by Amal Jayasinghe
Sri Lanka’s Tamil Tiger guerrillas are known to be ferocious in the battlefield, but they are also increasingly proving to be equally formidable in tearing the country’s balance sheet apart.

As the army’s biggest and the bloodiest campaign against the Tamil Tiger rebels entered its 16th straight month Thursday, the government announced that defence spending had overshot the budgeted allocation by 18 per cent.

Justice Minister G. L. Peiris said defence spending would rise by eight billion rupees (120 million dollars) over and above the estimated 44 billion rupees because of intense rebel resistance to the army drive to capture a key highway.

Government forces deployed over 20,000 troops on May 13 last year to capture a 76-kilometre (45-mile) stretch of road to the northern peninsula of Jaffna, but 15 months and thousands of lives on both sides later, one third of the highway is still in rebel hands.

Military officials estimate that about 1,500 government soldiers have been killed in the offensive which has become the bloodiest battle for both sides.

The LTTE have admitted that they have lost over 1,300 of their men and women killed while resisting the military onslaught along the A-9 highway that is to be the army’s "Main Supply Route" to the Jaffna peninsula.

The peninsula was wrested from rebel control by the army in December 1995 but with the guerrillas holding the main land route to the region has forced the government to use expensive sea and air transport to supply the area.

For the Tigers, the highway is of vital importance. Its loss will effectively split the northern Wanni region where they are currently operating and push them deeper into the northeastern jungles.

Military analysts say if the road falls, the rebel group will be considerably weakened and will lose its grip on the minority Tamil population still living in areas where there is no military presence.

Justice Minister Peiris admitted Thursday that it was the rebel resistance along the A-9 highway that has derailed the original budget estimates which had relied on a quick military victory against the rebels.

"The MSR (main supply route) operation is costing us more money and we will need to spend an additional eight billion rupees this year," said Peiris, who is also the junior finance minister.

He said the government was meeting about half the defence spending through a 4.5 per cent tax levied on most goods and services and there were contingency plans to meet the additional cost of the war.

The minister said faster depreciation of the Sri Lankan rupee against the US dollar also added to the increased defence spending because the military was forced to import much hardware and ammunition this year.

Sri Lanka’s defence spending last year was a provisional 48 billion rupees, up from an initial estimate of 44 billion rupees. This year’s revised estimate now stands at 52 billion rupees.

In US dollar terms there is no change in the expenditure for 1997 and this year.

The rupee has fallen by 12.5 per cent against the US dollar in the past year and its depreciation has become faster in recent weeks. Private analysts maintain it is still 24 per cent overvalued at 66.5 to the dollar.

The intense rebel resistance in the north of the country has also cost the country a local council election.

The polls that were due to be held on August 28 to elect five provincial councils, the highest level of local government, has now been postponed by the government saying that the war is at a "critical stage."

Prices also have begun rising with the cost of living set to increase more than 12 per cent, compared to a provisional 9.6 per cent last year.

Private analysts say that increased defence spending is causing inflationary pressure. (AFP)