Sri Lanka cuts capital spending to contain deficit

August 4, 2007 (LBO) - Sri Lanka’s government has significantly altered its budget halfway through the year slashing public investment and bringing down a planned deficit, despite spending more money on salaries and interest. We haven’t established the groundwork in terms of economic policies and political stability to sustain higher growth." Public investment, earlier budgeted at 303 billion rupees or equal to 9.4 percent of GDP, has been slashed by 65 billion rupees or 25 percent.

Higher current spending by 15 percent will consume 30 billion rupees more than originally planned according to a treasury circular to senior bureaucrats last week.

Capital spending was cut because of delays in aid funds for the mega projects said a top treasury official.

We have to deal bureaucracy sometimes at Asian Development Bank and Chinese government too, he said referring to two of Sri Lanka’s biggest donors who are financing port, power and road projects.

Capital to Current

The forecast deficit, which has fallen by less than the capital spending cut because of increasing current spending, has been reduced by 43 billion rupees to 256 billion.

That’s the equivalent of 7.9 percent o