ECONOMYNEXT – Amid ongoing talks with the International Monetary Fund (IMF) for a possible deal, Sri Lanka’s ruling politicians have started backing the restructuring of state-owned enterprises (EPs) and opposing political appointments in the government entities.
The island nation pays 86% of its tax revenue on salaries and pension bills from the public sector, which includes one civil servant for every 16 people.
Sri Lanka currently has more than 1.5 million public sector employees, a size that has doubled in the past 15 years, according to official data. The efficiency of the civil service is lower than that of Sri Lanka’s peers in Asia, although there is one civil servant for every 14 citizens.
Most public enterprises (EPs) have become a dumping ground for politicians to recruit their supporters, which has led to an increase in the number of employees with very little work despite monthly payments and a pension plan.
Energy and Power Minister Kanchana Wijesekera called on Saturday (27) for the restructuring of all public companies.
“All public enterprises need to be restructured. Political decisions, political appointments, bad administration and incompetence led to the downfall,” he said on his Twitter platform.
“I don’t think the majority of the public workforce will survive in the private sector or be recruited at all. Performance-based salaries are essential,” he said.
He said that while there are capable and efficient workers at the Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC) and Ceylon Petroleum Storage Terminals Limited (CPSTL), the majority are inefficient and incompetent.
“A good workforce of 500 people instead of 4,200 could do the job efficiently at CPC-CPSTL and half of the 26,000 people at CEB. Unions thrive on ineffective members.
Efforts to restructure state-owned enterprises under past IMF programs proved futile as the center-left, left and Marxists opposed such a move, citing such a move could lead to loss of money. jobs for tens of thousands of public sector employees.
However, Sri Lanka’s economic crisis has woken up many politicians, especially after unprecedented protests toppled the powerful regime of former leader Gotabaya Rajapaksa and his brother Mahinda Rajapaksa.
President Ranil Wickremesinghe’s government is in talks with the IMF for a possible $3bn deal and the island nation is in the process of signing the staff-level deal and restructuring its external debts while scrapping most subsidies general.
Sri Lanka has already announced that it may have to close loss-making state enterprises that are
“To get out of this crisis, we need to increase our income. Restructuring will have to be done,” cabinet spokesman Bandula Gunewardena told reporters during the weekly cabinet briefing on August 23.
“We may have to close some loss-making state-owned enterprises or take other measures,” Gunawardane said.
State tax revenue in 2021 was 1,298 billion rupees, but 1,115 billion of this was spent on public sector salaries and pensions.
“We have no intention of suspending anyone’s services without giving compensation. There is a
formula for that,” Gunawadane said.
Sources close to the president’s economic decision-making team told EconomyNext that the country must reduce the size of the public sector by at least a third of the current number. Analysts said the goal was ambitious.
Most Sri Lankans want to join the public sector mainly because of pensions and reduced workload. (Colombo/ August 27, 2022)