• Claims President indicated increase would happen in 4Q23 at meeting with State employees
• Notes State sector salary allocation for 2023 lower than payments made over Jan.-Sept. 2022
• Says voluntary retirement schemes to be introduced in SOEs undergoing restructuring

State Minister of Finance Ranjith Siyambalapitiya hinted that a salary increase for State sector employees might be implemented in the fourth quarter of 2023 (4Q23), based on a discussion held by President Ranil Wickremesinghe with State sector employees regarding the proposals included in Budget 2023.

Speaking in an interview with TV Derana, he said that President Wickremesinghe had held a discussion with State sector employees regarding the various forms of relief they would be granted, which he had noted could also include a salary increase in the last quarter of 2023.

State Minister Siyambalapitiya thus forecasts economic pressures to gradually reduce by the end of the second quarter of 2023.

According to the State Minister, between January and September 2022, Rs. 714.2 billion has been spent on State sector salaries, while Rs. 701 billion is estimated for salary payments in 2023. 

Although the Government decided to provide a monthly allowance of Rs. 5,000 to State sector employees in January 2022, the last time an overall increase in salaries in the State sector took place was in 2019, while these salaries had been increased by 107% between 2015 and 2019.

According to the Central Bank, public sector employees experienced a real wage erosion of 6.4% during 2021 compared to 2020.

Further, the State Minister said that the Government has not yet decided on the exact amount by which it will reduce the current State sector workforce of about 1.5 million, but added that new recruitments have been indefinitely suspended.

The Government reduced the retirement age of the State sector from 65 to 60 in a bid to reduce the State sector workforce.

Moreover, he said that the Government has decided to introduce a Voluntary Retirement Scheme (VRS) within State-owned enterprises (SOEs) that will be subjected to restructuring.

Further, he said that the Treasury expects to settle the remaining Rs. 195 billion due to contractors during the first few months of 2023 through the increase in tax revenue to the Government.

Tax revenue is estimated to increase to Rs. 3.04 trillion in 2023 from Rs. 1.85 trillion in 2022.