Sri Lanka minister threatens mandated wage hike

May 26, 2008 (LBO) – Sri Lanka’s labour minister threatened to mandate a private sector wage hike the same day the island’s monetary authority said it was trying to contain ‘second round’ effects on inflation. The minister of labour, Athauda Seneviratne told our sister site vimasuma.com that the government had decided the private sector should raise wages by 15 percent to 25 percent.

He said the decision will be given legal effect through the publication in next week’s government gazette notification.

Sri Lanka’s inflation hit 25 percent in April and was at 20 percent levels for the past two years amidst heavy money printing to meet government expenses.

Politicians gave state workers fat salary increments of around 20 percent in the past two years in a blatant vote-buying exercise, helping drive up the salary bill to unsustainable levels.

The largest expense in the government budget – about half the revenue – is now the state worker salary and pensions bill.

In 2008 there was no state wage hike.

The Central Bank of Sri Lanka said in its May monetary policy statement Monday that international commodity prices were pushing up recent inflation and policy was tightened to contain