Sri Lanka’s 2023 budget would aim to reduce the fiscal deficit to 6.8% in 2023 from a projected 9.9% in 2022, a senior Cabinet minister said on Tuesday, ahead of the visit of the IMF delegation for a plan to bailout in the face of crisis. hit the island nation.
Sri Lanka is in the midst of an unprecedented economic crisis that has led to severe shortages of fuel and other basic necessities, resulting in long queues outside petrol stations.
The island nation of 22 million has also witnessed significant political upheaval following massive mass protests that forced former President Gotabaya Rajapaksa to flee the country and resign from his post.
“Sri Lanka plans to reduce the budget deficit to 6.8% of gross domestic product in 2023 from an expected 9.9% in 2022,” Cabinet Spokesperson and Information Minister Bandula Gunawardena said on Tuesday.
The Cabinet of Ministers approved a budget framework for 2023-2025. Sri Lanka is facing the worst fiscal crisis in its history, he said.
We ultimately need to bring the deficit down to 5% of GDP to manage debt, reduce money printing and have low inflation, Gunawardena said.
The deficit target was announced before the visit of the IMF delegation which will arrive here this evening. They are due to resume talks on reaching the staff level deal between August 24 and 31.
The government statistics office said on Monday that the headline inflation rate as measured by the national consumer price index on an annual basis had risen to 66.7% in July from 58.9 recorded in June.
This is mainly due to the higher price levels prevailing in the food and non-food groups. The food group rose to 82.5 in July 2022 from 75.8 in June 2022, the statement said.
In its latest assessment, the World Bank said that Sri Lanka was ranked 5th with the highest food price inflation in the world.
Sri Lanka is ranked behind Zimbabwe, Venezuela and Turkey, while Lebanon tops the list.
The World Bank says record food prices have triggered a global crisis that will push millions into extreme poverty, deepening hunger and malnutrition while threatening to erase hard-won development gains.
The war in Ukraine, supply chain disruptions and the continued economic fallout from the COVID-19 pandemic are undoing years of development gains and pushing food prices to unprecedented levels.
Rising food prices have a greater impact on people in low- and middle-income countries, as they spend a larger share of their income on food than people in high-income countries. This note examines growing food insecurity and the World Bank’s responses to date.
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