The official wage rate index for employees in the State sector remained unchanged over the past year, which may justify the significant increase in the cost of living allowance for public servants as stated in the 2024 budget.
In September 2023, the official wage rate index for public sector employees stood at 133.1 index points, the same level as it was a year ago when the country was facing economic turmoil and soaring consumer prices. The 2024 budget, presented last week, announced a Rs.10,000 increase in the cost of living allowance, raising it to Rs.17,800, effective from January 2024 but payable from April 2024.
During the budget presentation, President Ranil Wickremesinghe, who also serves as the Minister of Finance, highlighted that the State sector has not received a salary increment since 2015, except for the Rs.10,000 increase implemented by the previous government under his leadership. However, trade unions are still demanding a Rs.20,000 salary hike.
Under the current International Monetary Fund (IMF) program, the government faces the challenge of meeting high revenue targets while gradually reducing the overall budget deficit to below 3.5 percent of the Gross Domestic Product within the next few years.
Although economists and analysts have expressed concerns about the potential inflationary impact of the substantial salary increase and its impact on fiscal consolidation, the government maintains that it can raise public sector salaries without compromising the fiscal balance. The government has allocated a significant Rs.133 billion for the increase in the cost of living allowance for public servants, including pensioners who will receive an increase ranging from Rs.2,500 to Rs.6,025.
However, considering the high cost of living, depreciation of the rupee, and higher taxes, there are concerns about the feasibility of the budget proposals for both public servants and the general population.
