Crisis-hit Sri Lanka finally starts to deal with bloated public sector
By Shihar Aneez
COLOMBO – Sri Lanka is looking at ways to trim the public sector by allowing state workers to go on leave for other jobs both locally and abroad as a worsening economic crisis compels the island nation to reduce government expenditure.
The country is going through its worst ever forex crisis and the government is faced with the possibility of cutting down the number of employees in the state sector in order to manage a massive wage bill, even as talks begin with the International Monetary Fund (IMF) on a possible bailout.
Sri Lanka has more than 1.5 million public sector employees at present, the size having doubled over the past 15 years, according to official data. Efficiency in the public service is lower compared to that of Sri Lanka’s peers in Asia, despite there being a public servant for every 14 citizens.
Most state owned enterprises (SOEs) have become a dumping yard for politicians to recruit their supporters, resulting in more employees with very little do in spite of a monthly payments and pension scheme. Power and Energy Minister Kanchana Wijesekera recently said there are 26,000 employees working in the state-owned Ceylon Electricity Board (CEB) alone, an institution that can be run with just 5,000 employees.
In 2021, the government paid 86 cents as salaries and pension payment to public servants from every rupee it earned as tax revenue, leaving little for other public investments like health and education.
Many multilateral finance organizations including the IMF, the World Bank, and the Asian Development Bank (ADB) have advised Sri Lanka to reform the public sector and to keep it tight and efficient but political leaders have been stubborn in their reluctance to heed the advice fearing political repercussions including electoral defeats.
However, the ongoing financial crisis has forced the government to look into alternatives, government sources said.
“We may either have to go for a salary cut or reduce the number of government servants by at least 30 percent as the first step,” a top government official told Economy Next.
This week, the Ministry of Public Administration came up with two key proposals to reduce the size of the public sector: No-pay leave for state sector employees to go for foreign jobs or to work locally in the private sector.
“It has been decided at the meeting of the Cabinet of Ministers held on 13.06.2022 to grant leave with no pay to be spent in/out of Sri Lanka to public officers under special provisions, deviating from the provisions existing in the Establishments Code regarding the granting of leave with no pay, until further notice,” M. M. P. K. Mayadunne, Secretary to the Ministry of Public Administration, Home Affairs, Provincial Councils and Local Government, said in a circular issued on Wednesday June 22.
“Public officers are able to obtain leave with no pay to go out of Sri Lanka subject to a total period of five years maximum, so as to be applicable to seniority and pension.”
Public servants who are leaving the country for foreign jobs need to send remittances through formal channels, ranging from 100-500 US dollars monthly depending on their grades, the circular showed.
It has also addressed the key issues of seniority and eligibility for pensions if they choose to leave the government service. According to the new circular, there won’t be any impact on both these both sensitive areas.
In addition to this, a committee has been appointed to find out if five years of leave could be granted to government employees to work in the private sector. The committee is expected to submit its report to the cabinet within the two weeks, the government official said.
“There is no way we can go ahead with the current public sector. The ideal size is 500,000. But it is an ambitious target and there could be a lot of socio-economic impact if we are going to implement that in the short term,” the official said.