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Country reeling from serious economic crisis

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Treasury Secretary informs SC
Likelihood of fiscal slippages in 2023
Expenditure for an election adds further pressure on already stressed public finance system

Treasury Secretary Mahinda Siriwardena filing an affidavit in the Supreme Court on the issues in managing Government cash flow operation amidst the ongoing serious economic crisis yesterday stated that there is a high likelihood of fiscal slippages in 2023 unless steps are taken to curtail even budgeted expenditure.

The Treasury Secretary stressed that an expenditure for an election adds further pressure on an already stressed public finance system and treasury would find extremely challenging to find additional resources for an election at this critical juncture.

The Supreme Court on Wednesday ordered the Treasury Secretary to file an affidavit in court in relations to the petition filed requesting that the decision to hold the Local Government Election be postponed on request made by Additional Solicitor General who represented the Treasury secretary.

The Treasury Secretary filing an affidavit said that the cash flow management of the government has become extremely challenging at present with foreign financing options as well as domestic financing channels being exhausted when the writ petition filed by retired army colonel W.M.R. Wijesundara seeking an order to suspend the decision to hold the Local Government election was taken up before the Supreme Court yesterday.

The petitioner in a writ application seeks court order to suspend the Local government election as the country is facing unprecedented economic crisis.

“In 2022, average monthly expenditure, on salaries based on the government cashflow was around Rs.90 billion,monthly pensions and Samurdhi payments amount to around Rs.28 billion and other recurrent expenditure, including medical supplies, fertilizer amounted to around Rs.28 billion , totaling to about Rs 145 billion per month”, the Treasury Secretary in the affidavit said.

He said that there were additional expenditures including interest payments of around Rs.114 billion, capital expenditure of around Rs.31 billion and debt repayment of around Rs.169 billion per month in 2022.

“Consequently, there was an average cash deficit of around Rs.296 billion per month. This large cash deficit is in spite of the foreign debt standstill announced by the government in April 2022.

“Compared to this monthly government revenue was Rs.163 billion based on the 2022 cashflow. Hence on average only Rs.18 billion per month was left from the revenue collection for all other expenses of the government”, the affidavit said .

The Treasury Secretary stated that extreme care is necessary in deciding on the priority areas of the expenditure, given the critical cash flow position and the need for managing mandatory and essential expenditures.

“Any slippage would simply add to the already stressed fiscal position, in turn burdening the public.

“Considering these difficulties in cash flow management, the Treasury has issued circulars (Annex A, B and C), imposing restrictions on expenditures and instructing the line ministries and public corporations/statutory boards to be very cautious in spending to preserve the scarce resources”, the affidavit said.

Given the latest developments. it is observed that the government’s daily cash flow management has become extremely challenging in 2023 as well. Even the regular payment of public sector salaries on time has been extremely difficult, requiring innovative methods to manage mandatory payments of this nature, particularly in the first few months of 2023.

He stated that the Cabinet of Ministers recently approved a proposal to make the salary payment of government officers in two different days splitting the outflow as salaries for non-executive staff and salaries for executive staff for the months of January and if the need arises to apply the same in the future months as well until the ‘treasury cash flow permits the full , payment on time followed by adequate revenue collection and adequate borrowings (Annex D).

In addition, the government has decided to implement a further reduction of 1% in addition to the previous decision to reduce 5% from selected budgeted allocation to ministries in 2023 (Annex E). Parts of the resultant savings are expected to be channeled to the health care sector which faces urgent requirements for essential medicines.

He added that there are cash requirements to provide much needed assistance to the poor and the vulnerable, given the severity of the ongoing crisis and its impact. Accordingly, the government has recently decided to provide additional support in terms of cash grants and rice.



Friday, January 20, 2023 – 01:00

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