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Sri Lankan women discriminated against because of Mat Leave benefits – Verité

ECONOMYNEXT -Sri Lanka’s women between the ages of 20-40 are most likely to be unemployed because hiring them is expensive for the private sector, mostly because employers have to bear the full cost of maternity leave benefits (MLB) Verité Research has found.

Verité, a Colombo based think tank and research body said that this is a problem unique “in terms of opportunities for young women to effectively participate and contribute to the labour force.”

Dr Nishan de Mel, head of Verité said they discovered the issue during research into finding solutions to reduce youth unemployment in the country.

“One of the things we investigated was the laws and rules governing employment requires employers to pay 12-week MLBs however there is no equivalent paternity leave which means hiring women between the ages of 20-40 becomes more expensive in the private sector,” De Mel said.

A law in Sri Lanka mandates that the employer provide 12-week maternity benefit which is a 3-months fully paid leave. However, the country does not have paternity leave.

Sri Lankan women only participate at half the rate of men in the labour workforce and their unemployment rate is twice that of men and their disadvantage increases when they enter this age group while they only secure 30 per cent of the jobs in the private sector compared to 45 per cent in the public sector.

If there was a paternity leave as well, De Mel says the outcome would have been equal.

Verité Research in partnership with YouLead-USAID’s Youth Employment and Business Start-up program conducted this research as part of USAID’s initiative to reduce youth unemployment in the country.

Women’s disadvantage increases when they enter this age group while they only secure 30 per cent of the jobs in the private sector compared to 45 per cent in the public sector.

According to Sri Lanka’s Annual Labour Force Survey published in 2018, women in the 20-40 age group are 6.6 times more likely to be unemployed than women outside this age group.

The Department of Census and Statistics, Labour Force Survey Annual Report 2018 indicates that out of the 4.4 per cent unemployment in the country, 208,667 or 7.1 per cent are women. Unemployment rates for specific ages groups – 20-24 is 29.4 per cent female (14.7 per cent male), 25-29 is 19.8 per cent female (5.4 per cent male) and 30-39 is 5.9 per cent female and 1.4 per cent, male.

According to a Labour Demand Survey (2017), 41 per cent of the employers out of 3,500 private sector entities had claimed that “maternity leave and working hour relaxation” is a factor they consider when recruiting.

A recent World Bank report suggests the following main factors as hindrances to women’s participation in Sri Lanka’s paid workforce: marriage, childrearing, and related household chores that fall disproportionately on women.

Globally, the gap in female participation in the workforce has closed 57.8 per cent according to the Global Gender Report of 2020 by World Economic Forum. Women holding senior managerial posts has increased 2 per cent to 36 per cent in the private sector and public sector.
“Despite this progress, the gap to close on this aspect remains substantial as only a handful of countries are approaching parity,” said the report.

A state-supported maternity leave benefits

In Sri Lanka, gender parity is also a factor to raise its gross domestic product (GDP) by as much as 20 per cent in the long run by closing the gender gap in the workforce, an IMF assessment of Sri Lanka’s program said in 2018.
“For Sri Lanka’s economy to grow, it needs to maximize the potential of its workforce.”

Verité Research proposes that to reduce these disadvantages the government should set off the exorbitant cost borne by the private sector via tax incentives.

1. Tax relief for MLBs translate into positive economic and labour market outcomes.
Increased female participation in the labour force will increase income flow into households
and cushion post-Covid19 job-losses.

2. Tax relief for MLBs cost less than other welfare initiatives. Based on 2018 data, Verité
Research estimates the annual cost of MLBs to be LKR 4.2 Billion. This amounts to
approximately 0.25% of tax revenue. In contrast, Samurdhi subsidies amounted to 2.3%
(LKR 39.2 Billion) of tax revenue.

3. Tax relief for MLBs is more cost-effective than the government’s recent initiative to
boost employment. Verité Research estimates that the government’s plan to recruit 160,000
workers will cost approximately LKR 58.67 Billion annually. State-supported MLBs will
boost the employment of women for less than one-tenth of this cost.

4. State support for MLBs is consistent with existing MLB practices across the world. 129
states either fully (96 states) or partially (33 states) fund MLBs.

5. The 2019 budget included a proposal for the state to partially support MLBs through
tax deductibility, but the proposal was not implemented. Subsequently, the tax cuts
implemented at the beginning of 2020 were worth LKR 52 Billion – ten times the value of
tax concessions necessary to support MLBs. Yet the opportunity to structure these tax
concessions in a manner that would fund MLBs was lost.

Society and the state have an obligation to ensure that women have equal opportunities in the labour
market.

While employers must bear the cost of MLBs, women will continue to be disadvantaged.

The state can boost female economic participation and combat this unfair disadvantage against women
in the 20-40 age group by including MLBs in the forthcoming 2020/2021 budget, Verite proposed.

(Colombo, October 1, 2020)

Reported by Mahadiya Hamza

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Sri Lanka state airport agency swimming in cash after sovereign default

ECONOMYNEXT – State-run Airport and Aviation Services (Sri Lanka) Ltd is swimming in cash after a sovereign default halted debt repayments allowing it to post a profit of 29.7 billion rupees with 10.4 billion rupees in interest income, official data showed.

In April 2022 Sri Lanka declared a sovereign default after printing large volumes of money over more than two years to enforce rate cuts and blowing the biggest hole in the balance of payments in the history of the island’s money printing central bank.

