Wednesday,
7 Nov 2012 | 7:22 AM ET
*
Government to protect local industries
* Deficit, tax revenue, slowing exports are
concerns
* Aims for plus 7 pct growth, mid single digit
inflation
* Govt to negotiate new IMF programme in January
COLOMBO,
Nov 7 (Reuters) - Sri Lanka is aiming to accelerate the pace of economic
expansion to 7 percent with its 2013 budget, government officials said, by
pumping in money for post-war infrastructure projects while raising import
tariffs to protect local industries.
President Mahinda Rajapaksa
will present the 2013 budget on Thursday, the fourth since the end of a 25-year
war that had hindered the Indian Ocean island nation's economy.
Sri Lanka is expected to spend
over $21 billion on the construction and rebuilding of ports, roads, railways
and other infrastructure through 2015.
"It will be a growth and
development oriented budget," a finance ministry source said on condition
of anonymity.
Both the central bank and
finance ministry have previously said the budget proposals will support an
economic growth target of more than 7 percent and single digit inflation.
Growth in 2012 is expected to be 6.8 percent.
The new budget also aims to
curb the fiscal deficit and protect local industries such as diary and leather
in a bid to replace imports, four government officials told Reuters on
condition of anonymity.
Two government sources involved
in budget preparations said achieving this year's budget deficit target of 6.2
percent of the gross domestic product was challenging as revenue has not been
up to the target. However, they said, the government may aim to reduce the
deficit to 6.1 percent in 2013.
The country cut the deficit to
6.9 percent last year from 8.0 percent in 2010 under the terms of a $2.6
billion International Monetary Fund loan.
The IMF fully disbursed the
loan in July. The central bank said the country will negotiate a fresh loan in
January to fund development activities.
Businesses have called on the
government to cut corporate taxes further. But analysts said the government has
little flexibility given the low tax collections this year and may actually be
looking to raise new taxes.
"The government may raise
some import tariffs to protect some local industries like diary and leather.
Such a measure will encourage local industries and reduce import cost. The
government may also raise some indirect taxes to increase its revenue,"
Colombo-based TKS Securities' research head Danushka Samarasinghe told Reuters.
Three analysts said they also
expect some tax relief to export-oriented businesses amid slowing shipments to
Europe, the country's main export destination.
(Reporting
by Shihar Aneez; Editing by Sanjeev Miglani)
((shihar.aneez@thomsonreuters.com)(+94-11-232-5540)(Reuters
Messaging: shihar.aneez.thomsonreuters.com@reuters.net))
