Public Report on the 2021 Budget - Assessment of the Fiscal, Financial and Economic Assumptions Used in the Budget Estimates

Abstract

The 2021 budget presented to parliament on 17 November 2020 sets out the government’s proposals for raising public funds through taxation and proposals for expenditure during the year. These proposals form the key components of the executive’s management of public finance. Therefore, it is in the public's interest that the assumptions and estimations used to arrive at such proposals are subject to objective and robust analysis. This is a public report compiled by Verité Research, which engages a similar mandate to that of the parliamentary Committee on Public Finance (COPF). It provides an assessment and analysis of the fiscal, financial and economic assumptions and estimates applied in the budget. It aims to inform a wider audience of stakeholders, including the parliament, and COPF. Verité Research anticipates that the contents of this report can improve informed engagement, in public and in parliament, with Sri Lanka’s annual budget. The assessment was based on three sources: (1) the numbers provided in the 2021 Budget Speech presented in parliament on 17 November 2020; (2) draft budget estimates for 2021 provided to the parliament on 17 November 2020; (3) updated detailed estimates given by the MoF to COPF. The analysis considers the macro-economic framework (relating to debt management, inflation, interest rates, exchange rates, fiscal deficits, and GDP growth) and economic assumptions of the government, where those assumptions have been stated. All numbers in the assessment are set out in current value terms. In addition to informing the public and other stakeholders including parliament and the executive, this assessment also contributes to improving access to relevant information; and professionalize the process by which budget estimates are constructed. This is expected, in the medium term, to result in better formulated budgets, and thereby to improve public finance outcomes in Sri Lanka. The report has three main sections; 1) Introduction to the report; 2) Informational standards and due diligence; and 3) Analysis of the budget estimates.