Sri Lanka raises taxes to boost defence spending

COLOMBO (AFP) - Sri Lanka's President Mahinda Rajapakse on Thursday increased import taxes in an annual budget which allocated a record US$2.2 billion (S$2.69 billion) for defence, three years after ending a war with Tamil rebels.

Mr Rajapakse, who also holds the defence and finance portfolios, told parliament the country had suffered the effects of a global economic downturn as it emerged from nearly four decades of ethnic bloodshed.

"The economic crisis in the US and Europe, the political uncertainties in the Middle East and the slower growth in China and India have adversely affected us," Mr Rajapakse said.

"In an uncertain world, we have managed to maintain a 6.8 per cent economic growth this year." Expansion was 8.0 per cent in the first two full years after the military crushed Tiger rebels in May 2009.