Sri Lanka to hike pensions of pre-2016 retirees

ECONOMYNEXT – Sri Lanka will hike pensions of those who retired before December 2015 effective from July 2018, with the basic salary raised by 107 percent by 2020, the finance ministry said.

Sri Lanka has allocated 12 billion rupees in the 2019 budget for the increments.

The pensions of already retired state workers will be raised by between 2,800 rupees and 20,000 rupees, the finance ministry said.

Under the Rajapaksa administration, state the basic wage for which pensions were entitled was kept much lower than the full salary paid. But the current administration, under ‘revenue based fiscal consolidation’ has raised the pensionable salary.

The salary of a retired teacher in Grade I service will be increased by 9,200 rupees and the salary of a retired Nursing Officer will be increased by 9,200, rupees.

The salary of a retired Police Sergeant will be increased by Rs.4200.

A retired senior executive officer will get an increase by 16,000, and the salary of a ministry secretary who retired before 31.12.2015 will be increased by 20,000 rupees.

By 2020, the basic salaries of state workers will be up by 107 percent, under circular number 2016/3 the finance ministry said.

From 2015, Sri Lanka went on an unusual strategy of ‘revenue based fiscal consolidation’ under advice from the International Monetary Fund, instead of cutting spending as advocated by (classical) economists.





In 2015, state spending as a share of gross domestic product rocketed to 20.9 percent from 11.6 percent in 2014, as salaries and subsidies were hiked indiscriminately and expenditure restraint was thrown out of the window under ‘revenue based fiscal consolidation.’

Retrospective taxes were also slammed, expanding on the expropriation of the previous regime in undermining Sri Lanka’s image as an investment destination.

In a bizarre move, instead of simply removing exemptions – which were admittedly widespread – even income tax rates were raised ending an advanced proportionate tax of personal income, with the administration running on a misguided drive to boost direct taxes, which hurts future investment, employment and growth.


Under current finance minister Mangala Samaraweera state spending as a share of GDP has been brought down to 18.6 percent and revenues are at 13.4 percent of GDP.

However state spending may be overstated now may have been understated in the past in some respects, with the Auditor General finding irregularities in the classification of past expenses. (Colombo/June16/2019)

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