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However, Sri Lanka's budget deficit has widened to 8.2 per cent of gross domestic product (GDP) in 2005 from an original forecast of 7.5 per cent, and the island's oil import bill has run $500 million over target on high crude prices, Finance Minister Sarath Amunugama said.
The government is seeking to bring double-digit inflation down to 8.0 per cent in 2006, he added. Annual inflation hit 12.5 per cent in October, as measured on a 12-month moving average.
But with a presidential election looming on Nov.17 that could redraw the island's political landscape, Amunugama's best laid plans may never see the light of day.
"The economic transformation process includes pro-poor growth strategies, a regional focus with special emphasis on recovery in the conflict-affected districts, in the tsunami-hit coastal belt ... as well as a comprehensive infrastructure programme," Amunugama told parliament.
The main opposition United National Party boycotted the budget presentation, accusing the government of trying to help Prime Minister Mahinda Rajapakse's presidential election chances against its leader, Ranil Wickremesinghe.
If market-favourite Wickremesinghe wins the election, his team have vowed to revamp the spending plans anyway, and financial markets were not putting much store in the budget pending the election outcome.
"Nobody's paying much to attention," said Vajira Premawardhana, head of research Lanka Orix Securities in Colombo.
"People are more concerned about the election, and know implementation of the budget will depend on the outcome. If Ranil wins, this will be a non-starter."
The main opposition United National Party also questioned why Amunugama's growth forecast was different from a long-term growth target of 8.0-10.0 per cent he had announced only last Monday.
"We feel the whole exercise is politically motivated and we don't want to play a part in such an exercise on the eve of a presidential election," said chief opposition whip Mahinda Samarasinghe.
The government said in October it would raise expenditure by 1.4 per cent next year, mainly to help the island recover from December's tsunami.
It wants to cut the budget deficit to less than 8.0 per cent of GDP in 2006.
Government spending will rise to 568.3 billion rupees ($5.6 billion) in 2006 from the 560.6 billion rupees budgeted for 2005, which does not include government fuel subsidies expected to cost the state around 16 billion rupees ($157 million) in 2005.
That means government spending will probably overrun the 2006 spending plan unless fuel subsidies are cut next year. Sri Lanka imports all of its crude needs.
The budget also includes a sharp rise in defence spending, which officials say is due to salary rises promised to the armed forces and civil servants.
Sri Lanka's central bank lowered its 2005 economic growth forecast to 5.3 per cent after the tsunami, but has said international aid could help the $20 billion economy grow by up to 6.0 per cent. The economy expanded 5.4 per cent in 2004. (One US dollar equal to 101.86 Sri Lankan rupees)
Meanwhile, Pakistani rice prices remained steady over the past week, but dealers said last Tuesday that they would ease in the coming days on healthy supply.
"The demand from exporters is there, but prices are expected to come down slightly due to the good supplies, which are improving continuously," said Abdul Majid, a Karachi-based dealer.
Dealers said supplies had picked up in the central Punjab province and in the southern Sindh province. They expected supply to rise further in the coming weeks.
Mahid said exporters had so far made commitments for around 250,000 tonnes of rice. "We are expecting a bumper crop this year, and will hopefully export over 1.5 million tonnes."
Pakistan expects a crop of more than five million tonnes, against last year's 4.8 million.
Pakistan's crop year runs from April to November. Sowing normally starts in mid-April and harvesting begins in August, peaking in September.
Annual domestic consumption is about 2.3 million tonnes.
In neighbouring India, a top trade official said last Tuesday in New Delhi that the largest economy in South Asia is unlikely to open wheat imports in the coming weeks as the country has sufficient grain stocks and prices are comfortable.
Global grain traders have been closely tracking India's policy on grain imports as the country, a wheat exporter in recent years, was expected to import for the first time in six years.
D.P. Singh, chairman of the All India Grain Exporters' Association of India, said the government is not expected to take a decision before December.
"The situation is not alarming on the stocks front," he said. "The government seems to have postponed its decision for the time being and I think they will revisit it by the end of November."
The government has so far maintained that wheat and rice stocks are comfortable and rejected predictions that the country could turn to imports for the first time since 1999.
The farm ministry has pegged 2005 wheat production at 72.1 million tonnes, close to the output a year ago.
Traders had expected grain imports as production was lower than initial estimates of 75 million tonnes following some crop damage due to untimely rains and hailstorms.
India levies a 60 per cent customs duty on wheat, making it unviable for private traders to import, and the industry has been speculating the government might ease the tariffs.
In the physical market in Delhi, wheat was quoted around 840 to 850 rupees per 100 kg, nearly the same level as last year.
Singh said wheat prices were not high enough for the government to rush into imports. "So far, prices are okay. I don't think anyone is making money if you take the carrying cost and taxes into account."
But Indian wheat futures have been rising. The December wheat contract NWTZ5 at the National Commodities and Derivatives Exchange (NCDEX) rose Indian rupees 8.0 to rupee 864 per 100 kg.
The government has been trying to manage its stocks and distribution system by replacing wheat with rice for southern and eastern states where people consume more rice.
"They have successfully managed the situation and postponed the decision to import wheat by substituting rice with wheat."
The Food Ministry said on Sept. 1, India had 11.3 million tonnes of wheat and 7.07 million tonnes of rice. Indians tend to consume about 1.5 million tonnes of wheat a month but consumption increases in the north in the winter months, beginning November.
Singh said the country may still need around 1.0 million tonnes of wheat from January as the new crop will come in the market only by April.
"There is a chance to get one million tonnes of wheat in early January," he said.
"We have enough time to take a call as it will take just four to six weeks to get wheat into India."
Sowing for the next wheat crop has started in some parts and conditions were good with ample soil moisture, the official said.
"We will know the area under the wheat crop by December and that will be the right time to take a decision on wheat imports."
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Reuters
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