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Sri Lanka Government to Present ‘Mini’ Budget Ahead of Election

[Bloomberg, Wednesday, 7 October 2009 21:06 No Comment]

Sri Lanka will present a mini budget for the first few months of 2010 instead of one for the full year as the South Asian island’s parliament term ends in April, Deputy Finance Minister Ranjith Siyambalapitiya said.

The government will announce later this week when the so- called Vote on Account will be presented in parliament and what time period it will cover, he said in a telephone interview today from the capital Colombo. The current legislature’s six- year term ends on April 22, 2010.

“The elections are expected before April. The Vote on Account will cover that period,” Siyambalapitiya said.

The Ministry of Finance said in July that it planned to focus spending in the government’s 2010 budget on rebuilding after the end of the island’s 26-year civil war. The army’s victory over the Liberation Tigers of Tamil Eelam in May has spurred investment and a rally in Sri Lankan stocks, prompting economists to boost their growth forecasts.

The International Monetary Fund said on Sept. 22 it’s “cautiously positive” on the island nation’s prospects as it reviews the economy for the release of a second payment in its $2.6 billion aid package to Sri Lanka.

The Washington-based lender raised Sri Lanka’s 2009 growth target to 3.5 percent from a July estimate of 3 percent, as the economy is showing signs of “bottoming out,” said Brian Aitken, the IMF’s Mission Chief for Sri Lanka.

In return for the IMF loan, Sri Lanka agreed to reduce its budget deficit to 5 percent of gross domestic product by 2011, from 7 percent this year, and maintain flexibility in the exchange rate in order to build foreign reserves to cover 3 1/2 months of imports and bolster the economy.

‘Right Track’

Central Bank Governor Nivard Cabraal, who’s cut benchmark interest rates to a three-year low to support growth, said in an interview in Istanbul yesterday that he expects the $41 billion economy to expand as much as 6 percent next year after growing about 3.5 percent in 2009.

The finance ministry said in July that the government’s development programs will help increase the pace of growth to 7 percent over the “medium term.”

The Asian Development Bank said in July that it plans to raise Sri Lanka’s annual allocation to $300 million in 2010 from $200 million, to fund road, power and water and sanitation projects in areas liberated from the Tamil Tiger rebels.

Sri Lanka presents its budget for the calendar year in the preceding November.

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