Nov 23, 2018

Rs. 54.4 b worth of State payments outstanding

A staggering Rs. 54.4 billion payment by the State is outstanding as of 16 November, according to Finance Ministry sources.

The outstanding bills include both recurrent and capital expenditure. Of the amount outstanding, over 70% or around Rs. 38.8 billion has been outstanding for less than three months.

Given this situation, the Finance Ministry maintains that in managing the cashflow, priority will be given to meet the bills outstanding for over three months. Additionally, priority will be given to urgent payments to ensure essential services continue smoothly.

Sources said at this week’s Cabinet meeting on Wednesday that the State’s financial contingencies had come under discussion.

At the Cabinet meeting, an assurance was given that the Government would meet all financial commitments including international borrowing.

In a memorandum to the Cabinet, Mahinda Rajapaksa, who President Maithripala Sirisena controversially appointed Prime Minister and Finance Minister, said his government, having taken over at a critical juncture in the country’s history, is mindful that fiscal discipline will remain the cornerstone of its policies. The Cabinet was told that the 2018 Budget Deficit would be contained at around 5% of GDP whilst recording a primary surplus of 0.7% of GDP.

The revenue target of Rs. 2.2 trillion for 2018 is unlikely to be realised and Rajapaksa said the actual collection will be about 10% below. Given this possibility, the need to curtail less prioritised expenditure, both capital and recurrent, at this stage has been stressed.

“Careful recalibration of the expenditure structure will be undertaken with ongoing projects being supported to conclude,” Rajapaksa said.

He has also directed Treasury officials to revisit some key capital projects, especially their cost structures and the timing of such project implementations, funding arrangements, etc. which will also result in savings in the budgetary provisions already mandated by Parliament.

These savings will facilitate the Government to provide the support envisaged specially to the agriculture sector and small and medium businesses (announced in early November) without creating additional stress on public spending and deficit financing.

The Secretary to the Treasury has been directed to give a detailed fiscal position report to Cabinet and the same will be tabled in Parliament for the benefit of all MPs.

Rajapaksa’s memorandum on the state of the economy to the Cabinet, despite external and other challenges, said favourable weather has helped the important agricultural sector. It has also ensured the realisation of the full potential of power generation from water resources.

With regard to the latter, the Government believes that the budgetary funds allocated to meet the potential losses incurred by the CEB and CPC by way of Non Commercial Operations (NCO) will be saved.