After rejecting for decades, Sri Lanka politicians now want SOE restructuring amid IMF deal talks
ECONOMYNEXT – Amid an ongoing talks with the International Monetary Fund (IMF) for a possible deal, Sri Lanka’s ruling politicians have started to back restructuring of state owned enterprises (SOEs) and against political appointments into government entities.
The island nation is paying 86 percent of its tax revenue on the wages and pension bills of the public sector which includes one public official for every 16 people.
Sri Lanka has more than 1.5 million public sector employees at present, the size having doubled over the past 15 years, according to official data. Efficiency in the public service is lower compared to that of Sri Lanka’s peers in Asia, despite there being a public servant for every 14 citizens.
Most state owned enterprises (SOEs) have become a dumping yard for politicians to recruit their supporters, resulting in more employees with very little do in spite of a monthly payments and pension scheme.
Power and Energy Minister Kanchana Wijesekera on Saturday (27) called for restructuring of all SOEs.
However, Sri Lanka’s economic crisis has awaken many politicians specially after unprecedented protests overthrew powerful regime of former leader Gotabaya Rajapaksa and his brother Mahinda Rajapaksa.
President Ranil Wickremesinghe’s government is in discussion with the IMF for a possible $3 billion deal and the island nation is in the process of signing the staff level agreement and restructuring its foreign debts amid removing most blanket subsidies.
Sri Lanka has already announced that it may have to shut loss making SOEs which are
overstaffed.
“In order to come out this crisis, we need to increase our income. Restructuring will have to be done,” Cabinet Spokesman Bandula Gunewardena told reporters at the August 23 weekly cabinet briefing.
“We may have to shut down some losses making state enterprises or take other action,” Gunawardane said.
The state tax revenue in 2021 was 1,298 billion rupees but 1,115 billion out of that was spent on salaries and pensions of the public sector.
“We have no intention of suspending anyone’s services without giving a compensation. There is a
formula for that,” Gunawadane said.
Sources close to the President’s economic decision making team have told EconomyNext that the country needs to reduce the size of the public sector at least to a third of the current number. Analysts have said that target is ambitious.
Most Sri Lankans want to join public sector mostly due to pensions and lower workload. (Colombo/ Aug 27/2022)