Interest earnings of Airport and Aviation Services also shot up to 10.4 billion rupees in 2023 from 6.1 billion in 2022 and 3.3 billion rupees in 2021 before the sovereign default.

Under the terms of the default or ‘debt suspension’, state agencies like the Airport and Aviation Services, and Sri Lanka Port Authority were also not required to service loans, even if they had the cash to repay loans.

AASL’s finance income shot up in 2023 “mainly because the company has invested surplus cash saved by not servicing the foreign loans obtained by the company due to the temporary debt moratorium policy of the country,” the Finance Ministry said in a report.

Sri Lanka’s rupee and foreign currency interest rates also shot up in 2022 and 2023 as rate cuts enforced by money printing were lifted to clear anchor conflicts.

After inflationary rate cuts kill confidence in a currency triggering capital flight and parallel exchange rates, excessively high rates are needed to kill domestic credit and stabilize the currency.

Countries with such flawed operating frameworks in central banks tend to have chronic high nominal interest rates in any case.

AASL’s rupee revenues went up to 48.8 billion rupees in 2023 from 32.2 billion rupees in 2022 as passenger movements increased to 7.5 million from 5.5 million with a recovery in tourism and local traffic.

Sri Lanka’s currency crisis hit in 2022 just as the island was recovering from Coronavirus pandemic triggering fuel shortages and power cuts as money printing triggered forex shortages.

From 2022 March the rupee collapsed from 200 to 370 levels an attempt to float the rupee was failed by a surrender rule (a type of buy-side pegging which pushes the exchange rate down).

In 2023, after hiking rates to kill credit, the surrender rule was removed, leading to a currency appreciation.

The airport agency also made an exchange gain of 6.1 billion rupees in 2023 against an exchange loss of 10.5 billion rupees in 2022 the rupee appreciated. (Colombo/June16/2024)

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Sri Lanka car import relaxing roadmap given to IMF: State Minister

ECONOMYNEXT – Sri Lanka has submitted a roadmap on relaxing vehicle imports to the International Monetary Fund, State Minister of Finance Ranjith Siymabalapitiya said as the country recovers from the worst currency crises in the history of its central bank.

The import relaxation will allow vehicles for public transport, goods transport, then motor cycles and cars use by private individuals and after that, luxury cars, Minister Siyambalapitiya said.

Luxury cars however attract the highest taxes for each dollar spent on imports.

Economic analysts have characterized vehicle import controls as a ‘cascading policy error’ that follows inflationary rate cuts, which then deprive taxes to the state and triggers more money printing and more forex shortages, requiring even higher corrective interest rates and a contraction of economic activities to save the rupee.

According to the latest IMF report car import controls may have led to revenue losses of 0.7 to 0.9 percent of GDP.

Sri Lanka started controlling imports few years after a central bank was set up in 1950 and also tightened exchange controls progressively, so that macroeconomists using post-1920 spurious monetary doctrines taught at Anglophone universities could print money through various mechanisms to suppress rates.

Sri Lanka is working with the IMF as a guide on many issues and the roadmap was submitted to the agency on June 14, Minister Siyambalapitiya said.

The IMF in an economic report released last week the plan was expected to be submitted by June 15.

Whatever the IMF’s faults, which some wags have called ‘progressive Saltwaterism’, the agency does not advocate import controls as solution to balance of payments problems, despite a Mercantilist fixation with the current account deficit in countries with reserve collecting central banks, analysts say.

Import controls have the same effect as import substation on the balance of payments, which is none, classical economists have pointed out and is now mainly a problem associated with macro economists and economic bureaucrats of so-called basket case countries.

Any pressure on the currency or missed reserves targets in the IMF program has come in the past only if the central bank printed money to suppress rates as credit growth picked up from car imports.

Sri Lanka had 3,000 items under import controls when rates were suppressed with printed money from 2020 to 2022 but eventually ended up with the worst currency crisis triggered by macro economists in the history of the country and eventual external default.

A committee made up of the Department of Trade and Fiscal Policy of the Finance Ministry, the Department of Registration of Motor Vehicles, the Central Bank and two associations representing vehicle imports were appointed to come up with the roadmap, he said. (Colombo/June15/2024)

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Chitrasiri Committee presents draft constitution for Sri Lanka Cricket

ECONOMYNEXT – A draft constitution for Sri Lanka Cricket, the governing body for cricket in the island, prepared by a committee headed by retired Supreme Court judge K T Chitrasiri, was presented to President Ranil Wickremesinghe today (15).

The Sri Lanka team were ignominiously knocked out of the Men’s T20 World Cup tournament this week, sparking renewed criticism of the team and the governing body.

Last November, a cabinet sub-committee was appointed to address challenges faced by Sri Lanka Cricket and provide recommendations after consecutive losses became a hot topic in parliament.

After parliament decided to remove the administrators of the sport, the International Cricket Council (ICC) Board suspended Sri Lanka Cricket’s membership.

Based on the sub-committee’s recommendations in its report, the Cabinet then appointed an expert committee to draft a new constitution for Sri Lanka Cricket.

The committee headed by judge K T Chitrasiri includes President’s Counsel Harsha Amarasekara, Attorney-at-Law Dr Aritha Wickramanayake and Chairman of the Sri Lanka Chamber of Commerce Duminda Hulangamuwa.

Deputy Solicitor General Manohara Jayasinghe, and Shamila Krishanthi, Assistant Draftsman representing the Legal Draftsman’s Department, and Loshini Peiris, Additional Secretary to the President were also on the committee. (Colombo/Jun14/2024)

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