How did the government finance its expenditure in 2023?

Abstract

The 2023 fiscal numbers, recently released through the Central Bank of Sri Lanka's Annual Economic Review, reveal that the Government of Sri Lanka's total expenditure for 2023 was LKR 5,357 billion. A significant portion of this expenditure, amounting to LKR 2,456 billion (43%), was spent on interest payments for existing government debt. This was followed by transfer payments at LKR 1,005 billion and salaries and wages at LKR 939 billion.

The government financed 57% of its expenditure through revenue sources, primarily taxes, which amounted to LKR 3,017 billion. The main revenue contributors were taxes on domestic goods and services (mainly VAT and excise duties) totaling LKR 1,399 billion, and taxes on income and profit (mainly corporate and personal income taxes) totaling LKR 911 billion.

The remaining 43% of the government expenditure was financed through borrowings, amounting to LKR 2,282 billion. Notably, the government had to borrow just to cover its interest payments for the year, which totaled LKR 2,456 billion. This additional borrowing to cover the budget deficit increases the total amount of government debt, ultimately raising the interest bill further.