Sri Lanka boosts election, war budget for '09

By Shihar Aneez

COLOMBO (Reuters) - Sri Lanka's proposed 2009 budget on Thursday showed the government planning to spend 18 percent of it on a war with separatist rebels, and nearly tripling its elections expenditure.

The overall budget of 980.6 billion Sri Lanka rupees ($9.09 billion) rose 6 percent year-on-year, and proposed a 20 percent increase in government borrowing some analysts and ratings agencies have criticised as unsustainably high.

The bill submitted to parliament on Thursday showed defence spending rising by 6.4 percent to 177.06 billion rupees.

The appropriation bill also showed the government had nearly tripled funds for the Elections Department to 1.1 billion rupees, compared to this year's 284.5 million rupees -- which financed three provincial polls and one local election.

The country has been rife with speculation about a general election, especially now that the government is increasingly confident of a conventional military victory against the separatist Tamil Tiger rebels.

"If the government can capture Kilinochchi and Mullaitivu, they might even go for a general election," Vajira Premawardhena, head of research at Lanka Orix Securities, said, referring to the two major rebel-held towns.

President Mahinda Rajapaksa has said he would hold local and provincial elections in northern Sri Lanka when it is captured from the Liberation Tigers of Tamil Eelam (LTTE). That is part of his plan for devolving power to the predominantly Tamil region.

To finish the job will require garrisoning troops in formerly rebel-held territory. The 2009 defence budget is estimated at 177.06 billion rupees, 6.4 percent higher than the 166.45 billion rupees set aside for this year.