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