Cablegate: Sri Lanka: Fiscal Transparency Report

VZCZCXRO0212
RR RUEHBI RUEHLMC
DE RUEHLM #0238 0701149
ZNR UUUUU ZZH
R 101149Z MAR 08
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 7792
INFO RUEHKA/AMEMBASSY DHAKA 0761
RUEHIL/AMEMBASSY ISLAMABAD 7749
RUEHKT/AMEMBASSY KATHMANDU 5935
RUEHNE/AMEMBASSY NEW DELHI 1877
RUEHKP/AMCONSUL KARACHI 2332
RUEHCG/AMCONSUL CHENNAI 8364
RUEHBI/AMCONSUL MUMBAI 5843
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS COLOMBO 000238

SIPDIS

SIPDIS

STATE FOR EEB/IFD/OMA, SCA/RA, AND SCA/INS

E.O. 12958: N/A
TAGS: EAID ECON PGOV PREL CE

SUBJECT: SRI LANKA: FISCAL TRANSPARENCY REPORT

REF: SECSTATE 16737

1. (U) The following is the text of Embassy Colombo's fiscal
transparency report for Sri Lanka.

2. (SBU) Begin text:

Sri Lanka has achieved a substantial degree of fiscal transparency
in areas such as legal and administrative framework, compilation and
reporting of fiscal accounts for the central government, and
explicit separate accounts for the public corporations. Sri Lanka's
budget is made public through a publication. The President's budget
speech and a summary of revenue and expenditure estimates are
published on the internet. There is a 12 month time lag to release
actual detailed budget data for a given year. The budgets are
prepared on a medium term budget framework. Budget documents
contain all central government revenue and expenditure. Details of
expenditure on military hardware are not provided in budget
documents available to the public. The government's budget
documents do not contain accounts of public corporations or of
provincial and local governments. Public corporations publish
separate accounts.

The government's budget transparency has been enhanced by the Fiscal
Management (Responsibility) Act, passed in 2003. The Act lays out
clear obligations for fiscal control, budget preparation,
monitoring, reporting and parliamentary review with explicit medium
term targets. While fiscal targets contained in the FMRA have not
been achieved to date, reporting has improved. As required by the
FMRA, the government publishes a fiscal strategy statement, a
budget, an economic and fiscal position report, a mid-year fiscal
position report and a final budget position report. These reports
are presented to parliament and published on the internet.

The government has backtracked recently on previous measures to
improve transparency and the fiscal oversight role of parliament.
Beginning in 2003, the government has allocated increasingly large
sums to a special Finance Ministry account. The government has used
this account to pay for expenses in various ministries as they arise
throughout the year, by transferring funds on a case-by-case basis.
Some of these payments are described in the "Budget, Economic and
Fiscal Position Report," but many more are not detailed at all. The
Supreme Court in 2007 instructed the government to more fully report
the use of these funds to Parliament as required by the Fiscal
Management (Responsibility) Act.

To achieve full transparency, additional reforms are needed. These
include provision of data on accounts payable and commitments, and
publication of intra-year data in a timely manner. Consolidated
general government accounts need to be prepared and transactions
between government and public enterprises further clarified.
Transparency could be enhanced by strengthening the audit process.

The government has been working with donor agencies to improve the
budget process. The World Bank is considering a $32 million loan
for Public Financial Management and Statistical Institution
Building. This project will build technical capacity to improve
public financial management. The Asian Development Bank has
assisted the government with a fiscal management reform program
during 2005-2008. The program aimed to support fiscal consolidation
through improving public resource and expenditure management
systems, fiscal discipline and supporting fiscal decentralization.
ADB's standby loan list for 2008 includes a second Fiscal Management
Program to further enhance expenditure management, internal auditor
and service delivery.

End text.
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