COLOMBO: The Sri Lankan parliament on Wednesday (Oct 23) passed an ambitious interim budget weeks before a presidential election, with 1.47 trillion rupees (US$8.11 billion) in spending for the first four months of 2020.
The interim budget, passed unanimously in the 225-member parliament, expects 745 billion rupees in government revenue in the first four months of next year and sought permission to raise up to 721 billion rupees as loans.
The two presidential front-runners, former wartime defence chief Gotabaya Rajapaksa and housing minister Sajith Premadasa, have promised a number of handouts including free of charge fertilisers and higher wages, threatening Sri Lanka's fiscal consolidation path.
Both, however, have yet to release their policy framework with the election scheduled for Nov 16. The winner will serve until 2024.
The interim budget targets a fiscal deficit of 2.2per cent of GDP, government officials have told Reuters. Official budget documents presented in parliament did not mention the 2020 deficit target.
Finance Minister Mangala Samaraweera said in his presentation of the interim budget that Sri Lanka could still see 3 per cent economic growth in 2019 despite challenges including subdued growth following the Easter Sunday bombing attacks by Islamist militants in April, which killed more than 250 people and hurt the important tourism industry.
The US$87 billion economy's growth eased to a 17-year low of 3.2 per cent in 2018 and the International Monetary Fund expects the pace to slow to 2.7 per cent in 2019 this year.
A Reuters poll has predicted 2019 growth will be the lowest in nearly two decades.
Parliamentary elections are likely early next year under a new president. The new government could then decide the full year budget, officials said.
The government had originally aimed at a budget deficit of 3.5 per cent for 2020. However, the government is compelled to revise down the target after a political crisis and the bombings.
Investor confidence nosedived last year after President Maithripala Sirisena abruptly sacked his prime minister Ranil Wickremesinghe and dissolved parliament. That was later ruled unconstitutional, and Wickremesinghe was reinstated.
The crisis created panic and uncertainty among investors, who dumped Sri Lankan government bonds and other assets, sending the rupee currency to record lows.