COLOMBO, March 3 The worst drought to hit Sir
Lanka in 40 years may cost the government up to 40 billion
rupees ($264.7 million), but shoud not worsen the fiscal
deficit, Finance Minister Ravi Karunanayake said on Friday.
Sri Lanka has already decided to import its staple food --
rice -- after local rice farmers were forced to abandon
cultivation due to severe water shortages.
In a investor note on Thursday, Moody's said weaker economic
activity due to drought would weigh on government revenues and
forecast the fiscal deficit to rise to 5.2 percent of GDP from
and estimated 4.6 percent, "if the negative credit effect of the
drought worsens or is not offset by other fiscal measures".
But Karunanayake said this was not the case.
"We have drafted the budget factoring in those
uncertainties. We prepared this year’s budget with stable
policies and we added some percentage for these types of
incidents," he told reporters.
"Drought may cost 30 to 40 billion rupees. There are revenue
increases taking place. The budget deficit doesn’t need to swell
up just because of one abnormal condition," he said
He also said 2017 economic growth is expected at 6 percent
despite the drought.
Achieving the 4.6 percent deficit target this year is one of
the main goals under a $1.5 billion International Monetary Fund
loan. Karunanayake said the government has not considering for a
waiver on the deficit target because of the drought.
Sri Lanka's consumer price inflation hit a record high of in
February pushed up also by the impact of a lingering drought.
Currency dealers say drought has raised imports in the
absence of local food production while reduced exports of
agricultural commodities have resulted in a decline of dollar
earnings, putting pressure on the rupee..
($1 = 151.1000 Sri Lankan rupees)
(Reporting by Shihar Aneez and Ranga Sirilal)