Sri Lanka, Nov. 5 -- The government's half-year books are out, and on the face of it they look good.The Mid-Year Fiscal Position Report, covering January to June, shows the state running a budget surplus, the first the country has seen in years. We asked economist Dhananath Fernando what it really tells us, beginning with why that surplus matters and why it is not the whole story.

Fernando notes that while reporting a budget surplus of about 9.5 billion rupees is "commendable" because such surpluses are rarely seen, it should not be confused with a primary surplus. He explains that this surplus was achieved largely "by slowing down our capital expenditure". While the numbers look positive on paper, he warns that the flip side is that "th...