President Ranil Wickremesinghe, who is also the island nation’s finance minister, will present the annual budget to parliament at midday.

Wickremesinghe has the tricky task of boosting tax revenue and rationalising spending in the budget while supporting an economic turnaround seen by political pundits as essential to boosting his appeal at presidential elections in 2024.

Authorities have their work cut out as they must meet strict targets set by the International Monetary Fund (IMF) under a $2.9 billion bailout for the island nation, part of which has already been allocated and helped drive a slow recovery in an economy set to contract 2% this year.

The IMF has warned of revenue shortfalls and backed a 12% budget deficit for 2024 under its four-year program.

Sri Lanka’s cabinet approved raising Value Added Tax (VAT) by 3% from Jan. 1 and broaden VAT collection to increase revenue. Wickremesinghe is also expected to outline how the government may implement additional revenue measures including new taxes such as wealth and inheritance taxes proposed as part of the IMF program.

“This budget has not been formulated with short-term political agenda in mind,” said State Minister of Finance Ranjith Siyambalapitiya in a short statement released on Sunday.

“The main focus is to ensure that Sri Lanka will not fall back into crisis and will maintain its recovery path”.

Bondholders and bilateral creditors will also be watching the budget for signals on how closely Sri Lanka will adhere to IMF targets, which include reaching a primary surplus of 2.3% by 2025 and reducing debt to GDP to 95% by 2032.

Sri Lanka’s budget expenditure will exceed a record 6.5 trillion rupees ($19.8 billion) in 2024, an increase of 12% when compared with the previous year, according to the preliminary budget figures.

Interest payments of 2.6 trillion rupees make up more than a third of total spending, while capital expenditure will stay largely unchanged from 2023 at 1.2 trillion rupees.

Sri Lanka’s economy contracted 7.8% last year, forcing it to default on its foreign debt in its worst financial crisis since Independence in 1948.

The nation’s central bank expects growth of 3.3% in 2024 after an economic contraction of 2% this year.

The Health Ministry, a hospital director and the Palestinian Red Crescent Society in the Hamas-controlled enclave have said the Israeli strike targeted a convoy of ambulances evacuating wounded people from the besieged northern Gaza area.

Mohammad Abu Selmeyah the director of al-Shifa Hospital, where an ambulance was hit, said 15 people had been killed in the strike and 60 injured. Those killed and injured were mainly people standing by the hospital gate, rather than inside the vehicles, he said.

Israel’s military said late on Friday it would present more evidence that an ambulance it struck was being used by Hamas to transport fighters and that the group used ambulances to move militants and weapons as “a method of operation”. Hamas has denied both accusations.

U.N. Secretary General Antonio Guterres said in a social media post on Saturday “I am horrified by the reported attack in Gaza on an ambulance convoy”.

The World Health Organisation said it condemned the strike and the medical charity Medicins Sans Frontieres described it as “horrendous”, and “a new low in an endless stream of unconscionable violence”.

The Palestinian Red Crescent Society (PCRS) said in a statement that a group of five ambulances was seeking to transport people wounded by Israeli bombardment from al-Shifa Hospital in Gaza City to the Rafah border crossing with Egypt.

The journey would have required crossing from the northern half of the enclave, which has now been entirely surrounded by Israeli forces, into the southern area where Israel has not yet sent ground troops, but which it is also bombarding.

Abu Selmeyah said the wounded people being evacuated in the convoy had their names listed at Rafah for permission to enter Egypt. Egypt’s Health Ministry did not immediately respond to a Reuters request for comment but a statement it put out on Friday said that 28 injured people had been expected at Rafah on that day.

Evacuation

Israel’s military assault, aimed at destroying Hamas, is a response to the militant group’s Oct. 7 attack on Israeli towns which Israel says killed 1,400 people. Health authorities in Hamas-run Gaza say Israeli bombardment has killed 9,488 people.

The PRCS said Friday’s ambulance convoy was forced to turn back some 4 km (2.6 miles) from the hospital because the road was blocked with rubble from shelling.

As it returned through Gaza City, about 1km from the hospital, the lead ambulance was targeted by a missile that damaged it, wounding both its crew and the injured patient inside, the PCRS said.

The organisation said it was responsible for one of the five ambulances in the convoy carrying a 35-year-old woman with shrapnel injuries. It said as it was unloading the woman from the ambulance at the hospital gate, another missile struck the vehicle injuring the driver and a medic.

Videos verified by Reuters of the aftermath showed numerous people lying prone in pools of blood near ambulances.

MSF quoted one of its doctors working at al-Shifa hospital, whom it identified as Dr. Obaid, saying “We were standing inside the hospital gate when the ambulance was directly hit in front of us. There were bloody bodies everywhere”.

Asked about the incident, a spokesperson for the International Committee of the Red Cross in Geneva said “we are heartbroken to see medical services in Gaza put in harm’s way”.

The ICRC spokesperson said the Palestinian Red Crescent Society, which said it owned one of the ambulances in the convoy, has “a strong track record providing life saving services. Like all the organisations forming part of the Red Cross Red Crescent Movement they are bound by principles of neutrality and impartiality”.

Prime Minister Narendra Modi’s party, which faces elections in key states this year and national polls in 2024, has been under pressure to create jobs and help farmers, which may lead to higher than planned expenditure for the year.

“The central government is likely to meet its 5.9% deficit target for FY23-24,” said Krishna Srinivasan, IMF’s director for the Asia and Pacific department.

Earlier, this month, India hiked the cooking gas subsidy for low income households to 300 rupees per cylinder from 200 rupees announced in August.

This could add to the 3.74 trillion rupees of subsidies for food, fertiliser and fuel planned for the current fiscal year, and with elections on the horizon more such measures are expected.

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“There’s some pressure on expenditure with higher than budgeted expenditure expense some areas – subsidies, higher MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) expenses. At this stage, we see room in the budget to absorb these unexpected increases,” Srinivasan said.

Earlier this month, IMF raised its growth forecast for Asia’s third-largest economy to 6.3% from 6.1%, reflecting stronger-than-expected consumption.