By: Staff Writer

December 28, Colombo (LNW): The non-contributory structure of Sri Lanka’s Public Services Pensions (PSP) scheme has become a major financial burden on the nation, as pension payments are entirely financed through government revenue via general taxation, according to a study by the Institute of Policy Studies (IPS).

“With around 700,000 public sector pensioners, the system places a significant fiscal strain on the government,” the IPS report highlights.

 Notably, nearly half of these pension payments benefit the wealthiest 20% of the population. IPS suggests implementing a gradual shift to a contributory pension model alongside broader structural reforms to alleviate this strain.

Addressing Sri Lanka’s pension-related financial challenges requires structural reforms and transitioning to a contributory scheme, particularly given the country’s recent economic difficulties.

Public sector pensions, which are entirely funded by tax revenue, account for 12% of government income, creating significant pressure on public resources. Moreover, the current PSP scheme is largely regressive, benefiting higher-income groups disproportionately.

The IPS estimates that nearly 50% of PSP payments go to the wealthiest 20% of households, while only 11% reach the poorest 40%. This inequality diverts critical resources from essential sectors like healthcare and education, further deepening inefficiencies in public spending.

The PSP scheme, Sri Lanka’s largest pension program for permanent public sector employees, has seen growing financial demands over the years. By 2023, pension payments totaled LKR 372.3 billion (approximately $1.15 billion), making up 7.9% of recurrent government expenditure and 12.1% of its total revenue.

Additionally, the number of pensioners has risen significantly, with total pension payments increasing by 20.5% in 2023 alone, driven by a 4.2% net growth in pensioners. This rapid growth is unsustainable given the country’s constrained fiscal capacity.

Currently, 43% of government revenue is allocated to public sector salaries and pensions, leaving little room for critical investments in innovation, training, and infrastructure development.

The economic crisis of 2022 exacerbated these challenges, as revenue shortages disrupted essential services, including public sector salaries, pensions, healthcare, and agricultural support like fertilizer.

The PSP disproportionately benefits high-income groups, as nearly 44% of recipients belong to the richest 20% of the population. A Commitment to Equity (CEQ) analysis further reveals that PSP is not a pro-poor program, reflecting a system that favors well-off segments of society.

Public sector employees, who constitute 15% of the workforce, enjoy stable incomes and pensions throughout their careers.

 This stands in stark contrast to the 67% of Sri Lankans engaged in informal, precarious employment.

By: Staff Writer

December 28, Colombo (LNW): Sri Lanka, under its new government, is keen to enhance its diplomatic and economic relations with Canada, alongside other global partners.

However, Canada’s engagement with Sri Lanka has not been as robust or sustained as that of other countries, such as Australia, France, the United Kingdom, and the United States.

These nations have fostered long-standing relationships with Sri Lanka, building the understanding and diplomatic connections necessary for effective engagement, particularly on sensitive issues.

In contrast, Canada’s approach has been more detached, missing opportunities to deepen ties with Sri Lanka and contribute positively to the country’s ongoing political transformation.

The recent political changes in Sri Lanka have ushered in a period of significant reform, with the new government seeking to solidify its democratic foundations and strengthen its international alliances.

To signal its support for this transformation, Canada’s foreign policy should actively engage with Sri Lanka through high-level visits and dialogues.

 An early visit by Canada’s foreign minister to meet with Sri Lankan government officials, opposition leaders, and civil society representatives would be an important gesture of solidarity.

Such engagement would not only demonstrate Canada’s support for Sri Lanka’s democracy but also underscore the importance of political change in Sri Lanka.

 It would send a clear message that Canada is committed to nurturing a deeper, more meaningful relationship with Sri Lanka, moving beyond the historical focus on political and ideological differences.

In this context The High Commission of  Sri Lanka in Ottawa participated in the annual International Food Fair, a signature initiative of Global Affairs Canada (GAC) organized in support of the Government of Canada Workplace Charitable Campaign.

This vibrant event brought together over 400 attendees including representatives from Embassies and High Commissions accredited to Canada, to celebrate the rich cultural diversity and culinary traditions of the participant countries.

The High Commission of Sri Lanka showcased the country’s distinctive and delectable cuisine, offering attendees an authentic taste of traditional dishes, and served refreshing Sri Lankan tea.

Moreover, the opportunity was utilized as a platform not only to celebrate Sri Lankan gastronomy, but also to promote the country as an attractive tourist destination.

Promotional materials and brochures highlighting Sri Lanka’s natural beauty, cultural heritage, and historical landmarks aimed at inspiring attendees to explore the island nation’s many attractions were displayed at the event.

