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The Sri Lankan government has given its citizens a bitter pill to swallow this new year. It has declared that a hike in the prices of diesel, petrol and other household goods is the only remedy to resuscitate the island nation's sick economy. With basic commodities -- from milk powder to onions -- and medical and educational services being affected, Sri Lankans have little choice but to wait for the tide to change. Matters had become worse two years ago when the ruling United National Front adopted strict fiscal policies to counter the country's depreciating growth rate. The fiscal deficit for 2004 is estimated to be US $1.38 billion, or 6.8 per cent of the projected gross domestic product. Deputy finance minister Bandula Gunawardena admits that a pay raise is essential for the people, given the rising cost of living. At the same time, he insists that revisions in tax structures were essential to bridge the budget deficit. In areas where the Liberation Tigers of Tamil Eelam (ltte) have a hold, milk products, books and medical equipment have been exempted from tax. But since the government has levied a 10-15 per cent tax on commodities transported to rebel-controlled areas, it has conveniently passed this extra burden to the people.
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