Public service and salaries 

Monday, 23 September 2019 00:50 -     - {{hitsCtrl.values.hits}}

The point that Sri Lanka’s public service is too large and employs too many people, which results in high expenses to the State and low productivity, is an oft-made one. But it also remains one of the most challenging aspects of governance to tackle as demonstrated by the latest spate of strikes. 

As presidential elections loom ever closer, there is no shortage of unions lining up to take advantage of the situation. Last week a flash work to rule was initiated by railway workers who refused to issue tickets to the innocent public that turned up at the Fort Railway station to go home after a hard day of work. There were also several train disruptions and delays, which is extremely unfair on commuters who as tax payers actually pay the salaries of State workers. 

The upshot of these strikes and work to rule campaigns is that a fresh proposal is to be submitted to the Cabinet next week to decide on a fresh round of salary increases which also apply to doctors, engineers, teachers and non-academic university staff.

The proposal is being introduced ahead of Government executive service officers threatening to resume their trade union action on Wednesday, if the Government fails to approve the salary increases. Other trade union groups also have threatened to resume strikes. Unfortunately the new round of salary increases, if they are to be approved, will cost the State an additional Rs. 200 billion – funds it does not have. There are also additional concerns. 

The Government’s current annual public sector salary and pension bill is estimated to be Rs. 735 billion, which would rise to Rs. 940 billion if approval for this Cabinet paper is granted. Unfortunately the gratuity and pension payments that are due to these public employees will also grow proportionately. In fact, it has been warned that the Government is sitting on a demographic time bomb as larger numbers of public servants retire, and given that Sri Lanka has a rapidly aging population, it will be progressively harder for the Government to raise the funds needed for these payments. 

A more immediate concern is fiscal slippage. Due to slow growth and the Easter attacks, Government revenue has taken a strong hit, with the Budget deficit to grow at least to 5% or higher this year. A salary increase to the public service is likely to exacerbate the situation and push up consumption, leading to higher inflation. This could lead to a temporary sugar high later on, where monetary policy, which has been relaxed of late, will have to be tightened again to offset the adverse economic impact. Sri Lanka’s economy has gone through these cycles numerous times and tends to fall prey to them nearer to election times. 

Using elections and the public to squeeze monetary returns is a common ploy of the public sector. They appear to be unaware or uncaring of the immediate and long term challenges that are presented to the citizenry through their ill-advised and often selfish actions. A Government that is already unpopular will not have the political will to fight back as it is only concerned with its survival. This is why it is imperative that at least the next Government must set in place a competent, inclusive, transparent and effective system to deal with the outstanding issue of State Owned Enterprises (SOEs). It should be a discourse that transcends beyond mere privatisation to one that has a strong anti-corruption, competent one that holds both politicians and public servants responsible for their excesses. Right now, only the public is paying.