Deadly weapons, prohibitive cost

By Nirupama Subramanian

COLOMBO, JUNE 6. Sri Lanka's new military hardware, which has helped it stall the offensive of the Liberation Tigers of Tamil Eelam in the Jaffna peninsula, carries a price tag that could have serious consequences for the economy.

The current arms purchases include K-Fir bomber jets and fast attack boats from Israel and field guns from the Czech Republic. Ammunition and the much talked about multi-barrel rocket launchers that can fire 30 rockets simultaneously or in rapid succession, have been supplied by Pakistan.

All this has cost the Government a lot of money. At a recent press conference, the Foreign Minister, Mr. Lakshman Kadirgamar, told journalists: ``There is nothing like a free lunch... there are no donations in the hardware game. We are paying for it, and we are paying very dearly.''

Last week, the Deputy Defence Minister, Mr. Anuruddha Ratwatte, said the President, Ms. Chandrika Kumaratunga, had allocated Rs. 24 billion for the new weapons. This fresh spending has sent the defence budget for 2000 soaring far beyond the initial allocation of Rs. 52.4 billion.

As Sri Lanka frantically shopped for arms to hold back the LTTE advance in the first week of May, the Deputy Finance Minister, Mr. G. L. Peiris, told Parliament that the Government needed to raise Rs. 12 billion at once to meet the war expenditure.

Immediately, the price of cigarettes was hiked by 50 Sri Lankan cents a stick and liquor by 10 Sri Lankan rupees a bottle. The increase was expected to net Rs. 1.5 billion for the war chest. The Government also raised the national defence levy from 5.5 to 6.5 per cent and will issue additional treasury bills this year worth Rs. 10 billion.

Yesterday, Ms. Kumaratunga defended a steep hike in the price of LPG, saying that in view of the ``prevailing high cost of war expenditure'', the Government could no longer afford to subsidise the price of the cooking fuel. The prices of water and electricity have also gone up, while the petrol and diesel prices were increased in February.

The additional defence expenditure following the LTTE's capture of the Elephant Pass, came just as the Central Bank released its annual economic report for 1999. The report said Sri Lanka's growth would have been up two or three percentage points from the year's average of 4.3 per cent, had it not been for the ethnic conflict.

``If allowed to continue, the conflict could seriously drain the resources and energies of the people and marginalise the country in the international community,'' the report warned.

It was mainly by curbing defence spending last year that the deficit fell to 7.5 per cent from the previous year's 9.2 per cent, though it was still beyond the Government's target of 6 per cent. In the present scenario, economists predict the deficit will cross this year's projected target of 8 per cent. The all- round increase in prices and the additional defence expenditure will also put a dampener on growth.

``The Central Bank projection of a 5.5 per cent growth is very much on the optimistic side. With all the price increases, the tax increases, we may see more inflation and a decreased consumption expenditure. If we reach 5 per cent, that should be very reasonable in the current circumstances,'' said

economist Dushini Weerakoon of the Institute of Policy Studies here.

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