ECONOMYNEXT – The International Monetary Fund (IMF) is not to judge the government needs to identify resources to provide public services, but that has to be done within the targets of the bailout package, the global lender said.
President Anura Kumara Dissanayake’s government has vowed not to reduce the size of the public sector, compared to what former president Ranil Wickremesinghe administration committed to the IMF.
Successive governments in the past have said the IMF had been demanding to reduce the size of the public sector.
However, a top IMF official this week said the Sri Lanka government has the liberty to decide the public sector size.
“On the size of the public sector, that’s really not for us to judge the government’s needs to sort of identify the resources it needs to provide the services that it’s expected to provide. And do all of that within the envelope of the program,” Peter Breur, the Senior Mission Chief for Sri Lanka told reporters on Tuesday at an online media briefing.
“So there may be other institutions, the World Bank, for example, that can provide some more assistance, technical assistance to help with making the government as efficient as possible.”
Sri Lanka has a bloated public sector with one state sector employee for every 16 citizens due to heavy politicization and political interference in provision of employment.
Sri Lanka’s public sector has long been criticized for its inefficiency and excessive size, contributing to fiscal imbalances and economic challenges.
As of 2023, the public sector employed approximately 1.5 million individuals, accounting for nearly 14% of the country’s total labour force.
This substantial workforce has led to a significant wage bill, consuming a considerable portion of government revenue and limiting fiscal space for essential development projects and social programs.
The IMF in the past has expressed concerns regarding the bloated nature of Sri Lanka’s public sector.
In its 2023 Governance Diagnostic Assessment, the IMF highlighted that persistent corruption issues have endured despite nearly five decades of anti-corruption efforts, indicating systemic weaknesses within public institutions.
The IMF emphasized the need for comprehensive governance reforms to enhance public sector efficiency and reduce opportunities for corruption.
To address these challenges, the IMF has recommended several measures aimed at improving fiscal governance and public sector performance.
These include strengthening public financial management, reforming tax policy and revenue administration, and enhancing the overall anti-corruption framework.
Implementing these reforms has been seen as crucial for reducing fiscal deficits, ensuring debt sustainability, and fostering economic growth. (Colombo/March 06/2025)
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