Sri Lanka could overshoot its 2009 budget deficit target set by the IMF for a $2.6 billion loan, due to high post-war reconstruction costs, a central bank official said on Monday. The IMF has set a budget deficit target of seven percent of gross domestic product for 2009, although both the global lender and the central bank have acknowledged it as a challenging one.
Government spending on reconstruction after the end of a 25-year war in May and low revenue due to a sluggish economy were putting pressure on the deficit, Ranasinghe said. The budget data for 2009 is expected to be announced in the central bank’s annual report due in late March or early April. An IMF mission will be in Sri Lanka this week to assess December data before deciding on the third tranche of the loan. Sri Lanka’s IMF resident representative Koshy Mathai has said whether or not the IMF is flexible in a country is determined on a “case by case” basis. reuters