Considerations for the welfare system

There is a case to be made that, given the socioeconomic climate today, having access to appropriate social protection is essential to maintaining social harmony and defending human rights. In Sri Lanka, there are several Government-run programs and projects that offer various forms of social security. However, the present crisis has further highlighted these programs’ long-standing shortcomings, notably the Samurdhi program. These include inadequate funding, insufficient benefit levels, poor targeting, and the exclusion of a sizable percentage of the population owing to administrative shortcomings.

Aiming to ensure the right to social security, universal benefit programs have been criticised for granting payments based on poverty levels due to their arbitrary nature, exclusion of those who should be included, stigmatising consequences, and increased administrative expenses. These issues were present in Sri Lanka before, but now their effects are more severe. 

Because the effects of the economic crisis are extending to far greater segments of society, civil society organisations are stressing the need to move toward more universal methods to social protection. A new social protection policy is now being thought upon by the Sri Lankan Government.

In Sri Lanka’s present economic and budgetary environment, there are worries that the Government may pass changes that just broaden the population eligible for targeted aid based on poverty levels, omitting to address the other drawbacks of these programs. In addition, broad social protection coverage should be a goal of revisions to the current social assistance programs.

States frequently use policies to lower deficits during economic downturns by raising tax collections and cutting spending. They have established standards for how austerity measures should be created and put into place when they are thought to be essential based on this. International standards require, among other things, that prior to the implementation of economic reform programs, Governments and international financial institutions complete impact analyses. 

Impact analyses are essential for determining the potential effects of a policy, especially when such effects may not be immediately apparent, and for putting protective measures in place. It is unclear if these have taken place or are anticipated in Sri Lanka.

By lowering Sri Lanka’s high debt repayments, the Government will have more money to spend on social programs like health care. Over the past ten years, Sri Lanka’s Governmental debt has significantly expanded. The Government’s entire outstanding external debt as of the end of 2021 was 32.2 billion dollars. According to the IMF, Sri Lanka’s gross finance needs were among the highest among developing market countries at 30.1% of GDP. 

While the average for South Asia is 21.1% and the world average is 6%, Sri Lanka’s Government revenue in 2020 was made up entirely on interest payments at 71.4%. Since the Government must spend this much each year to pay down its debt, less money is left over for spending on areas like health, education, and social protection.

Prioritising social expenditures and human rights is crucial as talks over the deal between Sri Lanka and the IMF proceed. The Government must also guarantee that decisions are made in a transparent manner. As talks with the Government progress, the IMF added that debt relief from Sri Lanka’s creditors and extra funding from multilateral partners will be needed to assure debt sustainability and address financing gaps.