Characterising Alternative Fiscal Policy Rules for Sri Lanka

Sri Lanka: Selected Issues

“…Corresponding reconstruction costs increased deficits and debt. Rising commodity prices and the global financial crisis in 2007-08, and increased military spending at the end of the civil war (followed by resettlement, reconstruction and rehabilitation costs in 2008-09) further exacerbated the fiscal situation likely contributing to the relaxation of the targets in 2013 (Ehelepola, 2017). Deviations from targets since then are more difficult to pin on macroeconomic surprises reinforcing the view that there are few political consequences for breaking fiscal rules.…”