Sri Lanka will overshoot IMF 2010 deficit target-finmin

COLOMBO, March 2 (Reuters) - Sri Lanka significantly overshot its 2009 budget deficit target set by International Monetay Fund (IMF) and will fail to meet the target set for 2010, a Finance Ministry report data showed on Tuesday.

The IMF had set budget deficit targets of 7 percent of GDP by end-2009 and 6 percent this year as conditions for a $2.6 billion loan approved last July to help Sri Lanka avert a balance of payment crisis during the global financial crisis.

On Thursday, the IMF said it was delaying payment of a third tranche of the loan until it sees the budget after the parliamentary polls scheduled on April 8. [ID:nSGE61O0GP] [ID:nSGE61P0KY]

"The budget deficit of 469,627 million rupees ($4.1 billion) turned out to be 9.7 percent of the GDP," the Ministry of Finance said in a "Pre-election budgetary position report" posted on its website www.treasury.gov.lk.

The 2010 budget deficit is estimated at 7.5 percent, well above the IMF target of 6 percent, the report showed.

"Fiscal adjustment towards containing the budget deficit below 7 percent in 2009 suffered a setback due to a less than expected recovery in trade-based activities and due to a more than envisaged impact of the global economic crisis on the Sri Lankan economy."

Revenue had declined by 0.5 percent of GDP, while interest payments and public investments have increased by 0.8 percent and 1 percent of the GDP respectively, the report said.

Though government revenue had declined only by 3.25 percent from the estimated level, expenditures were 22.2 percent higher than the full-year estimated spending, data showed.

High spending has been also due to welfare spending on rehabilitation and humanitarian expenditure after the end of the country's 25-year war last year, increased wages for state employees due to expanded public sector. ($1=114.59 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Kim Coghill)