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Implications of Sri Lanka’s defense expenditure in the 2007 Budget

Defense expenditure allocated in the 2007 Sri Lankan budget is 139.66 billion Rupees which is 1.4 billion US dollars.

This is a 46% increase on the 2006 defense spending. The government has said that this is mostly due to increases in salary.

The 2007 defense allocation is 23.28%of the total government income.

Of the total government expenditure for 2007 this is 16.72%.

The budget shortfall for 2007 is estimated to be 235 billion Rupees. The table below shows how the Sri Lankan government is planning to make up for the shortfall.

The proposed deficit is to be made as follows
Item	Amount in billion Rupees	Amount in billion US dollars
Foreign borrowings	114.789	1.15
Foreign grants	24.075	0.25
Internal borrowing (non banking sectors)	139.512	1.39
Internal borrowing (banking sector)	8.00	.08
Foreign currency domestic borrowings	8.70	.087
Total	295.076	2.95
After paying overseas loan repayment	60.038	.6
Rest that will make up the budget shortfall	235.038	2.35

The Sri Lankan government clearly has a need to convince the donors its intentions to pursue the peace process to convince them the extensive borrowing and receiving aid needed to make up the short fall as shown above. In order to do this the Sri Lankan government will posture as the party interested in peace. Will the donors be deceived?

The table below shows how the Rajapakse government has made a three fold increase in the estimated expenditure for purchasing military hardware for 2007.

Estimated capital expenditure for purchasing military equipment for 2007 in US dollars
by the regime previous to the Rajapakse regime	14.962
by Rajapakse regime	44.896

The table below is comparison of the defense expenditure of some countries.

Country*	Defense expenditure as a percentage of the nation’s GDP	Defense expenditure per year per person in US dollars **	Number of citizens for each soldier
Japan	1.0	-	533
Germany	1.5	-	250
Norway	2.0	-	173
UK	2.4	-	280
France	2.6	-	236
India	2.6	14.00	820
USA	3.7	-	203
China	3.9	43.00	580
Sri Lanka	4.3	71.00	130
Pakistan	4.5	20.00	251
Bangladesh	1.2	4.60	1109
Average	2.7	-	305

* The data for other countries are based on 2003 spending. The Sri Lanka data is for the 2007 budget.

** Comparison of this data is valid only for countries with similar economic development. Therefore only countries in the South Asian region are compare.

21 November 2006

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