COLOMBO. Mar 2 Soaring Jrlciur siwnJnig and drought aie pushing up Sri Lankas inflation despite govenuneut ef torts to keen the lid on prices, officials ana analysts said yes-

We expect double-digit inflation this year, a government economist told Reuters "Bus fares are going up. electricity charges are increasing and thanks to the massive drought, supply constraints on vegetables and rice will push prices up.'

The purchase of six Kfir jet fighters from Israel for attacks on Tamil Tiger separatist rebels pushed defence spending to 41 billion rupees (775 million dollars) this year from 38 billion rupees allocated originally, the economist said.

The census and statistics department said on Friday that year-on-year inflation based on the 12-month moving average rose to 9.3 per cent in February from 8.4 per cent in Jan-Ua'oepartinent officials said prices of rice, sugar, milk, coconut and some varieties of fish had increased. The failure

of the north east monsoon late last year had hit crops in major agricultural areas in north-central and eastern Sri Lanka.

The government has announced plans to raise electricity charges while private bus operators are pushing for higher (ares.

Arjuna Mahendran. senior analyst at Crosby Securities, said they forecast 11 per cent annual average inflation this year, from 7.7 per cent in 1995.

"Of course, the government is stepping in by importing food from India and Pakistan to counter price increases." he told Reuters. "But this has led to a backlash — lots of farmers' groups are protesting."

The steady depreciation of the rupee had helped fuel inflation. Mahendran said. The recent fall in the rates of benchmark treasury bills could also crate Inflationary pressure as bank credits could rise sharply if the government persists with a low Interest rate policy. Jie added.

"The critical thing is whether production will rise

to absorb increases in demand created by excess borrowing." he added

But with drought affecting crops and possibly leading to power cuts as water levels fall in hydro-power reservoirs. Mahendran said he doubted whether agricultural and in-dustrial supply could respond to increased.demand.

"It means the tea an rubber sectors (the Island's main export commodities) will not benefit from international prices." he said. "The government is probabjy abandoning its earlier policy of keeping inflation down at any cost."

Deputy Finance Minister G L Peiris vowed late last year that the government would fight inflation with grim determination and added that it did not believe that a little inflation was good.

President Chandrika Ku-maratunga has said the 13-year war by Tamil rebels for independence in the north and east was costing the island five per cent of its annual income, hampering efforts to accelerate economic growth.