2011 spend up 6.7% to Rs. 1.9 trillion

Appropriation Bill to be tabled in Parliament today

COLOMBO, (Reuters) - Sri Lanka’s government expenditure for 2011 is forecast to grow 6.7 percent to 1.90 trillion rupees ($17 billion), a budget document obtained by Reuters on Monday says.

By Ranga Sirilal

The appropriation bill, due to be presented to parliament on Tuesday, also showed total external and internal borrowing at no more than 997 billion rupees, an increase of 1.8 percent.

The Indian Ocean nation has turned around its $42 billion economy since the end of a quarter-century war in May 2009 and the International Monetary Fund’s (IMF) approval of a $2.6 billion loan the following July.

Sri Lanka has forecast this year’s economic growth at 7.5-8 percent, up from 3.5 percent in 2009. It expects to narrow its budget gap to 8 percent of gross domestic product (GDP), still higher than the IMF’s 6 percent target.

The IMF last month said planned financial and tax reforms herald a better fiscal position and higher growth if they are executed properly. Colombo is targeting a budget deficit of 5 percent of GDP by 2012. The government has already made changes, and more tax and fiscal reforms are due in the budget to be presented on 22 November.

Its main deficit-cutting strategy is to boost revenue from an inefficient state sector, long seen as the primary cause for Sri Lanka’s perennial budget woes.

President Mahinda Rajapaksa’s administration has reversed earlier privatisations and increased the government’s stake in nearly every economic sector. He or his family control about two-thirds of the total budget through the ministries they run.

Defence spending, which is also in Rajapakse’s portfolio, is forecast to grow by 6.3 percent to 215.2 billion rupees.

Although the enfeebled opposition is likely to complain that war is over and no increase is needed, the defence ministry’s budget now encompasses that of the Urban Development Authority, which is planning to develop prime state lands.