ECONOMYNEXT – Sri Lanka’s recent welfare system, Aswesuma, was better at targeting poverty than previous schemes, but could lead to a decline in male labour force participation, raising concerns about long-term fiscal sustainability and disincentives to work, a study by the Institute of Policy Studies found.
Male labour force participation is projected to fall by 5.4 percentage points under the revised scheme (up from 4.2 points under the original), according to IPS’ Recalibrating Aswesuma: A Move Towards a Dynamic and Adaptive Social Registry in Sri Lanka by Pulasthi Amarasinghe.
“Results show that with the new Aswesuma, food insecurity decreased, but it also negatively affected the labour force participation, with a much greater reduction in labour force participation seen for males,” IPS said.
“Labour force participation, especially among men, is expected to decline more sharply with the revised benefits.
For women, the reduction is more minor, at 1.3 percentage points.
“As economic theory predicts, non-labour income can reduce incentives to engage in paid work, particularly in informal sectors where wages are low and opportunity costs are minimal.
“These trends highlight the importance of combining cash transfers with activation policies to promote employment, skills development, and labour market reintegration.”
Strengthening social protection remains a critical priority for Sri Lanka, which continues to grapple with the aftermath of its economic crisis, IPS said.
At its inception, the Aswesuma scheme provided tiered cash transfers ranging from 2,500 to 15,000 rupees based on households’ poverty levels.
In April, Cabinet approved the expansion of Aswesuma, where after Parliamentary confirmation, households will receive cash transfers ranging from 5,000 to 17,500 rupees.
Aswesuma’s effectiveness will depend on its ability to better identify the beneficiaries.
The study findings were presented at a roundtable held at the IPS recently, where policymakers and stakeholders discussed the programme’s achievements and emerging challenges.
The targeting mechanism used for the welfare scheme, launched in the wake of the economic crisis, represented a structural shift, moving from income-based to multidimensional poverty targeting using a social registry.
The programme promised a more holistic and objective framework to reach the most vulnerable communities by looking at the weighted deprivation of households across 22 criteria.
The IPS study found that these eligibility criteria were an improvement over the previous Samurdhi programme, which critics said showed political patronage.
The IPS roundtable discussed policy lessons beyond simulations, improving local-level data verification, refining multidimensional indicators to include transient poverty and nutritional risks, and monitoring socio-economic outcomes to track progress toward poverty “graduation.”
Aswesuma was fast-tracked to meet the urgent need of the time, President of the Sarvodaya Movement Vinya Ariyaratne noted, but the underlying targeting system and registry required review.
A Commissioner at Sri Lanka’s Welfare Benefit Board said there were plans to consolidate welfare schemes and invest in stronger data systems through development officers on the ground.
The roundtable highlighted the foundations of the current social protection landscape as a success in a move towards a more transparent and well-targeted system.
“However, long-term success will depend on how well Sri Lanka can balance short-term relief with efforts to promote labour force participation, reduce dependency, and support individuals in graduating from poverty.
“Thus, to build resilience, social protection must become more adaptive and responsive not only to deprivation but also to the dynamic risks that shape household vulnerability in Sri Lanka today.”
You can find the Estimating Aswesuma Effectiveness report here. (Colombo/Jun20/2025)