ECONOMYNEXT – Sri Lanka will hike state worker wages between 24 to 35 percent in a 2025 budget while trimming grades to reduce salary anomalies, Minister Bandula Gunawardana said.
The salary hikes came from recommendations in an interim report from a committee appointed to study salary increments and anomalies earlier in the year. The committee consulted 200 persons before making the recommendations.
Cost of living allowances of active workers will be consolidated and increased to 25,000 rupees. Pensioners would get half that.
After the revision the lowest gross salary of a state worker would be 55,000 rupees.
The committee has recommended that all future recruitments would be made after competitive examinations.
In 2023 Sri Lanka had 1.35 million state workers in 2023, and the salary bill was 939 billion rupees and the pension cost was 372 billion rupees.
The salary hike would cost around 200 billion rupees a year, Minister Gunwardana said.
The increase will be within the parameters of an IMF program,
The policy would be carried out in stages within the existing tax framework starting from January 01, 2025 as permitted by fiscal space.
The policy will apply to all state entities except banks and commercial enterprises.
The Committee has also recommended that the state worker cadre be reduced to one million by 2030.
Sri Lanka is use digitalization and and outsourcing wherever possible.
Implement a re-structuring plan to list state corporations and statutory entities s public limited companies in the stock market.
Sri Lanka has hired tens of thousands of unemployed graduates and others without educational qualification into an already bloated sector since 2005 under polices made popular by the Janatha Vimukthi Peramuna and taken forward by then President Mahinda Rajapaksa.
In 2015, a so-called Yahapalana administration hiked salaries by 10,000 rupees and the central bank made inflationary rate cuts to target potential output and push up inflation, denying monetary stability, triggering serial currency crises and output shocks.
Extreme macro-economic policy involving both rate and tax to target ‘persistent output gaps’ followed from December 2019.
Taxes have since been increased on the people after Sri Lanka defaulted in 2022, after after macro-economists implemented extreme policy involving rate and tax cuts leading to target ‘potential output’.
As the currency collapsed from 200 to 360 real and disposable incomes of state and private workers evaporated. The central bank has appreciated the currency over the past year to around 300 to the US dollars by operating deflationary policy allowing economic activity to resume.
(Colombo/Aug12/2024)