Sri Lanka's Economic Dilemma: A Nation in Crisis
The Financial Tightrope
Sri Lanka's economic strategy has been a rollercoaster, with a recent focus on revenue-based state expansion. Here's the catch: over half the revenue collected from citizens funded state workers, while spending-based consolidation was neglected. But wait, there's more! In 2020, taxes were slashed for 'stimulus,' adding another twist to the tale.
On November 5, 2025, a media report revealed Sri Lanka's ambitious plan to employ 60,000 state workers, following the recruitment of 30,000 workers this year. The Minister of Public Administration, Chandana Abeyratne, announced the commencement of hiring for various services, including administration, engineering, planning, and accounting.
The report highlights the recruitment of 226 engineers based on a Cabinet subcommittee's recommendations, selecting top performers from a recent exam. But here's where it gets controversial—Sri Lanka already has a massive public service of 1.5 million workers, and its population is aging. This raises the question: who will support this growing public service?
Central government workers enjoy lifetime pensions, funded by annual tax collections. The challenge? Analysts suggest that attracting more women to the private sector workforce might help generate goods and support the economy, but many end up working in the Middle East to sustain the bloated public service.
The central bank's inflation and rupee depreciation have forced millions of Sri Lankans to seek work in countries with more stable economies. Analysts criticize the IMF's revenue-based fiscal consolidation, arguing for a focus on cost-cutting.
This week, the cabinet approved the hiring of 8,547 additional state workers, primarily policemen. Meanwhile, tax money is being spent on digitalization, and the government continues its hiring spree.
The current administration seems more cautious in its hiring practices, focusing on actual vacancies. However, analysts warn that Sri Lanka must reassess its state agencies and cadre requirements due to demographic changes. The younger generation may struggle to support the public service, potentially leading to further outmigration.
High vehicle and import taxes have made houses and salaries disproportionately expensive. As the IMF proposes taxing houses, the government is hiring more workers, adding to the financial strain.
Since 2004, hiring unemployed graduates has significantly expanded the public sector and increased unfunded pension liabilities, while the wartime military remains intact. Sri Lanka's default in 2022 led to higher taxes to reduce deficits and debt, with over 80 cents of tax money previously going towards state worker salaries and pensions.
The public service's growth, fueled by new hires outpacing retirees, raises concerns about its sustainability. Will Sri Lanka find a balance between its ambitious hiring plans and the economic burden on its citizens? The nation's economic future hangs in the balance.
