Tidal Aid

Last month’s devastating tsunami will increase the strain on Sri Lanka’s government finances, but help from donors will likely prevent a full-blown crisis, officials and analysts said Wednesday. Last month’s devastating tsunami will increase the strain on Sri Lanka’s government finances, but help from donors will likely prevent a full-blown crisis, officials and analysts said Wednesday. This year’s budget deficit could widen to 9.4%-9.8% of gross domestic product from a forecast 7.5% due to the cost of reconstruction after the tsunami, a senior official at the Central Bank of Sri Lanka told Dow Jones Newswires.

Public investment could increase by $500 million this year, or around 2.3% of GDP, but it will likely be funded by concessional assistance – soft loans and grants – from donors, he said.

“The finance ministry is working on new numbers and preparing a mini budget which will include a revised revenue program and the impact of a debt moratorium,” said the official, who declined to be named.

Pledges of assistance from donors increased sharply after huge waves lashed the island’s coast Dec. 26, killing more than 30,000 people and leaving hundreds of thousands homeless.