Manila, Philippines (BBN)- Japan will provide financial support through Asian Development Bank (ADB) to improve Sri Lankan public finances and to strengthen fiscal reforms.
The Japan Special Fund will provide a grant of US$300,000 to help the Sri Lankan government identify measures to contain expenditures and increase revenues in the medium term, in order to support its fiscal consolidation program.
Sri Lankan government will provide the equivalent of $60,000 for the technical assistance project, an ADB press statement said on Friday.
“The project aims to help reduce poverty by supporting sustainable fiscal management and good governance,” said Bruno Carrasco, Principal Economist for the Financial Sector of ADB’s South Asia Department.
Under the program, the government has made significant strides in modernizing its revenue operations. The three and a half year program, which ended in June 2008, helped boost revenue collection and reduce the country’s fiscal deficit from 8.2 per cent of gross domestic product (GDP) in 2004 to 7.7 per cent in 2007.
The government is targeting a fiscal deficit of 5 per cent of GDP by 2010, according to the statement.
However, public expenditure as a share of GDP has not stabilized. Interest payments on the country’s large national debt continue to absorb a significant share of spending, while government subsidies designed to insulate the population from the impact of sharp international increases in the prices of food and other items provide a further hurdle.
To help address these concerns, the project will review public spending in three target areas – agriculture, education and health – in order to identify unproductive and duplicate spending in the sectors, which account for the bulk of government expenditure.