Parliament yesterday passed the 2012 budget with 151 votes for and 50 against, giving the nod to an overall increase in spending by 14 per cent and a shock 3% currency devaluation that has already been put into effect.
The budget reading last week was overshadowed by the president’s announcement of a 3% currency devaluation during his presentation of the 2012 spending plan, which was implemented by the central bank the next day.
The devaluation shocked the markets, but is expected to help boost Sri Lankan export competitiveness and ease International Monetary Fund (IMF) pressure to be more flexible with the exchange rate, to avoid spending foreign exchange reserves to keep it stable against depreciation pressure.
Overall 2012 spending was forecast to climb 14.15% to Rs. 1.59 trillion ($13.96 billion) while the budget gap in 2012 will be narrowed to 6.2%versus a 7% forecast this year, in line with IMF targets.