* 2014 budget deficit expected to be 5.2-5.3 pct of GDP
* Some taxes may be raised, but corporate taxes likely on hold
* Populist policies would boost president's vote base
* Budget presentation due Thurs, Nov. 21 at 0730 GMT
Sri Lankan President Mahinda Rajapaksa will unveil a 2014 budget on Thursday that is expected to include populist measures ahead of a possible election year as well as some tax hikes to enable the government to further trim its still-large fiscal deficit.
Rajapaksa, who is also the finance minister, will present the fifth budget since the end of 26-year civil war that battered Sri Lanka's economy.
At present, the Indian Ocean island is growing at about 7 percent a year, and the government is hoping that a $21 billion programme of infrastructure projects through 2015 - including ports, roads, railways and power plants - will help it keep expanding at a healthy clip.
No details are known about what tax hikes might be made, but economists do not expect an increase in corporate taxes, as the private sector is sluggish.
Economists and political analysts expect Rajapaksa to raise subsidies for agriculture and perhaps hike wages in the bloated public sector. Such moves would bolster his voter base, much of it is in rural areas.
Rajapaksa's second six-year term does not end until November 2016, but senior officials say he may call early presidential poll during 2014 in a bid to consolidate the power for the next six years.
Finance ministry officials say the budget for 2014 will aim for getting growth of more than 7 percent and trimming the debt-service ratio to 78 percent of gross domestic product (GDP) from the current 80 percent.
Since the end of the war in May 2009, a large proportion of growth has come from massive state-led infrastructure projects instead from a vibrant private sector.
"We hope to reduce the budget deficit to around 5.2-5.3 percent (of GDP) without cutting any capital expenditures on infrastructure," a finance ministry official said.
For 2013, the government has pledged to achieve its target of keeping the budget deficit to a 35-year low of 5.8 percent. Last year, the deficit was 6.4 percent of GDP and in 2009 it was nearly 10 percent. The government was required to cut the deficit under the terms of a $2.6 billion loan the International Monetary Fund gave after the civil war.
IMF LARGELY SATISFIED
The IMF, which fully disbursed its loan by mid-2012, has been largely satisfied with Sri Lanka's economic performance, but it wants authorities to do more on medium-term fiscal consolidation and improving the investment climate.
"Sri Lanka's exports may be hit by slower global economic growth," IMF deputy managing director Naoyuki Shinohara said in Colombo on Monday.
According to government economic data - which Rajapaksa's rivals have disputed - Sri Lanka has maintained single-digit inflation for more than four years, had growth of more than 6 percent annual economic growth since 2009 and last year attracted record foreign direct investment.
Debt has been higher, but the IMF has said it does not see any "immediate danger" in debt sustainability. The rupee could be under pressure due to possible foreign outflows if the U.S. Fed Reserve starts tapering of asset buying.
Economists say weak tax revenue could derail progress in continually reducing the budget deficit.
"They will have to focus on revenue side," said strategist Sanjeewa Fernando at CT Smith Research. "An economically sensible decision would be to raise direct taxes. But it is likely to increase a mix of both direct and indirect taxes."
The IMF has repeatedly asked the authorities to broaden the tax net and increase the efficiency of collection.
Sri Lanka 2014 budget expected gives subsidies
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