Sri Lanka plans to spend more and borrow further next year as expenses for defence and fuel related subsidies escalate. Sri Lanka plans to spend more and borrow further next year as expenses for defence and fuel related subsidies escalate. Total state spending will rise 30 percent to Rs. 568.3 billion (US$ 5.6 billion) in 2006 from Rs. 438 billion budgeted for 2005, the government said Tuesday while tabling the budget appropriation bill for 2006 before parliament.
Defence spending will go up 23 percent to Rs. 69.4 billion next year, above Rs. 56.6 billion budgeted for this year (Rs. 52 billion spent in 2004).
Overall borrowing programme will expand by Rs. 100 billion to Rs. 536 billion, as the government leans further on foreign debt, rupee loans and government bonds. The programme excludes Rs. 300 billion ceiling set for borrowings through treasury bills.
The appropriation bill does not include revenue estimates, but Finance Minister Sarath Amunugama will disclose the details in his November 8 budget.
Sri Lanka is hoping to contain its budget deficit to eight percent, Treasury Secretary P B Jayasundara said adding that the government plans to raise US$ 100 million through an international bond issue this month, aimed at its migrant workers.
The island is digging deep for extra cash after surging crude prices will see its oil import bill exceed US$ 800 million to US$ 1.5 billion this year.
With tsunami related costs also piling up, Jayasundara says Sri Lanka has asked the Group of Eight industrial countries to extend its one-year debt moratorium for another twelve months.
G8 members waived off US$ 250 million due in interest payments this year. “We didn’t ask for a US$ 250 million debt moratorium. We have spent more than that out of our own pockets for tsunami relief,” Jayasundara said.
Sri Lanka’s minority government can be defeated over a finance bill. But the government is expected to get parliamentary support from Marxists JVP, who have struck an electoral pact with upcoming presidential candidate Prime Minister Mahinda Rajapakse.
Left centered Rajapakse is pitted against right-of-centre main opposition party leader Ranil Wickremasinghe of the UNP, in the upcoming November 17 presidential election.
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