Sri Lanka raised its 2005 budget deficit forecast on Wednesday to 8.5 percent of gross domestic product from 7.6 percent, citing costs related to rebuilding the island's tsunami-battered coastline. Last year's tsunami flattened entire towns and villages, and hammered the fisheries and tourism sectors, which are key contributors to the island's GDP.
Investment planned in the 2005 budget were pushed on to the back burner by the disaster.
"(Before the tsunami) we were planning on investing $2.2 billion on coastal areas that were hit by the tsunami over the next 3-4 years," Treasury Secretary P.B. Jayasundara told a news conference.
Jayasundara said Sri Lanka had expected the investment to boost government revenue by stimulating the economy.
The loss of projected revenue was weighing on the budget along with the huge cost of reconstruction and the government was trying to find a way to manage its finances without adding significantly to national debt, he said.
Sri Lanka's Central Bank, which makes separate forecasts from the finance ministry, raised its own 2005 budget deficit target in May to 9.0 percent of GDP. It has also lowered its GDP growth forecast for 2005 to 5.3 percent from 6.0 percent. Sri Lanka's GDP was 2,023 billion rupees ($20.2 billion) in 2004, according to provisional data.
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