Downsizing public sector

Recently, Senior Presidential Advisor Duminda Hulangamuwa publicly remarked that the country would have to downsize its State sector employee pool from its existing 1.3 million to 750,000. His comment raised eyebrows as the JVP – the ideological parent of the NPP – staunchly stood for the expansion of the public sector for the most part of its existence apart from providing the political leadership to agitations that pressurised Governments in power to provide public-sector jobs to graduates who could not secure employment in the private sector, particularly art degree holders. Moreover, almost 80% of postal votes were polled in favour of the ruling political party during the two previous national elections.

Interestingly, there is a dichotomy within the NPP’s support base about public sector employment. A considerable number of public sector employees were at the forefront of the NPP’s election campaign. This particular segment included so-called Development Officers (known as DOs) – university graduates with no clearly defined roles and responsibilities and recruited mainly due to political considerations. There is a perception within the society that the amount of work performed by them is not commensurate with their pay levels. Any talk of worker layoffs in the public sector would surely be abhorred to such individuals.

On the other hand, there is also a section of NPP supporters representing the private sector especially bankers, who would have voted for the JVP-led alliance for the first time in their lives at the concluded national elections, that loathe the island’s bloated public sector as recently imposed taxes like PAYE are used to finance the salary hikes and allowances of State sector employees. Hulangamuwa belongs to this branch of followers which got baptised into the social media-driven, popular political coalition in the aftermath of the 2022 Aragalaya movement. The views of this group diametrically contradict with the longstanding, core JVP support base, which is dominated by trade unionists, student activists, and advocates of Leftist political views.

The amount of funds allocated to pay the salaries and pensions of Government employees began to come under increasing scrutiny due to the increased tax burden caused by the hike in the rates of both direct as well as indirect taxes in addition to the introduction of new taxes levied on the earnings of salary earners. According to PublicFinance.lk, a platform for public finance-related information in Sri Lanka which is run by the reputed think tank Verité Research, Sri Lanka’s public sector employment levels are highest among countries in the South and Southeast Asia region. 

The platform points out that in 2023, 15% of the total 8-million workforce (1.16 million people) were employed in the public sector and Defence and Public Security alone had accounted for one-third of all Government employees. As per the think tank, regional peers with similar economic structures employ substantially less public sector workers. For example, India employs 9%, Vietnam 8%, and Bangladesh only 5% of their workforce in the public sector. Last year, the Treasury allocated Rs. 940 billion on public sector salaries, representing about 20% of the recurrent expenditure or 30% of the Government revenue during the period.

To defuse the controversy emanating from Hulangamuwa’s remark, Public Administration Minister Prof. Chandana Abeyratne had told the media that there was no plan to lay off the public service, but the Government instead would focus on improving the productivity of the public sector. The Minister had added that graduates had been recruited as DOs in an ad hoc manner without giving consideration towards productivity. Unlike others in the public service, DOs have no clearly designated duties and responsibilities; hence, this practice of recruiting graduates as DOs must be discontinued immediately by the Government.

The excessive, burdensome public sector workforce is an enormous hindrance to the country’s economic development. Going forward, its size needs to be trimmed down gradually and scientifically in order to reduce the burden on taxpayers.