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Sri Lanka will use aid to pare its budget gap
<b>By Anusha Ondaatjie Bloomberg News</b>
Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "<b>the benefits of debt relief</b>," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
COLOMBO Sri Lanka will rely on overseas aid and debt relief pledged after the December tsunami disaster to help trim its budget deficit, Finance Minister Sarath Amunugama has said.
The government will seek "the benefits of debt relief," to reduce next year's deficit to 8.5 percent of gross domestic product from the 9 percent the central bank estimates for 2005, Amunugama said late last week in Colombo. He is due to present the budget to Parliament on Tuesday afternoon.
Prime Minister Mahinda Rajapakse and the opposition leader Ranil Wickremesinghe both have promised to increase government spending as they campaign ahead of an election next week to succeed President Chandrika Kumaratunga. Subsidies provided to make fuel more affordable for Sri Lanka's 20 million people are also putting pressure on the budget deficit.
"Sri Lanka faces the short-term threat of the impact of large energy subsidies, which have not been fully passed on to the consumer," said Peter Harrold, the World Bank's representative in Sri Lanka.
"Fuel subsidies could be funded in 2005 partly because of the fiscal space created by the debt moratorium granted to Sri Lanka in the aftermath of the tsunami, but such fiscal space is unlikely to be available next year," he said.
Sri Lanka will probably spend about 20 billion Sri Lankan rupees, or $196 million, on fuel subsidies this year, twice as much as in 2004, the state oil company Ceypetco estimates. The country imports all of its oil needs.
Aid worth $2.2 billion and a debt moratorium worth $300 million, together with another $500 million to bolster foreign reserves were pledged to Sri Lanka following the disaster. The island needs to rebuild about 100,000 houses, as well as roads, hospitals and ports.
Sri Lanka's economy will expand at least 6 percent in 2005, the fastest pace in eight years, and maintain that growth rate next year, Treasury Secretary P.B. Jayasundera said last month.
The $20 billion economy expanded in the three months to June 30 at 6 percent from a year earlier, the fastest pace in more than a year, as tea and rubber output increased and roads and hotels were rebuilt.
The island's economic recovery could be strengthened further by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and Tamil rebels, which broke down in April 2003, are resumed.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
"It will be difficult to say how the budget will be positioned ahead of the election," said S. Jeyavarman, chief executive of National Asset Management in Colombo. "The real value to growth has come from peace," he said.
Sri Lanka's cabinet last month rejected a request from the main opposition United National Party to postpone the budget until after the Nov. 17 election, when Kumaratunga steps down after two terms in office.
"The economy is performing well and we will follow through on the path we set out in the last budget," Finance Minister Amunugama said. In his first budget last year, he raised taxes on goods and services to help cut the deficit and fund pay increases for government workers.
Increased tax revenue and a continued decline in defense spending since the 2002 cease-fire may help Sri Lanka to pare borrowing costs. The country is seeking a sovereign debt rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings, in a bid to attract foreign investment.
Tuesday's budget may provide fertilizer subsidies to farmers and fuel subsidies to the fishing industry, both of which are election pledges made by Rajapakse and his Sri Lanka Freedom Party-led coalition, said Chitra Sathkumara, who helps manage Sri Lankan stocks and bonds at Unit Trust Management in Colombo.
"The markets are expecting a welfare-oriented budget, so that fact has already been discounted," Sathkumara said.
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