Sri Lanka gets ADB help to curb fiscal profligacy

Aug 24, 2008 (LBO) - Sri Lanka is getting help from Japan and the Asian Development Bank (ADB) to improve government finances, the regional lender said, four years after the island returned to excessive government spending, money printing and high inflation. The Japan Special Fund is giving a 300,000 US dollar grant to help Sri Lanka identify measures to contain expenditure and increase revenue in the medium term, the ADB said in a statement.

"The project aims to help reduce poverty by supporting sustainable fiscal management and good governance," Bruno Carrasco, principal economist for the financial Sector of ADB’s South Asia department said in the statement.

From 2004 Sri Lanka has followed a spendthrift economic program which was based on expanding government with mass-recruitment, providing fuel and fertilizer subsidies and developing regional infrastructure.

Under an ADB supported fiscal management reform program which ended in June 2008, the regional lender says Sri Lanka was able to reduce the 8.2 percent of gross domestic product (GDP) budget deficit in 2004 to 7.7 percent in 2007.

By 2010 the government wants reduce the deficit to 5 percent of GDP.

Sri Lanka has increased revenue as a percentage of GDP in the period.