Election year budgetary allocation for public sector overlays actual expense

Sri Lanka's election-year budget 2024 salary expenditure has overlapped the actual salary bill exposing discrepancies in financial allocations, several economic experts disclosed.

Details in the annexure of public expenditure and revenue collection measures have to be revisited to arrive at a final conclusion relating to this incomplete budget, they said.

Public sector employees are to receive a substantial salary increase with effect from April 2024 in the form of cost of living allowance hike.

While these steps should result in a higher salary bill for 2024 from 2023, the 2024 budget estimate draft report for public sector salary expenditure for 2024 is Rs. 666.18 billion compared to a higher Rs.694.1 billion in 2023 which is a decline of Rs 27.92 billion in the salary spend.

The 2024 budget proposals included a Rs.10,000 salary hike for government servants by increasing the present cost of living allowance to Rs. 17,800.

The cost for the state from the salary hike would be in the region of Rs.156 billion per annum.

The state expenditure for cost of living allowance of state pensioners will also be raised by Rs.2,500 to

Rs.3,525 per month. Therefore pension payments would go up to Rs.16 billion in 2024.

The total cost for the state by increasing the cost of living allowance would be in the region of Rs. 172 billion. A sum of Rs.712.94 billion was allocated for the payment of salaries of the public sector in 2022 and it has come down by Rs.18.84 billion to Rs.694.1 billion in 2023. This significant cut in salary expenditure cannot be justified by claiming that it was due to reducing the retirement age of state employees to 60 from 65 years in 2023, financial analysts said.

According to Finance Ministry data, nearly 27,000 state employees have retired from service that year. The resultant reduction of the salary bill due to the drop in the number of employees was around Rs.1.15 billion.

To give higher salaries more taxes have to be raised, since money printing and more borrowings could no longer be feasible and the Treasury will adjust the salary expenditure sparingly, a senior finance ministry official said As a result, payments will be made from April when receiving tax revenue and the three months arrears will be settled from October in six monthly installments, he added.