplus in the primary balance of fiscal accounts during the first quarter of this year, State Minister of Finance Ranjith Siyambalapitiya revealed.

During the first quarter of this year, state revenue was Rs.894 billion while state expenditure stood at Rs.1.26 trillion.

However, Siyambalapitiya yesterday told parliament that Rs.637 billion of the expenditure was for interest payments and hence, he highlighted that the government was able to record Rs.48 billion surplus in the primary balance in the first quarter of this year.

Having an excess in the state revenue more than the entire state expenditure minus the interest payment is known as the surplus in primary balance.

The country also outperformed the indicative primary balance target of Rs.56 billion deficit set by the International Monetary Fund (IMF) for the first quarter under ongoing IMF programme.

In 2021 and 2022, the government recorded primary deficits of Rs.1, 009 billion and Rs.894 billion respectively.

After defaulting on its external debt last year, the government moved towards a revenue-based fiscal consolidation in consultations with the IMF.  Accordingly, the government started to increase taxes including VAT and PAYE from the latter part of last year.

The country was also restricted from monetary financing (money printing) to finance expenditure except for debt servicing while external borrowings remained limited following the country’s default on external debt last year. 

Consequently, the government was forced to cut capital expenditure while only maintaining essential recurrent expenditures including salary payments to public workers, welfare payments and fertiliser subsidies.

Sri Lanka last recorded primary surpluses of Rs.2.07 billion and Rs.91.41 billion in 2017 and 2018 when the country was under another IMF programme. 

The country has recorded primary surplus in 1954, 1955, 1992, 2017 and 2018 previously.