Although Presidential and General Elections are scheduled for 2024 no noteworthy concessions were provided except for an increase in monthly pension allowances (commencing April 2024) and state employees’ monthly allowance (commencing January 2024) the first such increment since 2015 says CT CLSA in their ‘Impact Analysis’ on the National Budget 2024 which is the 78th budget of Sri Lanka.
The key message of Budget 2024 was its focus on increasing Government revenue through improved tax administration to meet the indicative targets agreed with the IMF. “No new taxes were introduced given the already high tax rates.”
Policy measures were introduced to widen the tax net which included requirements to submit the Certificate of Taxpayer Identification Number when opening bank current accounts, obtaining building plan approvals, registering or renewing licenses of motor vehicles and registering a land title. Most of the exemptions under the VAT Act were also proposed to be removed.
Although the increased VAT rates will dampen consumer spending in the near term, the increase in state sector employee allowances is likely to support consumption from April 2024 onwards – given this is the first revision in salaries since 2015. A proposal was made to increase the debt ceiling to facilitate the issuance of new debt instruments for the restructuring of International Sovereign Bonds (ISBs) and the recapitalization of the two largest state banks. Foreign-funded infrastructure projects are expected to resume during 2024E once the external debt restructuring is concluded.
Budget 2024 re-iterated the target of reducing the debt stock via a restructuring of external debt in 2024E to reduce debt to GDP to 95% by 2032E.
“We forecast the 2024E budget deficit at -7.9% of GDP (vs. -8.5% in 2023E) with a primary surplus of 0.8% (in line with indicative targets set with the IMF).”
Budget 2024 is to be debated in the upcoming parliamentary sessions and is set for a vote of approval in parliament on December 13, 2023.