The staff of the High Commission of Sri Lanka in Ottawa headed by Counsellor, Kumarasamy Kiritharan actively engaged with visitors at the event and shared information about cuisine and tourist attractions in the country.

The participation of the High Commission in the event underscored its commitment to promoting cultural diplomacy while strengthening ties with Canada and the international community.

By: Staff Writer

December 28, Colombo (LNW): Minister of Labour Prof. Anil Jayantha Fernando recently addressed claims surrounding the restructuring of Sri Lanka’s external debt, clarifying that the current government’s role was limited to restructuring just one percent of the total debt, amounting to USD 300 million.

 According to the Minister, the majority of the debt restructuring agreements, covering 99 percent of the external debt, were already established during the previous administration.

At a press briefing held at the President’s Media Centre, Prof. Fernando explained that the restructuring involved only bilateral debts owed to official creditors like Kuwait, Saudi Arabia, Iran, and Pakistan.

 This process was handled by the Official Creditor Committee (OCC), co-chaired by France, India, and Japan, which represents 17 countries and other official creditors. An agreement on the terms and conditions was reached in June 2024, and restructuring with China Exim Bank was already completed in October 2023.

On the subject of restructuring International Sovereign Bonds (ISBs), Prof. Fernando noted that the previous government had agreed to the restructuring in principle just before the September 2024 presidential election.

The current government continued and successfully concluded this process on December 20, 2024, ensuring the issuance of new bonds to replace existing ones.

The restructuring of ISBs, which involves a total of USD 14.2 billion, including past due interest of USD 1.7 billion, was managed by the Ad Hoc Group (AHG) and a local banking consortium.

Prof. Fernando emphasized the government’s strong political commitment to economic stability, citing the positive recognition from rating agencies, which upgraded Sri Lanka’s credit rating due to the government’s timely actions and economic stabilization measures.

Responding to questions regarding Sri Lanka’s financial crisis, Prof. Fernando explained that the economic downturn was exacerbated by policies from previous governments, particularly the suspension of external debt servicing in April 2022, which led to the country’s financial troubles.

He assured that the current administration had laid the groundwork for financial stability and would continue steering the country towards economic recovery.

Looking ahead, Prof. Fernando expressed confidence that by the end of 2025, the results of the government’s efforts would be evident in the form of improved economic indicators and a better standard of living for the people of Sri Lanka.

Therefore, the government continued with the restructuring process and facilitated it to ensure the successful completion of the issuance of new bonds for the exchange of existing ones on 20th December 2024 in order to achieve the critical objective of stabilizing the economy in pursue of navigating the country with the growth and development trajectory towards a thriving nation and beautiful life,” he said.

December 28, Colombo (LNW): Sri Lanka’s Cinnamon Development Department has unveiled a plan to significantly increase the country’s annual revenue from cinnamon exports, with a target to double the current earnings of US$ 250 million to US$ 500 million.

Janaka Lindara, the Director General of the Cinnamon Development Department, emphasised that Sri Lanka currently produces around 25,000 metric tonnes of cinnamon annually, exporting approximately 19,000 metric tonnes.

Cinnamon is a major agricultural export for Sri Lanka, with key cultivation areas traditionally located in the southern and southwestern regions, including Galle, Matara, and Hambantota.

To achieve the revenue target, the department has outlined plans to expand cinnamon cultivation into new regions such as Kurunegala, Puttalam, and the Mahaweli zones.

This expansion aims to not only increase production but also diversify the areas in which cinnamon is grown, helping to ensure a steady supply for export.

A significant step towards reaching these goals was marked by the recent signing of a Memorandum of Understanding (MoU) with China, which will facilitate the commencement of cinnamon exports to the Chinese market starting in January 2025.

This partnership is expected to open up new opportunities for Sri Lankan cinnamon producers, with the potential for increased demand from one of the world’s largest markets.

Additionally, the Cinnamon Development Department is focusing on strengthening its presence in the European Union and other global markets, further broadening the reach of Sri Lankan cinnamon.

At present, the vast majority of the country’s cinnamon is exported in its raw form. However, the department is keen to shift towards producing more value-added cinnamon products, such as essential oils, spices, and cosmetics, to enhance foreign exchange earnings.

In a bid to support this transformation, the department is offering resources, training, and incentives to small and medium-sized cinnamon entrepreneurs. The goal is to empower local producers to add value to their products, ensuring greater profitability and market competitiveness.