HIGHLIGHTS-Sri Lanka 2013 budget

(Adds more details)

COLOMBO Nov 8 (Reuters) - Sri Lankan President Mahinda Rajapaksa on Thursday began presenting the 2013 budget to the island nation's parliament.

Following are some highlights of the budget:

ECONOMIC FORECASTS

Economic growth is forecast at 7.5 percent for 2013, against a forecast of 6.8 percent for this year. Sri Lanka posted record growth of 8.2 percent in 2011, but the economy has slowed as a result of tight monetary and fiscal policies adopted to curb the fiscal and external deficits. Rajapaksa said growth should return to 8.0 percent annually after 2013.

Inflation is expected to slow to 7 percent in 2013, based on money supply growth of 14 percent and favourable food supplies. Inflation in October was running at 8.9 percent from a year earlier.

FISCAL DEFICIT, DEBT, BALANCE OF PAYMENTS

The government aims to reduce the fiscal deficit to 5.8 percent of the gross domestic product in 2013 and 4.5 percent in 2015, after meeting a target of 6.2 percent for 2012.

Sri Lanka has been reducing its fiscal deficit under the terms of a loan agreement with the International Monetary Fund. The deficit has fallen from 6.9 percent in 2011 and 8.0 percent in 2010.

Rajapaksa said the government aimed to reduce Sri Lanka's debt to GDP ratio to 75 percent in 2012 from an estimated 78.5 percent this year.

The president said measures would be taken to encourage exports and discourage imports to reduce a balance of trade deficit and increase foreign exchange reserves.

CAPITAL MARKET DEVELOPMENT

The president offered a three-year half tax holiday for new companies that will be listed in Colombo Stock Exchange before December 2013 and maintain a minimum of 20 percent float.

FOREIGN EXCHANGE MANAGEMENT, DEVELOPMENT FINANCE

Rajapaksa proposed allowing corporate entities and licensed commercial banks to borrow $10 million and $50 million respectively per annum without approval from the Exchange Control Department to mobilise their funding requirements from the global financial markets over the next three years.

He also proposed development banks raise over 10-year foreign development finance up to $250 million to provide long term funding for small and medium-sized businesses. The government will underwrite the exchange risk of such borrowing.

REDUCTION OF IMPORTS, EXPORT PROMOTION:

Rajapaksa said the government sought to reach zero level imports in several farm products, including red onions and maize, by 2015 and proposed high taxes and stringent quality controls on imports.

High taxes have been proposed in order to save $350 million spent on milk powder imports per annum.

The president also proposed a two-year depreciation allowance for export manufacturers, including the apparel industry, to modernise with advanced technology, machinery and accessories to maintain higher quality production.

LAND FOR FOREIGNERS:

Rajapaksa said sale of state land to foreigners will be prohibited. Lease of state land will be permitted for foreigners subject to the payment of 100 percent tax on the lease for the entire lease period.

(Reporting by Shihar Aneez and Ranga Srilal; Editing by Simon Cameron-Moore and Ron Popeski)