April 16, 2008 (LBO) – Sri Lanka’s central bank has criticised the practice of ruling party politicians of stuffing the state sector with their supporters, saying such over staffing is not only wasteful but creates worker shortages in the private sector. It said in its annual report for 2007 that unemployment in the island was coming down and is estimated to have declined to the lowest recorded level in the fourth quarter of 2007.
This indicates a “potential hindrance” to future higher growth prospects unless labour productivity is improved substantially, it said.
High economic growth in recent years, together with a sharp rise in public sector recruitments led to a significant reduction in the unemployment rate to 6.0 percent at end-2007 from a rate of 7.7 percent in 2005.
“The recruitment to the public sector on an ad hoc basis and the availability of non-performance based benefits in the public sector discourage unemployed youth from joining the private sector,” the bank said.
It also encourages those already engaged in the private sector to join the public sector.
“Increasing public sector employment, not only leads to over staffing of public services, resulting in higher underemployment and higher recurrent expenditure to