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FC Budget Review 2015.pdf

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BUDGET REVIEW 2015 The 2014 Budget Speech focused on continuity of the Government’s existing policy framework to further improve its fiscal performance while concentrating on providing considerable relief to lower income segment, Government employees and simplifying the tax system. Government plans to historically lower budget deficit to 4.4% during 2015 while the expec
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    BUDGET REVIEW 2015 The 2014 Budget Speech focused on continuity of the Government’s existing  policy framework to further improve its fiscal performance while concentrating on providing considerable relief to lower income segment, Government employees and simplifying the tax system. Government plans to historically lower budget deficit to 4.4% during 2015 while the expected Debt to GDP ratio is expected to improve to 75%. Government expects to record a revenue surplus of 1.7% in 2015. The budget has put considerable effort to provide relief to the lower income segment and Government employees providing increased grants, salary and allowance increases and settling anomalies that existed among them. Government has made significant progress in further simplifying the tax system while making continuous efforts to broad base the tax system includes lowering income tax to 16%, introducing a special tax for vehicles, extending NBT to financial institutions and lowering withholding tax rate. In relation to the Capital Market, the electricity tariff reduction will be a positive sign for the overall market while strong infrastructure development may assist the construction related companies. Certain concessions to the plantation sector may also be beneficial as well. Executive Summary Inflation Unemployment Private Sector Credit Growth GDP Investments Capital Market Development Strategies  “ TAX ”   FC Research 24 October 2014 SRI LANKA ã LKR 1,689 Bn (14.9% of GDP) Revenue ã LKR 2,210 Bn (19.3% of GDP) Expenditure ã LKR -521 Bn ( -4.4% of GDP) Deficit    FC Research 2 Budget Review - 2015   Table of Contents 1.0 FISCAL STRATEGY .................................................................................................. 3 B UDGET S UMMARY F OR 2015 .................................................................................. 4 J AN  –   S EP 2014   F ISCAL O UTLOOK  ............................................................................. 4 2.0 BUDGET AND THE STOCK MARKET ......................................................................... 5 C APITAL M ARKET D EVELOPMENTS  .............................................................................. 5 B UDGET 2014   &   L ISTED S ECURITIES  ........................................................................... 5    FC Research 3 Budget Review - 2015   1.0   FISCAL STRATEGY The Government expects to continue its prime objective to support the country’s growth prospects in the medium to long run via further strengthening its fiscal position. The fiscal position is expected to be improved through higher Government revenue and a controlled expenditure management. Government Revenue is expected reach a surplus of 1.7% of GDP in 2015. Budget deficit is anticipated to be reduced to 4.4% with Debt to GDP ratio expected to fall to 75.0%.   The Government plans to grow revenue to 14.9% of GDP to LKR 1,689 Bn for 2015 with 84% of the revenue expected through taxes, with VAT projecting to take the top slot contributing 5.5% of tax revenue. Non-tax revenue is forecasted to be 10.3% of the total expected government revenue. The total planned expenditure for 2015 is LKR 2,210 Bn maintained at 19.3% of GDP, which is slightly below compared to 2014 estimated reach of 19.4% of GDP. Recurrent expenditure is forecasted to be controlled at 69% of total expenditure constituting 12.9% of GDP significantly lower from the 2014 planned figure of 13.8% of GDP mainly driven by the support of the declining interest payments. Salaries and interest payments are expected to be the largest components of recurrent expenditure amounting to 37% and 28% of recurrent expenditure respectively. Government plans to grow public investments to 6.5% of GDP with the largest investment continuing to be for highways where 2.0% of GDP (32% of public investments) is expected to be spent.    FC Research 4 Budget Review - 2015   1.1 Budget Summary for 2015   1.2 Jan  –   Sep 2014 Fiscal Outlook   Summary of the Budget (Jan - Sep): Economic Classification 20132014YoY (%)Revenue and Grants787,218 836,903 6.3% Revenue 784,201 828,191 5.6%Tax 710,667 752,180 5.8%Non Tax 73,534 76,011 3.4%Grants 3,017 8,712 188.8% Expenditure1,279,0681,326,6943.7% Current 920,350 962,076 4.5%Salaries 286,028 305,594 6.8%Interest Payments 367,572 363,489 -1.1%Other 266,750 292,993 9.8%Public Investments 372,655 375,872 0.9%Other -13,937 -11,254 19.3% Revenue Deficit (-)/Surplus (+)(136,149) (133,885) 1.7%Overall Deficit (-)/Surplus (+)(491,850) (489,791) 0.4%Financing491,850489,791-0.4% Net Foreign Financing 95,379 244,851 156.7%Net Domestic Financing 396,471 245,210 -38.2%Revenue/GDP Ratio (%) 9 8.4Current Expenditure/GDP Ratio (%) 10.6 9.7Public Investment/GDP Ratio (%) 4.3 3.8 Revenue Deficit (-)/Surplus (+)/GDP Ratio (%)-1.6-1.4Overall Deficit (-)/Surplus (+) /GDP Ratio (%)-5.6-4.9 Summary of the Budget: 2014-2015 (Percentage of GDP)20132014 (Revised)2015 BudgetRevenue13.9 14.2 14.9  Tax Revenue11.6 11.8 12.5  Income Tax2.4 2.7 2.8  VAT2.9 2.9 3.1  Excise Tax2.9 2.5 2.6  Tax on External Trade2.6 2.8 2.9  Other0.8 0.9 1.0  Non Tax Revenue1.5 1.5 1.5  PC Tax Sharing & Devolved Revenue0.6 0.6 0.6  Grants0.2 0.3 0.3  Expenditure19.8 19.4 19.3  Recurrent Expenditure14.5 13.8 12.9  Salaries and Wages4.5 4.5 4.3  Interest Payments5.1 4.4 3.8  Subsidies and Transfers3.1 3.0 3.0  Other Goods and Services1.1 1.3 1.3  Expenses from PC Revenue0.6 0.6 0.6  Public Investment5.5 5.7 6.5  o/w Highways1.8 1.8 2.0  Education0.3 0.5 0.5  Health0.2 0.4 0.5  Irrigation0.3 0.5 0.5  Transport0.3 0.4 0.5  Rural Sector0.7 0.8 0.9  Revenue Deficit (-) / Surplus (+)(0.8) - 1.7   Budget Deficit(5.9) (5.2) (4.4)  Government Debt (% of GDP)78.3 75.0 71.0  Summary of the Budget: 2014-2015 201320142015 BudgetTotal Revenue & Grants1,2041,4221,689 Total Revenue1,1881,3941,654Tax Revenue1,0061,1891,416Income Tax206258322Taxes on Goods & Services572672774Taxes on External Trade228260321Non-Tax Revenue132149174PC Tax Sharing and Devolved Rev515664Grants162835 Total Expenditure1,7201,9222,210 Recurrent1,2561,3861,525Salaries & Wages including PCs432478558Other Goods & Services incl. PCs108152163Interest446443425Subsidies & Transfers270313379Public Investment481553696Education and Health5678120Infrastructure425475576Other-17-17-11 Revenue Surplus(+)/Deficit (-)-688129 Primary Surplus (+)/Deficit(-)-70-57-96Budget Surplus (+)/deficit(-)-516-500-521Total Financing516500521 Total Foreign Financing80260251 Foreign Borrowings-Gross179370453Foreign borrowings179173258Foreign Commercial-197195Debt Repayments-99-110-202 Total Domestic Financing436240270  Non-Bank Financing83120160Foreign Inv. in T-Bills & T-Bonds563940Bank borrowings2978170
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