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Tuesday February 27th, 2024

Sri Lanka private workers bear Covid-19 shock with wage cuts, state workers get salary hikes

ECONOMYNEXT – Sri Lanka’s private-sector workers absorbed the burden of the Coronavirus shock taking real and nominal wage cuts while keeping the economy ticking, as state workers continued to get salary hikes, data show.

“In the midst of the adverse impact of the COVID-19 pandemic, real wages of the employees
in the formal and informal private sectors showed an erosion whereas the real wages of the public
sector employees showed an increase in 2020 compared to the previous year,” Sri Lanka’s central bank said in its 2020 annual report.

“Nevertheless, the demand pressure arising from wages on the general price level remained subdued during the year.”

Sri Lanka’s private credit collapsed amid lockdowns, despite money printing. Credit started to pick up only in the third quarter.

Around the world the Covid-19 pandemic has demonstrated graphically that it was private citizens, working in retail shops, restaurants, export manufacturing, transport and distribution chains that really kept economies ticking providing taxes for state workers and the elected ruling class to engage in coercive acts.

As soon as private sector activities were curtailed, economies collapsed.

In Sri Lanka the state health services have worked hard, though coercive state agencies put controls on private sector activity, including in medical services and food supplies especially with price controls, disrupting supplies, critics have said.

Private sector workers salaries were slashed and many were laid off, as they took the entire economic adjustment, while state workers continued to get salary hikes.

“The formal private sector was adversely affected by the COVID-19 pandemic,” the central bank said.

“Accordingly, some firms had to revise salaries downwards as their cash flows were severely affected by the disruptions to their business activities.

“Further, a tripartite agreement was reached between the Ministry of Skills Development, Employment
and Labour Relations, the Employers’ Federation of Ceylon and trade unions on paying 50 per cent of the last paid basic salary or Rs. 14,500 per month, whichever was more favourable to the employee, where employees were required to stay at home due to pandemic conditions.”

In 2020 a wages board rate increase was given for those on minimum wages.

“Nevertheless, real wages of employees in the formal private sector decreased by 4.2 per cent in 2020 compared to 2019.”

Sri Lanka’s state sector salaries continued to rise though the current administration halted some of the salary hikes given by the previous Yahapalanaya administration.

Nominal wages of state workers also rose 9.2 per cent in 2020.

“This increase was due to the addition of a new non-pensionable monthly interim allowance of Rs. 2,500 with effect from 01 July 2019, and the final tranche of the special allowance and interim allowance to the basic salary, with effect from 01 January 2020.

“Accordingly, real wages of the public sector employees increased by 2.9 per cent in 2020 compared to last year.”

The ousted ‘Yahalapalanaya’ administration also destroyed real and nominal wages of private-sector workers to boost exports through wage destruction involving real effective exchange rate targeting, to profit producers without raising productivity at the expense of the working class, critics have said.

In 2020 the rupee continued to collapse amid money printed to finance state expenditure and more ‘stimulus’.

About 86 cents of every tax rupee collected went to pay salaries and pensions of state workers.

In 2015 large salary increments were given to state workers, driving up the public sector wage index by over 20 per cent.

As money was printed heavily to target short term interest rates in 2015 and the rupee busted from 131 to 151 to the US dollar in the next year, state workers were cushioned against the real salary destruction.

The opposition Samagi Jana Balawegaya slammed President’s Secretary P B Jayasundera, when he suggested that state workers contribute part of the salary, at least one day to ease the fiscal burden on the rest of the people.

The REER targeting administration was roundly defeated in a 2019 election. However, stimulus has continued in 2020, creating more balance of payments trouble.

Sri Lanka’s United National Party also started the practice of giving tax fee vehicles to legislators, while taxing ordinary people at high rates.

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Sri Lanka police chief appointment against constitution: Opposition Leader

Samagi Jana Balavegaya leader Sajith Premadasa addresses the rally

ECONOMYNEXT – The appointment of Sri Lanka’s new police chief Deshbandu Tennakoon is against the constitution as the decision lacked required votes at the Constitutional Council, Opposition Leader Sajith Premadasa said.

President Ranil Wickremesinghe on Monday (26) appointed Deshbandu Tennakoon as the 36th Inspector General of Police (IGP) of the country after the Constitutional Council (CC) cleared the official who along with three other police officers were asked by the Supreme Court to compensate 2 million rupees in a fundamental rights case last year.

“CC didn’t approve IGP’s appointment. Votes: 4 for; 2 against; 2 abstentions. At least 5 votes are required for a decision,” Premadasa said in his X (Twitter) platform.

