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COLOMBO: 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 US$1.6 billion 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 per cent 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.
- AFP/yb
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