Budget emphasizes on more revenue, simplifying taxes and SOE reforms

• 15 Nov 2022
• 0

The Government’s fiscal strategy in its latest budget is emphasizing on improving revenue, focusing on simplifying tax structures and implementing SOE reform.

First Capital Research in its observations says the strategy is also aimed at satisfying the pre-conditions of the IMF on multiple angles facilitating a reduction in budget deficit and reducing macroeconomic risk.

They have also made the following observations:

In the Medium-Term Macro Fiscal Framework, Government maintains its original stance agreed with the IMF to raise revenue to reach 15.0% of GDP by 2025 while targeting a primary surplus of more than 2.0% of GDP in 2025.

Consequently, Government aims at reducing the public sector debt from around 110.0% of GDP as at end 2021, to no more than 100.0% of GDP in the medium term.

In the 2023 budget, the Government’s total revenue and grants is expected to improve to 11.3% of GDP amounting to LKR 3,415Bn for 2023 with 91.7% of the revenue expected through taxes, while Taxes on Goods & Services continuing to take the top slot contributing 56.3% of tax revenue and 51.6% of total revenue and grants. Non-tax revenue is forecasted to be 8.1% of the total expected government revenue and grants.

The total expenditure for 2023 is LKR 5,819Bn resulting in 19.2% of GDP, while recurrent expenditure is forecasted to be 79.2% of total expenditure, constituting 15.2% of GDP. Interest and subsidies & Transfers are expected to be the largest components of recurrent expenditure amounting to 47.6% and 24.2% of recurrent expenditure, respectively.

 Government plans on spending public investments at 4.0% of GDP amounting to LKR 1,220Bn for 2023.

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