SL Budget 2009: 7% increase in defence (20% revenue)

Early Numbers
06 Nov, 2008 14:25:17
Sri Lanka government to spend Rs200bn for defence in 2009
Nov 06, 2008 (LBO) – Sri Lanka's government would spend 360 billion for capital expenditure in 2009, and 200 billion for defence, the island's president and finance minister Mahinda Rajapaksa told parliament.
A day earlier, deputy finance minister Ranjith Siyambalapitiya said current expenditure would be 804 billion rupees in 2009. Revised government revenue for 2008 is estimated at 700 billion rupees, and capital expenditure at 278 billion, he said.
Revenue for 2008 was originally estimated at 750 billion rupees. Capital expenditure was originally projected 335 billion rupees.
The budget deficit was estimated at 7.0 percent of gross domestic product (GDP) in 2008, Rajapaksa said.
Income tax was a new record of 138 billion rupees, president Rajapaksa said.
"This was a record trend," he said. In Sri Lanka salaries of state workers and politicians are free from income tax, but those in productive sectors, including state corporations are taxed.
Of late politicians have been trying to put more emphasis on income taxes, instead of indirect taxes where their spending is also captured.

Numbers Game 06 Nov, 2008 17:35:50

Sri Lanka budget deficit projected at 6.5-pct of economy

Nov 06, 2008 (LBO) - Sri Lanka raised trade barriers and cut neutral value added taxes in its 2009 budget which is projected to have a deficit of 336 billion rupees or 6.5 percent of gross domestic product.
Revenues were estimated at an optimistic 855 billion rupees, though the island failed to meet the original 2008 target of 750 billion rupees with revised estimates presented to parliament of only 709 billion rupees.
But the revised numbers themselves can be off target. In 2007 November parliament was told that the revised revenue numbers were 605 billion rupees, but eventually revenues were reported at only 565 billion rupees.
Current expenditure is projected at 823 billion rupees, causing a revenue surplus of 31.5 billion rupees. The country has not reported a revenue surplus for decades and it is not known why the finance ministry continues to project large revenue surpluses.
Last year the government projected a revenue surplus of 37.8 billion rupees, but revised numbers show a deficit of 34 billion rupees for 2008. Even that is uncertain. In 2007, a 3 billion rupee projected surplus turned into a revised 24 billion deficit and a final 57 billion rupee deficit.
All prudent budget are expected to have at least a revenue surplus, showing that total revenues are above day to day expenses, which is known as the golden rule of budgeting.
Capital expenditures for 2009 are projected at 370 billion. In the 2008 budget, the government originally promised to spend 335 billion rupees on public investment, but outrun presented to parliament shows it revised down to 278 billion.
Total expenditure for 2009 is projected at 1,191 billion rupees, with the overall deficit at 336 billion rupees or 6.5 percent of GPP. The 2008 revised deficit is 7.0 percent of GDP.

Sri Lanka to unveil biggest ever war budget

Wed Nov 5, 12:13 am ET COLOMBO (AFP) – Sri Lanka will unveil its biggest ever war budget on Thursday as it intensifies a military campaign against Tamil separatists, officials said.
President Mahinda Rajapakse, who is also the commander in chief and finance minister, is due to announce in parliament Thursday his proposals to raise government revenue, one fifth of which will go on defence.
He plans to raise defence spending by seven percent to a record 1.6 billion dollars in 2009, according to provisional figures already presented to parliament.
"There is a definite military push in the budget," Anushka Shah, economist at the Mumbai-based Citigroup told AFP. He said the war will dominate the economic agenda.
Security forces are trying to eject the Liberation Tigers of Tamil Eelam (LTTE) from the northern town of Kilinochchi, which has been their political base for a decade.
Businessmen fear the military drive will raise corporate taxes and crowd out private investments that have already been hurt by high interest rates and falling corporate profits.
Despite high inflation, running at 23.4 percent at the end of last month, the government's war against the Tamil Tigers is seen as highly popular among the majority Sinhalese community.
Ruling party officials said Rajapakse may be encouraged to go for snap local elections later this year to improve the ruling party's hold on provincial administrations by cashing in on the popularity of the war.
However, the International Monetary Fund and other analysts have warned that the island's economy may be in trouble with its main export commodity tea set to earn less and garment exports suffering due to the global financial crisis.

Sri Lanka downgrades growth projections amid war budget

Thu Nov 6, 3:58 am ET COLOMBO (AFP) – Sri Lanka's war-battered economy may grow at its slowest pace in four years, dampened by high inflation and heavy borrowing costs, the central bank said on Thursday.
The bank cut 2008 economic growth to between 6.0 percent and 6.5 percent from an earlier projected figure of 7.0 percent as the global economic crunch curbed export orders for tea and garments.
The island's economy grew by 6.8 percent in 2007.
President Mahinda Rajapakse, who is also the island's finance minister, is due to unveil another war budget later Thursday, with defence expenses rising to 1.6 billion dollars in 2009 from 1.5 billion dollars in 2008.
The government is fighting Tamil Tiger rebels, who have been fighting to carve out a homeland for minority Tamils, in a conflict that has claimed tens of thousands of lives on both sides since 1972.
Sri Lanka, the world's second largest tea exporter after Kenya, has begun reducing production in a bid to stabilise prices. In the clothing market, buyers in the US and Europe have been buying less amid the credit crisis.
In its mid-year review of the nation's economic health, the central bank blamed double digit inflation, high interest rates and a hefty defence budget for curbing growth this year.
Consumer prices, which were flat at 23.4 percent in October, are expected to hit 23.9 percent by year-end, the International Monetary Fund said last week.