Sri Lanka plans to scrap social security systems such as the Employee Provident Fund and Employee Trust Fund as part of austerity measures amid a severe economic crisis and 95% food inflation, as of Thursday. The International Monetary Fund (IMF) and the World Bank have proposed measures including doubling the value-added tax, removing fuel subsidies and raising electricity prices by 165%. They also propose to introduce a targeted remittance scheme, Aswesuma, to replace Samurthi.
However, this approach has met with criticism from various quarters. A series of 82 trade unions and an Oxfam report have raised concerns that these measures lead to targeting errors, costly bureaucracy, social stigma and corruption. To address these potential issues, a civil society campaign led by the Global Coalition for Social Security Platforms was launched to advocate for universal social security by 2030.
In a move to spur growth amid cooling inflation, the Central Bank of Sri Lanka (CBSL) has cut interest rates following careful analysis. The decision comes after the CBSL had earlier hiked rates to control inflation during the financial crisis.
The IMF’s $2.9 billion bailout has played a significant role in stabilizing the economy and boosting international bond prices. However, during their first bailout review, potential government revenue shortfalls led to a failed deal with the IMF. The failure could delay the release of the second tranche of funds to further support Sri Lanka’s economy.
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