October 7, 2009 / 3:14 PM / 9 years ago

With early polls on way, Sri Lanka's budget to wait

COLOMBO, Oct 7 (Reuters) - Sri Lanka’s government said on Wednesday it would not present a full 2010 budget this year, and instead put forward an interim expenditure plan to coincide with the end of the present parliament’s term in April.

The opposition accused the ruling coalition of postponing more stringent measures it will need to take to meet the terms of a $2.6 billion International Monetary Fund (IMF) loan, which could cost it votes at presidential and parliamentary elections.

Allies of President Mahinda Rajapaksa say they expect him to call an early presidential vote in January, with parliamentary polls to follow two months later.

The president wants to lock in a second term to capitalise on the popularity he has garnered from defeating the Tamil Tiger rebels and ending a 25-year civil war in May.

“Cabinet made a decision to present a vote on account to parliament instead of the budget for 2010 as the term of the parliament is scheduled to end in April,” Cabinet spokesman Anura Priyadarshana Yapa said.

The vote on account, as the interim expenditure authorisation is known, would give the new parliament the right to vote on the budget priorities, Yapa said.

“This is more political than economics,” said Sirimal Abeyratne, a senior economics lecturer at University of Colombo. “There won’t be any reforms and revisions in the revenue measures for a few months amid the government’s high budget deficit.”

Abeyratne said the annualised budget deficit in the first half of 2009 was around 11 percent and the government needs to consider some prudent measures to increase revenue.

The opposition called the decision a convenient way to put off until after the election plans to increase revenue by introducing new tax measures and reducing expenditures by cutting down subsidies.

“We feel the government is doing this because it can’t face the IMF on the budget deficit and they can’t face an election with the IMF targets,” said United National Party legislator Ravi Karunanayake, a regular critic of government fiscal policy.

The government has agreed with the IMF to reduce the budget deficit to 7 percent by the end of this year and 5 percent by 2011. At present, the deficit is estimated at near 9 percent.

Analysts and economists have said Sri Lankan policymakers in the past have always given priority to populist measures in budgets to woo voters, instead of maintaining consistent economic and fiscal policies to boost investor confidence. (Additional reporting and writing by Bryson Hull; Editing by Sugita Katyal)

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