Big change in Sri Lanka govt spending seen needed
ECONOMYNEXT – A structural change is needed in Sri Lankan government spending, nearly half of which now goes for salaries and interest payments, with more expenditure required on education, health, and infrastructure, a senior official said.
“Total government spending has been falling to a manageable level but we need to change its composition,” said C. J. P. Siriwardena, Deputy Secretary General of the National Economic Council, and a former deputy governor of the Central Bank.
“Nearly 50 percent of expenditure now is for salaries and interest payments,” he told a conference for public sector accountants, held by the Association of Public Finance Accountants of Sri Lanka, the public sector wing of the Institute of Chartered Accountants of Sri Lanka.
“In the long run, we need a lesser share of these two and higher public investment, for infrastructure and social development, including social welfare, as Sri Lanka is one of fastest aging countries,” Siriwardena said.
The government needs to change its pension and social policies, with allocations in the budget to support old people, Siriwardena said.
The country of 21 million people has 1.5 million employees in the public sector..
Siriwardena, who has handled public sector financial management for the last 30 years, said better management of public money was needed to help improve the lives of citizens.
“Today, our public finance management is under stress,” he said.
This was because Sri Lanka has been a twin-deficit economy, running a budget deficit and current account deficit in the balance of payments, and has also had to endure a 30-year civil war.
“This is a serious condition for a small, growing economy. Running budget deficits means you have to borrow.”
Interest expenditure was now over 25 percent of total expenditure.
The government salary bill was also high, and together these two account for about 50 percent of recurrent expenditure.
“In the medium term, we plan to lower the budget deficit and debt stock and then only achieve sustainable public service financial management,” Siriwardena said.
Jehan Perera - Executive Director National Peace Council