Sri Lanka to expand public sector workforce amid rising tax burden

Sri Lanka
By Editor_1
Under revenue-based state expansion until 2019, more than half the money collected from the people went to state workers as spending-based consolidation was abandoned. From 2020, taxes were cut for ‘stimulus’ – Central Bank

COLOMBO – The Sri Lankan government is set to recruit up to 60,000 new state employees in the coming years, following the allocation of public funds to hire 30,000 workers in 2025, according to local media reports.

Minister of Public Administration, Provincial Councils and Local Government, Chandana Abeyratne, was quoted as saying recruitment processes have already commenced for key services, including the Sri Lanka Administrative, Engineering, Planning, and Accountants’ Services.

Reports also said that based on recommendations from a Cabinet-appointed subcommittee, 226 candidates were being recruited into the Sri Lanka Engineering Service, with the selections being made from top-performing candidates in a competitive examination held in March.

Sri Lanka’s public sector currently employs approximately 1.5 million individuals, including those in semi-government institutions. Analysts have long warned that the country’s ageing population and shrinking private sector workforce could make it increasingly difficult to sustain such a large public service, especially as central government employees receive lifetime pensions funded entirely by annual tax revenue.

In a bid to address workforce imbalances, the government is also encouraging greater female participation in the private sector. Experts suggest that women entering the workforce or seeking employment abroad, particularly in Middle Eastern countries, could help generate economic output to support the country’s fiscal needs.

However, economic pressures continue to mount. Inflation driven by central bank policies and currency depreciation has forced many Sri Lankans to seek employment overseas, often in countries with more stable exchange rates and lower inflation.

Critics argue that the International Monetary Fund’s (IMF) revenue-based fiscal consolidation strategy lacks sufficient emphasis on reducing government expenditure. Despite this, the Cabinet recently approved the recruitment of an additional 8,547 public sector employees, primarily for the police force.

While the current administration claims to be hiring based on actual vacancies rather than indiscriminately, analysts stress the need for a comprehensive review of public sector staffing and operational efficiency. Without such reforms, younger generations may struggle to bear the tax burden, potentially accelerating emigration trends.

Sri Lanka also faces steep import duties on vehicles and construction materials, making housing unaffordable for many citizens after taxes. Meanwhile, the IMF has also proposed property taxation as a means to increase government revenue.

Since 2004, successive governments have expanded the public sector by hiring unemployed graduates, contributing to rising pension liabilities. Additionally, the country’s military, expanded during wartime, has yet to be significantly downsized.

Sri Lanka defaulted on its sovereign debt in 2022 and is now implementing higher taxes to reduce budget deficits and stabilize national finances.

-ENCL/EN

Editor_1
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