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Friday June 2nd, 2023

Sri Lanka public sector ‘unbearable burden’: Finance Minister

ECONOMYNEXT – Sri Lanka’s public sector which has become an “unbearable burden” on the economy, Finance Minister Basil Rajapaksa said Saturday after bringing a budget proposal to increase the retirement age.

Explaining his maiden budget unveiled in parliament Friday, Rajapaksa said there will be no salary increases for the 1.42-million-strong state sector employees as the government struggled to pay their salaries.

Increasing the retirement age however will nix any chance of trimming the public sector by attrition.

The minister said new recruitment will be carried out only to fill vacancies created by retirees.

However, with the increase of the mandatory retirement age of the public sector by five years to 65, no public servant has to retire till November 2026.

“For at least one more year, there is absolutely no way we can spend public money on government sector employees,” Rajapaksa said.

Sri Lanka’s public sector is regulated expanded unemployed graduates, educated at tax payer funded state universities, who cannot find jobs in productive sectors.

President Gotabaya Rajapaksa after slashing valued added taxes in December 2019 to build a ‘production economy’ hired 53,000 graduates in to the public sector and set up a Multi-Purpose Development Task Force to hire another 100,000 workers who had passed Grade 8 to ‘reduce poverty’.


Sri Lanka to expand public service by over 10-pct in 2020, 53,000 graduates

Sri Lanka to create 100,000-strong multi-task force: minister

In 2020, 86 percent of all taxes collected from the people went to pay for salaries and pensions.

In his budget speech Finance Minister Rajapaksa had allocated an addition 30,000 million rupees to address the salary anomalies of teachers who recently went on strike to press their demands to get what was due to them.

Rajapaksa said increasing the retirement age was a concession to the public sector.

“The public sector has expanded so rapidly that they have become an unbearable (uhu-lun-ner barry) burden. There is no need to give them lozenges. We must honestly accept, that this public sector is a burden (bu-ruck) to the country ,” he said.

“To give benefits to the public sector we have to take money from the public.”

He said there was one public servant for 113 citizens at the time of Sri Lanka gaining
independence from Britain in 1948, but the civil service has expanded and the ratio was now 1 civil servant for 13 citizens.

In 2020 and 2021 Sri Lanka printed money to finance the deficit and also keep rates down and the country is now facing forex shortages, the rupee is under pressure and inflation is rising (COLOMBO, November 13, 2021)

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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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