DM Monitoring
COLOMBO: Sri Lanka’s treasury is running out of funds as the island nation’s worst-ever economic crisis since its inde-pendence in 1948 continues, Cabinet spokesman Bandula Gunawardena said on Tuesday.
Gunawardena told reporters that funds collected through taxes have seen a decline.
As a result, the treasury is running short of funds to make payments, he said.
The spokesman said the economic crisis that hit the country in 2022 has affected the income of the treasury.
“The expected income by way of taxes during the first three months of 2023 is low. However, we need to pay public sector salaries. Payments are made by the treasury and not by our personal funds,” he said
He noted the President has informed all the ministries to slash their budget allocations for 2023 by at least 5 per cent. Gunawardena said further steps to cut expenses will be taken to reduce the impact caused by the economic crisis.
The cabinet spokesman said the treasury gets funds from public taxes. The country used to print money and obtain loans, but now it is unable to do that as no one is giving loans and they cannot print money, he added.
Sri Lanka needs to achieve debt sustainability as a precondition to secure a $2.9 billion IMF loan. The lender has also asked Colombo to trim its 1.5 million-strong public service, sharply raise taxes and sell off loss-making state enterprises.
Key creditors such as China and India are yet to agree upon a “haircut” on their loans to the South Asian nation, which has stalled Sri Lanka’s efforts to restructure its debt. Doubled personal income and corporate taxes kicked in on New Year’s Day to shore up state revenue.
Electricity prices are also rising another 65 per cent after a 75 per cent tariff increase in August.
Sri Lanka’s 22 million people endured months of food and fuel shortages, chronic blackouts and runaway inflation last year, inflaming public anger.
Wickremesinghe came to power in July at the peak of the crisis after his predecessor fled the country when protesters stormed his residence. Besides, Sri Lanka treasury bonds yields went up and T-bills fell on Tuesday, dealer said while a guidance peg for inter-bank transactions appreciated.
A bond maturing on 01.05.2024 closed at 32.00/10 percent on Tuesday, up from 31.90/32.00 at the Monday’s close. The bond maturing on 15.01.2025 closed at 31.00/10 percent, up from 30.90/31.25 percent. A bond maturing on 15.05.2026 closed at 30.30/65 percent, up from 30.00/75 percent.
Three-months T-bill closed at 30.00/30 percent on Tuesday, down from 30.25/75 percent on Monday.
The Central Bank’s guidance peg for interbank US dollar transactions was set at 362.24 rupees against the US dollar up 85 cents from 363.09 rupees.
Commercial banks offered dollars for telegraphic transfers at 360.06 rupees on Tueday, data showed.
