COLOMBO, May 24 (Reuters) - Sri Lankan rupee forwards edged down on Tuesday as dollar demand from importers surpassed dollar selling by banks, with the currency expected to weaken on an expected increase in government spending after days of torrential rain caused flooding.
On Monday, the government said the cost of landslides and floods will be between $1.5 billion and $2 billion at the minimum, as the Indian Ocean island struggles to recover from its worst natural disaster since the 2004 Asia tsunami.
The dollar/rupee forwards, known as spot next, were at 146.90/95 per dollar at 0552 GMT compared with Friday's close of 146.85/90.
Markets were closed on Monday for a special holiday.
"The demand (for dollars) is there from importers and not much of sales today," a currency dealer said, asking not to be named.
"If the expected foreign inflows don't come, it could weigh on the rupee with high borrowing."
Finance Minister Ravi Karunanayake told parliament last week that Japan would lend Sri Lanka more than $3.5 billion, mostly to finance development.
The currency would stabilise in the 146.00 per dollar range in early June after money from an IMF loan flows in, Karunanayake also said.
The spot currency did not trade on Tuesday.
The spot rupee reference rate has been pegged at 145.75, dealers said. Sri Lanka's central bank had fixed the spot rate at 143.90 per dollar until May 2.
Meanwhile, Sri Lanka's stock market was 0.72 percent weaker at 6,585.52 as of 0601 GMT on a turnover of 108.7 million rupees ($743,502). ($1 = 146.2000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)