Though Sri Lanka’s new interim budget proposes to reduce the budget deficit to 4.4 per cent, there are possibilities of increasing inflation and economic imbalance due to the increase in the current spending, warns the international rating agency Moody’s Investors’ Service.

If this budget deficit of 4.4 per cent of the Gross Domestic Product (GDP) could be met, then Sri Lanka could be rated on par with other countries with a ‘B1’ rating and if the proposed budgetary revenue cannot be collected then there is a danger of the budget deficit rising further, says Moody’s.

It is stated that there are already doubts whether the Rupees billions as taxes imposed on casinos and other institutions would be actually paid by them and that some of the proposals to earn the revenue could impact negatively on future investments and development.

Moody’s has further added that increasing the salaries of government sector employees by 47 per cent could result in the future rise in consumption and thus a rise in inflation.