President delivers over Rs. 345 b bonanza for public servants

President and Finance Minister Anura Kumara Dissanayake in Parliament yesterday presenting Budget 2025

• Monthly salary increased by Rs. 15,750
• Total estimated cost of hike Rs. 325 b and will be implemented in phases considering present fiscal constraints
• Rs. 5,000 and 30% of amount will be paid starting April 2025, with remaining 70% paid in equal portions beginning in January 2026 and January 2027
• 2025 Budget allocates Rs. 110 b for first phase
• President justifies hike saying nearly decade has passed since last basic salary revision and Govt. needs to attract talent and skilled workers
• Value of annual salary increment hiked by 80%
• Distress loans amount for public servants increased from Rs. 250,000 to Rs. 400,000
• Pensions of those who retired before 1 Jan. 2020 to be revised in three phases
• President reveals plans to hire 30,000 individuals in essential public service roles; allocates Rs. 10 b
• Sri Lanka, with one of the largest public sectors in Asia, grants hikes and benefits despite calls to reduce headcount

President and Finance Minister Anura Kumara Dissanayake yesterday delivered a collective 

Rs. 345 billion bonanza for public servants via the 2025 Budget which he presented in Parliament.

He proposed to increase the minimum monthly basic salary by Rs. 15,750 or from Rs. 24,250 to 

Rs. 40,000. The current ad-hoc interim allowance and special allowance will be integrated into the basic salary, giving a net increase of Rs. 8,250 in the minimum salary.

The proposed minimum monthly basic salary increase of Rs. 15,750 will also be applicable to judicial services, public corporations, statutory boards, university staff, and officers of the Tri-Forces on the same basis in line with the minimum basic salary increase for public sector employees.

In addition to a minimum monthly basic salary increase of Rs. 15,750, it is proposed to raise the value of the annual salary increment by 80%. Consequently, the minimum annual salary increment of Rs. 250 will be increased to Rs. 450. It is also proposed to adjust annual salary increments for all public sector employees to the same percentage.

The total estimated cost of this salary increase is expected to be Rs. 325 billion. 

Considering present fiscal constraints, it is proposed that this salary increase be implemented in phases.

Of the total net salary increase, Rs. 5,000 and 30% of the balance amount will be paid starting from April 2025, with the remaining 70% being paid in equal portions beginning in January 2026 and January 2027.

Therefore, it is proposed that Rs. 110 billion be allocated for the proposed salary increase in 2025.

“Given that nearly a decade has passed since the last basic salary revision, it is now time to revise the salary structure having evaluated all factors in a holistic manner. It is necessary to provide a decent living standard for public sector employees, enabling the Government to attract talent and skilled workers, whilst at the same time avoiding an excessive burden on the Budget,” President Dissanayake said in justifying the bonanza.

As part of this salary increase, it is proposed that the retirement benefits for officers retiring on or after 1 January 2025 be calculated based on the new salary structure, ensuring that they receive retirement benefits under the proposed 2025 salary scheme.

Considering the increase in the minimum basic salary of State employees, the limit on distress loans for public servants, which is currently set at Rs. 250,000, will also be increased to Rs. 400,000.

Sri Lanka is considered to be having by far the largest public sector in Asia numbering 1.8 million (including armed forces who qualify for the new salary increase). Public sector employment, as a share of total employment, is a high 15% in Sri Lanka. The salary hike comes amidst calls for a reduction in the public sector headcount.

However President Dissanayake yesterday told Parliament that the Government will implement a strategic recruitment plan to hire 30,000 individuals in essential public service roles, strictly according to cadre vacancies starting from this year. Accordingly, the Budget 2025 proposed to allocate Rs. 10 billion for this purpose in 2025.

Referring to public sector pensions, the President said by considering salaries and benefits entitled to them, a monthly increase of Rs. 3,000 was implemented immediately after the Presidential Election, thus resolving the pension anomalies of pensioners who retired before 1 January 2020.

“We observe that there will be a pension anomaly created by revising the pensions of Government employees who retired from 2016-2020 only, based on the salary scale of the fifth phase related to the year 2020, since all the pensioners who retired till 31 December 2017 are on the same salary scale. As this issue remains unresolved for a long time, we believe that it has to be resolved in a phased manner within the existing limited fiscal space,” the President said.

Therefore, the 2025 Budget has proposed to revise the pensions of all pensioners who retired before 1 January 2020 in three phases, corresponding to the salary scales applicable to the year 2020 as per the Public Administration Circular No. 03/2016. 

As the first phase, the pensions of all pensioners who retired before 1 January 2018 will be revised in line with the third stage salary scales relevant to the year 2018 in the Public Administration Circular No. 03/2016, to be implemented from July 2025. 

“For this phase, we propose to allocate Rs. 10 billion through the Budget 2025,” the President said, adding: “Furthermore, we also propose to implement the pension conversions related to the fourth and fifth stages of the salary conversion from July 2026 and July 2027, respectively.”