19 February 2011

Sri Lanka Budget Deficit Target of 6.75pct of GDP to Remain Despite Floods

18th February 2011, www.lankabusinessonline.com

Sri Lankan authorities want to keep the budget deficit target of 6.75 percent of gross domestic product for 2011 despite the additional flood related expenditure, IMF mission chief Brian Aiken said.

"Addressing the impact of the floods may require some re-allocation of budget resources, but the authorities felt that it is premature at this stage to revise their budgeted deficit target of 2011 of 6.75 percent of GDP," he told a news conference.

The government had earlier said the Cabinet had approved additional expenses of 33 billion rupees.

Aitken said he was aware of the statement but authorities would try to meet expenses by re-allocating expenses.

Donors are also expected chip in, he said.

Aiken said Sri Lanka's growth for 2011 will not be reduced much despite crop damage.

"Recently flooding significantly damaged Sri Lanka's various crops including rice and vegetables, as well as rural infrastructure," Aiken said.

"(But) given the strength of Sri Lanka's economy the overall impact on output growth should be limited."

The IMF has forecast 7.0 percent growth for Sri Lanka in 2011, slightly lower than the 7.5 percent number estimated by the lender for 2010.

Aitken said demand-driven inflationary pressure was not evident and there was no evident pressure on land prices.

In this context the current interest rates policy seems appropriate, he said.

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