Higher taxes and economic growth generate SL budget surplus – Business Main

Treasury records total revenue of Rs. 3,266.94 billion in first ten months, up 34.2% year-on-year
Tax revenues amount to Rs. 3,000.25 billion, up 35.6% compared to the same period last year
Primary surplus of Rs.831 billion recorded, compared to Rs.225 billion in 2023
Overall fiscal deficit recorded at Rs.1,060.75 billion, down sharply from Rs.1,547.02 billion in the same period last year.

Sri Lanka’s budget is doing well, with significantly higher revenues, enabled by higher taxes, which are further supported by the strong economic recovery seen this year. This helped to further reduce the overall deficit while returning the primary balance to surplus for the second consecutive year.

As per data available till October 2024, the treasury recorded a total income of Rs. period in 2023.

This mainly came from higher tax revenues which stood at Rs. 3,000.25 billion during the same period last year, up 35.6 percent.
2024 was the second full year of tax hikes, when taxes on income, goods and services, and profits were increased exponentially under the International Monetary Fund program concluded in 2022 to address the shortage of foreign currencies that Sri Lanka experienced that year.

Meanwhile, the 2024 tax revenue also includes the value-added tax, increased by 3 percent, which was increased for the third time, starting from the beginning of this year.

As the Sri Lankan economy makes notable progress both externally and in the real economy, the new government in office has provided tax relief by increasing the personal income tax threshold from 100,000 rupees per month currently to 100,000 rupees per month. 150,000 per month but doubled the withholding tax rate from 5 to 10 percent to pay for that.

Sri Lanka’s economy came to a screeching halt in early 2022, hurtling into a widespread social and political crisis as its foreign currency reserves dried up, mainly due to exogenous factors.

But the authorities found a solution to the problem by increasing interest rates and taxes exponentially, thus worsening the suffering of a large part of the population and businesses.

Today, the economy is regaining its footing thanks to the resumption of foreign currency inflows and the suspension of most debt repayments in foreign currencies.

The primary balance of the budget, which excludes interest payments on debt, recorded a surplus of Rs.830.70 billion for the second consecutive year. This represents a significant increase from Rs 225.37 billion in the same period of 2023.

At the same time, total government spending and loans minus repayments rose a more modest 8.7 percent to 4,327.69 billion over the ten months.

Recurrent expenditure rose only 7.5 percent to Rs 3,796.05 billion, while capital expenditure and loans less repayments rose 18.5 percent to Rs 531.65 billion. of rupees.

Under these circumstances, the overall fiscal deficit was recorded at Rs 1,060.75 billion, down sharply from Rs 1,547.02 billion in the same period last year.

The government projects a budget deficit of 2,401 billion rupees for 2024, excluding the 450 billion rupees allocated for the recapitalization of banks, translating the deficit to 7.6% of gross domestic product (GDP).