• A look at the controversial salary hikes 

The Central Bank of Sri Lanka (CBSL) is once again on the receiving end of discontent from the public – this time not for its role in leading the country to its worst recorded economic crisis, but for the massive salary increment it recently gave its officials while others are suffering with no salary increment, probably since April 2022.

The report came out last week that the CBSL Governing Board had decided to increase the salaries and allowances of its employees by 27-70%, according to figures presented by numbers.lk.

According to numbers.lk, CBSL employees receive remarkably high salaries compared to similar top State positions; for example, an Office Assistant (KKS) at the CBSL receives a basic salary of Rs. 55,805, which is higher than that of an entry-level doctor (not an intern).

Also, it indicated that the parallel entry-level position (after training) at the CBSL – the Staff Class Grade 1 Officer – draws a salary four to six times higher than the parallel positions in key revenue-generating State departments, with a basic salary of Rs. 296,280 and a gross salary of Rs. 514,417.

Defending the decision, CBSL said that the decision to increase the salaries had been approved by the Governing Board under the triennial collective agreement entered into with the trade unions covering the period 2024-2026. 

Meanwhile, the Central Bank Executive Officers’ Union (CBEOU) issued a statement on Monday (26 February) stating that the salary hike had to be done to control the brain drain from the apex financial institution of the financial system.

The statement said that in 2023, nearly 100 officers had left the Central Bank to be employed at the World Bank and its affiliate institutions, the Bank of England, the Commonwealth Secretariat, and similar such institutions.

Questions of morality and special treatment

Speaking to The Sunday Morning, independent economist Dhanusha Pathirana said that the salaries of State workers had been suppressed over the past few years and had been increased by only a fraction of what the Central Bank had increased for its employees recently.

“We have to question the morality behind increasing their salaries by such large margins,” he said, adding that the Central Bank might try to justify this salary increase by saying that it had consolidated the economy and that its officials had higher demand in other countries.

However, he said that it was not just the officials at the Central Bank but specialised people who worked in all the other State institutions such as hospitals, universities, schools, and utility supply who were also experiencing a similar demand for foreign employment.

“Why is the Central Bank treated as a special entity when all other specialised workers have not been getting a salary increment?” Pathirana questioned. 

Moreover, he said that one-third of the population in Sri Lanka was suffering from poverty and noted the resulting widespread malnourishment under the current economic conditions.

He said that the Central Bank had implemented the domestic debt restructuring process specifically targeting pension funds while excluding the pension fund of the Central Bank itself, which received about 30% returns and had invested in short-term Treasury bills.

Pathirana further added that the draconian economic policies of the Central Bank had caused the redistribution of income from a large section of the population who were at the bottom of the income distribution in the country towards the financial sector.

“The profits of the financial sector have increased mainly because their bond holdings were untouched through the Domestic Debt Optimisation (DDO), so they have gained massive gains through capital gains because interest rates have come down. Now they are paying themselves after ripping off the majority of the public who are facing destitution under the current economic conditions,” he said.

State trade unions threaten to strike 

Speaking to The Sunday Morning, Sri Lanka Government Officers’ Trade Union Association (SLGOTUA) National Organiser Pradeep Basnayake said that salary anomalies largely existed in the State sector.

He said that when doctors, medical staff, and teachers went on trade union action requesting salary increments separately, their salaries had been increased by the Government, but other Government employees did not get the same benefits. He also said that the salaries of the CBSL staff had been increased by up to 70% as if they were living in a different economy while others in the State sector were suffering under the same economic conditions.

He said that salaries of other Government employees should also be brought to a similar, fair scale. “If Central Bank salaries are increased, then provide salary increments to others in a fair manner. Otherwise, we will also have to opt for trade union action to get the attention of the Government,” he said.

In the past few months, the SLGOTUA has been demanding a Rs. 20,000 allowance for all State workers but the Government has only agreed to provide Rs. 10,000 through Budget 2024 starting from April.

Basnayake said that the Government had failed to properly implement the Ranugge Commission Report which looked into preventing ad-hoc salary hikes to selected segments of the State service.

According to Basnayake, the last time the overall State service received a salary increment was back in 2014 while allowances were increased and decreased over the years, and since 2019 only an allowance of Rs. 15,000 had been provided to State service.

