Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Sri Lanka budget to seek recovery for crisis-hit economy

Published 11/13/2022, 07:31 PM
Updated 11/14/2022, 12:01 AM
© Reuters. FILE PHOTO: A vendor cooks food for customers in his food cart at Galle Face Green, amid the country's economic crisis, in Colombo, Sri Lanka, October 31, 2022. REUTERS/ Dinuka Liyanawatte/File Photo

By Uditha Jayasinghe

COLOMBO (Reuters) - Sri Lanka unveils a budget on Monday attempting to put the South Asian government's finances in order, with reforms to advance a $2.9 global billion bailout from the island's worst financial crisis since independence in 1948.

President Ranil Wickremesinghe's first full-year budget to parliament will include measures aimed at helping Sri Lanka restructure its debt, increase revenues and trim spending as it works on the bailout with the International Monetary Fund, analysts say.

"This is a budget that is being presented at a time Sri Lanka is facing an unprecedented crisis," said State Minister for Finance Ranjith Siyambalapitiya.

"More than 70% of families are asking the government for support and the economy is estimated to shrink 8.3% this year," he said in a statement. "This budget will present a political and economic way forward for the country."

The World Bank estimates Sri Lanka's economy will contract by 9.2% this year and 4.2% in 2023.

The nation of 22 million people plunged into crisis this year as a loss of tourism revenue from the COVID-19 pandemic compounded tax cuts and years of economic mismanagement, leading to a severe dollar drought.

Unable to pay for critical imports, Sri Lanka struggled to buy essentials such as fuel, and the public faced soaring inflation, a rapidly depreciating currency and sharply shrinking growth.

© Reuters. FILE PHOTO: Sri Lanka's President Ranil Wickremesinghe looks on during an interview with Reuters at Presidential Secretariat, amid the country's economic crisis, in Colombo, Sri Lanka August 18, 2022. REUTERS/ Dinuka Liyanawatte/

The government has proposed increasing the personal and corporate income tax rate to 30% from 24% and possibly changing tax brackets to boost revenue, despite criticism from companies and opposition parties.

Spending cuts will likely to be tricky, given Sri Lanka's large public workforce and high debt.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.