The 2021 budget is now being prepared amid a challenging economic environment, and reflects a variety of conflicting goals.

The government is compelled to tackle macroeconomic instability by reducing the budget deficit, increasing tax revenue and the tax base and by rationalizing expenditures.

On top of all that, the government is supposed to manage massive debt repayments due in 2019 and 2020. Under this set up, the Finance Ministry has issued strict guidelines to state institutions for preparation of their budget for 2021.

The ministry will be putting curbs on funding for new or stalled projects, maintenance of project offices and staff, and imposing a ban on construction of new buildings for government institutions for the next two years.

Finance Ministry Secretary S.R. Attygalle issued a circular recently detailing the guidelines for the preparation of the budget estimates for 2021.

It said that even though the COVID-19 situation in the country has been brought under control, it is vital that the economic fallout caused by it is minimised, and hence there has to be strict control over public finances.

Unnecessary expenditure will be halted giving priority to effective management of government finances with the budget estimates prepared in keeping according to strict fiscal discipline.

Government institutions have been instructed to review all projects that are stalled or have just started, as well as projects which started with foreign funding but must rely on money from the Treasury to complete its work.

If such projects are to continue, the institutions will have to get special Cabinet approval and only then forward the request to cover such projects to the Treasury.

No funds will be allocated for the maintenance of projects offices or their staff unless Cabinet approval is obtained. In case of projects for which agreements have been signed but no work has started, the commitment fee that is being paid is to be stopped and such agreements cancelled.

The Finance Ministry said that no funds will be allocated for any new projects within the next three years unless they come within the policy framework of the Government.

There will also be no budgetary allocation for Project Management Units (PMUs), hence estimates for their upkeep should not be included in the budget estimates, the circular said.