In his statement, the minister claims that the government has not adhered to the limits prescribed by the Fiscal Management (Responsibility) Act (FMRA). To substantiate this claim, the minister states limits specified in the Act and the fiscal outcomes in recent years.
To check this claim, FactCheck.lk consulted the FMRA No. 3 of 2003, later amendments to the Act, Central Bank of Sri Lanka Annual reports (CBSLAR), Ministry of Finance Annual Reports (MoFAR), and articles titled Does Sri Lanka Need More Rules or Better Compliance? (Veritè1) and Debt Update for March 2023 (Veritè2) both by Verité Research.
The FMRA sets fiscal limits for budget deficits, central government debt, and public (government) guarantees issued by the state, with specific target dates. Exhibit 1 compares the fiscal limits cited by the minister, against those specified in the original Act and its amendments. The minister refers to the original limits set in the FMRA prior to any amendments. The minister accurately cites the limits on the budget deficit. However, regarding the debt ceiling, he states it as 65% of GDP instead of the 60% stipulated in the Act. On public guarantees, he fails to mention that the limit is for a three-year cumulative amount, not the total outstanding.
On the fiscal outcomes realised, the minister makes three claims.
Claim 1: that “today” the budget deficit levels are above 10%. This has been the case for the past three years: 2020, 2021 and 2022. It is also the case that in every single year since the enactment of the Act, the budget deficit has exceeded the 5% limit.
Claim 2: that public debt is more than 125%. At the end of 2022, with accrued interest on unpaid external debt, the government has reported public debt as c.128% of GDP (see Veritè2). 2023 CBSLAR states it at a lower value of c.118% because it omits the accrued unpaid interest in the calculation.
Claim 3: that public guarantees have gone up to 15%. 2021 MoFAR and Veritè1 confirm that public guarantees have gone up to 15%, which is the total outstanding in 2021.
The minister is mostly correct on the limits set by the FMRA and correct on the three fiscal outcomes he has cited. Separately, the relevant fiscal outcomes in the last three years do significantly exceed the limits set by the original FMRA Act, which is the larger claim the minister is making in his statement. (See Additional Note for further clarification).
Therefore, we classify this statement as TRUE.
*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.
Additional Note: It is worth noting that the fiscal outcomes discussed by the minister don’t all align with the outcomes on which the FMRA sets limits. The FMRA sets a limit for central government debt, not public debt (which includes debt of state-owned enterprises); and the government guarantee limit in the FMRA is for a three-year cumulative amount, not the total outstanding.
Exhibit 1: Comparison of FMRA Limits (as a share of GDP)
Source: Fiscal Management (Responsibility) Act, No. 3 of 2003 and its amendments
Parliament of Sri Lanka. (2003). Fiscal Management (Responsibility) Act, No. 3. Retrieved from https://publicfinance.lk/public/uploads/act/file/1615372025.pdf
Central Bank of Sri Lanka. (2023). Annual Report 2022. Retrieved from https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports/annual-report-2022
Verité Research. (2023). Does Sri Lanka Need More Rules or Better Compliance? Verité Research Insights, March 2023. Retrieved from https://www.veriteresearch.org/wp-content/uploads/2023/03/VR_EN_Insights_FMRA_March_2023.pdf
Ministry of Finance. (2022). Sri Lanka Investor Presentation. Retrieved from https://www.treasury.gov.lk/api/file/10083639-80a1-4856-a72f-30698b30df35
Verité Research. (2023). Debt Update, March 2023. Retrieved from https://www.veriteresearch.org/wp-content/uploads/2023/03/Debt_Update_Issue_2_March_17.01.pdf
Ministry of Finance. (2021). Annual Report 2021. Retrieved from https://www.treasury.gov.lk/web/annual-reports/section/2021.
Publicfinance.lk (2021). Non-Compliance with the Fiscal Management Responsibility Act Has Been a Demonstration of Irresponsibility. Retrieved from https://publicfinance.lk/en/topics/Non-Compliance-with-the-Fiscal-Management-Responsibility-Act-Has-Been-a-Demonstration-of-Irresponsibility-1624966502.