Sri Lanka forecasts a 6.8% fiscal deficit for 2025, slightly higher than the 6.7% target. The government is projected to surpass its 15.0% GDP revenue target, mainly due to increased vehicle imports. However, 41.0% of total spending will be allocated to interest payments, posing concerns for fiscal management.
Sri Lanka’s fiscal outlook for 2025 anticipates a deficit of 6.8% of GDP, slightly surpassing the government’s target of 6.7%. The government is projected to exceed its revenue target of 15.0% of GDP, largely due to strong pent-up demand for motor vehicles, which is expected to contribute an additional 1.6% of GDP to the budgeted revenue.
The favorable revenue forecast will facilitate the government’s ability to meet its expenditure target of 22.6% of GDP. Nonetheless, a significant concern remains, as interest payments are projected to constitute a substantial 41.0% of total expenditures, indicating ongoing pressure on fiscal management.
It is pertinent to note that this analysis is published by BMI, associated with Fitch Solutions. The insights and data presented should not be construed as a reflection of Fitch Ratings Credit Ratings, maintaining the independence of BMI’s research and analyses.
In conclusion, Sri Lanka’s vehicle imports are poised to play a crucial role in achieving its tax revenue targets for 2025. While the anticipated fiscal deficit slightly exceeds the government’s projections, the positive revenue contributions from motor vehicle sales are expected to bolster the overall financial outlook. However, the substantial share of expenditures allocated for interest payments remains a critical concern that the government must address moving forward.
Original Source: www.fitchsolutions.com
