The intervention of the Indian Peacekeeping Force in 1987 permitted the Sri Lankan government to decrease its defense outlays for the first time in ten years. Since the United National Party came to power in 1977, Colombo's efforts to quell the Tamil insurgency and the radical Sinhalese movement in thÍÍÍe south had demanded an increasing share of the nation's resources in the early 1980s, defense expenditures represented only 1 percent of the gross domestic product (GDP see Glossary). By 1986 this figure had risen to 3.5 percent, and by 1987 it was estimated at over 5 percent. After a number of supplemental appropriations, 1987 defense costs were estimated at Rs10.6 billion (for value of the rupee--see Glossary), including Rs3.5 billion for the army, Rs1.3 billion for the navy, Rs1.9 billion for the air force, and Rs1.7 billion for the police (see National Police and Paramilitary Forces , this ch.). The dramatic growth in defense outlays took place at a time when Sri Lanka's major exports were realizing significantly lower prices on the international market and in 1986, for the first time, the government was forced to resort to large-scale commercial borrowing. A continuation of this trend promised to undermine the government's development efforts and aggravate an already sizable trade deficit (see Trade , ch. 3). After the arrival of Indian troops in July 1987, the Sri Lankan government withdrew most of its forces from Northern and Eastern provinces, saving significantly on operational costs. As a result, Sri Lanka projected a 37 percent cut in army expenditures and a total military budget of Rs9.2 billion, 13 percent below 1987 levels.

Data as of October 1988