Though it was planned to reduce the budget deficit through the interim budget of the new government to 4.4 per cent of the Gross Domestic Product (GDP), the government revenue deficit being increased by Rs. 149 billion is a significant feature.

The total revenue expected by the government for 2015 would be reduced to Rs. 1,622 billion as compared to the former government’s estimate of Rs. 1,689 billion and the reason for this is the concessions provided on a range of consumer items, pointed out Finance Minister Ravi Karunanayake.

While the current spending has risen from Rs. 1,525 billion to Rs. 1,612 billion through this interim budget due to the salary hikes of government employees and pensioners, the Finance Minister said that this is the highest pay increase in history for Sri Lanka’s government employees.

While capital expenditure has been reduced from Rs. 521 billion to Rs. 499 billion through this budget, the 4.4 per cent budget deficit proposed by the former government has thus been maintained.

The main feature evident here is the increase in the revenue deficit related to monthly financial payments possibly causing negative impacts on economic stability and foreign exchange.

Analysts point out that if revenue deficit is not covered soon through bank loans without increasing interest rates, it may result in the weakening of exchange rates and the reduction of foreign reserves.

Another fact pointed out by economic analysts is that though there are possibilities of collecting higher tax revenue through proposals like a tax of 25 per cent on companies which have gained profits of over Rs. 2,000 billion and imposing huge taxes on telecommunications companies and casinos, it would be impossible to collect the Rs. 01 billion imposed on the sports television channel linked to the former government.

However, the Finance Minister said that this time the tax imposed on the people has been reduced from 14.4 per cent of the GDP to 14.1 per cent.