Sri Lanka budget to cut deficit, maintain capex

Nov 20, 2011 (LBO) – Sri Lanka’s budget for 2012 to be presented to parliament on Monday will seek to further narrow a deficit, maintain public investment and create an environment to improve productivity, officials have said. According to earlier statements, the 2012 plans to cut the deficit to 6.2 percent of gross domestic product from 6.8 percent in 2011 and maintain public investments at over 6.0 percent of GDP.

Near Balance

If the target is met, the revenue deficit will narrow to just 0.2 percent of GDP, indicating that the current account of the budget will be almost in balance and recurrent expenditure can be almost covered by taxes.

Most of the borrowings will then be for public investment only.

A lower deficit will reduce pressure on interest rates and allow central bank not to printing money to fund state expenditure. It will help keep inflation low and a peg with the US dollar stable.

“We honestly believe that the deficit must be reduced,” opposition lawmaker Harsha de Silva, an economist who has been a vocal critic of deficits spending for several years told reporters Friday.

He said attempts to go in the direction of cutting deficits were welcome. However he cautioned against