"Any reckless new public spending in hundreds of billions on recurrent expenditure will be disastrous to the economy and will reverse the sound macro-economic fundamentals as prevailing now and put many businesses at intense risk."
Cabraal brought inflation down to 4.8 percent by end 2010 with tight monetary policy despite some of worst deficit spending seen in recent years, though prices have now started to curve upwards.
Following a float of the currency in April which broke a sterilized intervention cycle (dollar peg defence and money printing to fill liquidity shortages) ending a balance of payments crisis, the exchange rate has also been stable.
But Sri Lanka's current ruling coalition has more than a 100 ministers and has engaged in mass state recruitment expanding the public sector to unprecedented levels, putting on a long term burden on the people and putting breaks on the growth potential of the country.
The opposition's common candidate for presidential polls due on January 26, has promised a 10,000 rupee salary increment for the 1.1 million state workers which the finance ministry says will cost 132 billion rupees a year.In the first nine months of 2009 a record 58.4 percent (267.4 billion rupees) of tax revenues were taken away by state workers in form of salaries and pensions.
Opposition spokesmen have claimed that a salary hike could be financed by cutting corruption and state enterprise losses.
Sri Lanka's entire capital spend and part of the current spend is now financed by debt.
This year the overall deficit of the budget was planned at 7.0 percent of gross domestic product, and under an International Monetary Fund backed program, brakes had been put on domestic borrowing to help ordinary citizens including the private sector lift their head.
"Any substantial increase in credit to the public sector could put the vulnerable recovery in the private sector at risk by exerting upward pressure on market interest rates," Cabraal said.
"Therefore it is essential that the budget 2010, when it is prepared gives due priority to these areas and ensures that borrowing from the banking system does not exceed the stipulated levels."
The IMF's borrowing limit for its last review of the program was 'waived' with officials saying data was not available in time by November.
But market interest rates have come down steeply after a balance of payments crisis and capital flight ended. Backed by an IMF program, private capital flooded into the country, boosting foreign reserves as well as liquidity in money markets.
Sri Lanka's state enterprises, especially in energy, have been mis-managed for short term political gains have run up large losses.
Enterprises have also been created through the back-door without a formal act of parliament, including Mihin Air a state budget airline which lost around 3.0 billion rupees in its first year of operations.
"Credit utilisation by the main corporations, similar to the credit to the government, would impact credit from the banking system available to the private sector, unless these entities arrange a part of their financing from outside sources," Cabraal said.
"That is an option they should consider."