“Speaker has a casting vote only in case of a tie. 4/2 is not a tie! Constitution is being blatantly violated for the second time. Shame on you speaker!”

Speaker Mahinda Yapa Abeywardena was not reachable for a comment on the Opposition Leader’s claim.

The President Media Division (PMD) said the President appointed Tennakoon “as the IGP in accordance with the provisions of the Constitution”.

The island nation’s Supreme Court on December 14 ordered Tennakoon when he was the Acting IGP and three other officials to pay a compensation of 500,000 rupees each for the violation of the fundamental rights of an individual.

The Supreme Court also instructed the Police Commission to take disciplinary action against the said Police officers including Tennakoon after it considered the petition filed by W. Ranjith Sumangala who had accused the Police officers of violating his fundamental rights during his detention at Mirihana Police Station in 2011.

The Supreme Court held that the four police officers violated the fundamental rights of the petitioner by his illegal arrest, detention and subjection to torture at the Mirihana Police Station, which was under the supervision of Tennakoon at the time of the arrest. (Colombo/Feb 27/2024)

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All major party leaders Sri Lanka remained unpopular in January: poll

ECONOMYNEXT — All major party leaders in Sri Lanka continued to show negative favourability ratings in a January 2024 poll indicating continued unpopularity, with leftist leader Anura Kumara Dissanayake increasing his favourability by 12 points to -10.

The poll, run by the Institute for Health Policy (IHP), showed that favourability of opposition leader Sajith Premadasa declined by 9 points to -53 in January, while President Wickremesinghe’s also dropped by 9 points to -77.

The IHP said in a statement on February 22 that favourability estimates for each month are based on 100–500 interviews conducted during that month and during a few weeks before and afterward to ensure a minimum set of responses. The January 2024 estimates are based on 376 (Premadasa), 346 (Dissanayake), 361 (Wickremasinghe), and 121 (former president Gotabaya Rajapaksa) interviews.

According to the IHP, its Sri Lanka Opinion Tracker Survey (SLOTS) surveys a national sample of adults (ages 18 and over) reached by random digit dialling of mobile numbers, and others coming from a national panel of respondents who were previously recruited through random selection.

SLOTS tracks favourability by asking respondents if they have a favourable or unfavourable opinion of a public figure or institution: net favourability being the average of the positive (+100) and negative (-100) responses. All
estimates are weighted to match the national population with respect to age, sex, ethnicity, socioeconomic status, sector, province and past voting preference. Monthly estimates are based on samples of 100+ interviews pooled from interviews in each month and from weeks before and afterwards. As the January update uses a more recent data set than the previous update, there are small changes in estimates of favourability ratings for previous months.

According to the institute, the SLOTS survey has previously been funded by the Neelan Tiruchelvam Trust, the UK National Institute for Health and Care Research (NIHR), The Asia Foundation in Sri Lanka, and others.

“Current field work is financed by the IHP Public Interest Research Fund and others. The sponsors play no role in the study design, analysis, or interpretation of findings. Furthermore, the survey findings do not necessarily reflect the views or positions of past and present funders. Interested parties can contact IHP for more detailed data and results,” it said in the statement. (Colombo/Feb27/2024)

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Sri Lanka to seek private investments in water sector

ECONOMYNEXT – Sri Lanka is looking to form public private partnerships in the water sector, specifically to focus on rural water supply, Minister of Water Supply and Estate Infrastructure Jeevan Thondaman has said.

“Not privatization, but public private partnerships,” Thondaman said at a press briefing on Monday. “When we enhance private sector participation, we create a more competitive industry with better quality and cheaper prices.”

A water tariff formula, which will be reviewed annually or bi-annually, has been formulated and will be submitted to the cabinet, parliament and COPE committee, he said.

“Once this is in place, we will be able to attract investors to come on board. The water sector till now has not had a PPP model. We want to bring in private public sector partnerships in rural communities’ water supply; we believe they will be able to work hand in hand with community-based organizations to provide water to those who need it.

“I can give you one example, when you look at the water bottle that is being manufactured by the Water Board, you will see it’s from the Hanthana Estate; but people in Hanthana Estate still don’t have drinking water. There has been a top to bottom approach. Now we want to go rural first.

Most projects in the water sector had stalled post-crisis, Thondaman said, and the priority now was to resume them before attracting further investment into the sector. The minister said that there had been discussions with the Japan International Cooperation Agency (JICA) and the Asian Development Bank. (Colombo/Feb27/2024)

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