The take on social media

The Sunday Morning looked at what some of the experts and private sector individuals had to say about the Central Bank salary hike on X.

“As long as the CBSL doesn’t give all of us a salary decrease by printing money, I feel that all senior Government officials’ salaries have to be adjusted with market rates and market skills. Increments must be financed by downsizing the State sector which is tail-heavy with political appointees,” Advocata Institute Chief Executive Officer (CEO) Dhananath Fernando posted on his official account.

He said: “While CBSL is to be commended for bringing down inflation to 6%, it was the same CBSL that pushed inflation to 70%, claiming money printing has no causation for inflation. Hope CBSL would admit the deep crisis they created by throwing four million people into poverty and making all lives miserable.”

WSO2 CEO Sanjiva Weerawarana had posted: “Financial services sector does not pay anything like this for entry-level workers and most of the others. That includes private banks.”

University of Colombo Department of Economics Lecturer Umesh Moramudali said: “I don’t have a problem with CBSL salary scales (or other benefits they receive), but similar Government jobs should also have similar increases. Particularly, tax admin employees such as the Inland Revenue Department (IRD), medical officers, the Sri Lanka Administrative Service (SLAS), and academia.

“IRD salary scales need urgent attention. Without strengthening tax administration and recruiting more capable individuals to the IRD, we are not going to get out of our long-lasting tax problem. Without fixing the tax problem, we cannot get out of severe economic vulnerabilities,” he said.

Economist and CBSL Governing Board appointed member Anushka Wijesinha posted: “CBSL employees are not paid out of the Consolidated Fund (like SLAS officers) – it is CBSL’s own funds. Moreover, these increases are part of an established three-year revision cycle – the normal course of business. CBSL’s remuneration benchmark is the financial services sector – not SLAS.”

According to Section 5 of the Central Bank of Sri Lanka Act No.16 of 2023, the CBSL shall have administrative and financial autonomy while it shall be autonomous and accountable. 

The act states: “The autonomy of the CBSL shall be respected at all times and no person or entity shall cause any influence on the governor of the CBSL or other members of the Governing Board and Monetary Policy Board or employees of the CBSL in the exercise, performance, and discharge of their powers, duties, and functions under this act or interfere with the activities of the CBSL.” 

The new CBSL Act was brought in as part of the International Monetary Fund (IMF) programme as it aimed to buttress operational autonomy of the CBSL by preventing any form of Government representation or participation on the Governing Board or Monetary Policy Board as political influence over CBSL decisions was one of the main reasons which led Sri Lanka to its worst economic crisis.

CBSL salary hike not a result of providing autonomy

At a press briefing about ‘Aswesuma’ on Wednesday (28 February), State Minister of Finance Shehan Semasinghe said that the Central Bank had informed President Ranil Wickremesinghe that they were willing to give explanations about the salary hike before the Parliament.

“I informed them that the most suitable committee to give an explanation is before the Committee on Public Finance (COPF). We will be able to take further action based on what is revealed at the COPF,” he said.

He said that he was not willing to comment publicly about the matter as it was very complicated and would wait till the Central Bank officials spoke to the COPF to take any further action. 

However, the State Minister said that although some were trying to show that this was a result of providing autonomy to the Central Bank, the Government did not agree to that. Further, he said that some people were saying that the Central Bank was an institution that was governed under the purview of the Finance Ministry but added that it was not so under the new act.

Justice Minister regrets providing autonomy

Speaking to the media on Monday (26 February), Minister of Justice, Prisons Affairs, and Constitutional Reforms Dr. Wijeyadasa Rajapakshe said at a time when everyone including ministers had made sacrifices, the Central Bank, as the institution which was responsible for the downfall of the economy, was wrong in taking the arrogant decision to increase its salaries.

The Minister said that he regretted giving power to the Central Bank through the new act as the Central Bank was the institution which had the biggest responsibility for the economic crisis as it had avoided performing its duties.

“The officials can say that it was the Governor and the Monetary Board that took the decision, so we won’t blame the officials, but as an institution it is responsible,” he said.

Rajapakshe said that the Central Bank had informed them that it would present the reasons for the salary increment to the Cabinet next week and would also explain its reasons before the COPF.

The CBSL did not immediately respond to further queries by The Sunday Morning on the salary increments.