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Easing Sri Lanka’s fiscal burden: Who needs a state pension?

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Priyanka Jayawardena is a Research Economist at IPS with research interests in skills and education, demographics, health, and labour markets. Priyanka has around 15 years of research experience at IPS. She has worked as a consultant to international organisations including World Bank, ADB and UNICEF. She holds a BSc (Hons) specialised in Statistics and an MA in Economics, both from the University of Colombo. (Talk with Priyanka – priyanka@ips.lk)

By Priyanka Jayawardena

Public sector workers’ pensions are paid by tax revenue, with 12% of government revenue allocated for pensions.

An IPS analysis shows that public service pensions are not a progressive welfare programme, with half of the publicly funded pensions benefitting the top 20% wealthier group.

Implementing a contributory pension fund is crucial to creating a more sustainable and equitable retirement system.

The recent economic crisis has highlighted the need to address weaknesses in Sri Lanka’s economic policies for long-term structural change. One significant issue is the financial burden of public sector pensions. The Public Services Pensions (PSP) is the largest pension scheme for permanent public sector employees in Sri Lanka. However, its non-contributory nature has become a critical burden on the country, wherein pension benefits are funded directly from government revenue, supported by general taxation. With around 700,000 public sector pensioners, this system places a significant financial burden on the government. On top of that, an IPS analysis reveals that public service pensions are not a progressive welfare programme, with half of the pension benefitting the top 20% income bracket. Such obligations further exacerbate inefficient fiscal policies, constraining resources available for crucial areas like health and education services. This blog aims to provide a comprehensive overview of the current challenges and potential solutions for easing the pension burden in Sri Lanka.

Understanding the Current Pension Burden

As of 2023, the total PSP payments amounted to LKR 372.3 billion, which accounted for 7.9% of the government’s recurrent expenditure and 12.1% of its revenue. With over 1.35 million public sector employees, the financial demands are increasing, particularly for new pensioners who receive higher payments than existing and deceased pensioners. For example, the total pension payments have increased by 20.5% in 2023 mainly due to the net increase in the number of pensioners by 4.2%. This situation is unsustainable, particularly in light of the country’s constrained fiscal capacities.

Who Benefits from the Pensions?

The better-off people enjoy the lion’s share of the PSP benefits. Employing a framework developed by the Commitment to Equity (CEQ), the distributional analysis shows that around 50% of PSP benefits go to individuals in the top 20% income bracket, while only 11% of the benefits reach the bottom 40% (Figure 1). This is mainly because PSP beneficiaries are from the better-off segment – around 44% of PSP receivers belong to the wealthiest 20% of the population. . This analysis clearly shows that PSP is not a pro-poor spending programme.

Furthermore, public service sector workers represent 15% of the employed population and benefit from secure, stable incomes throughout their careers, unlike the 67% of Sri Lankans in informal, unstable employment. This raises the question: Should the government shoulder the social security of the most stable public sector employees?

Proposed National Contributory Pension Fund for Easing the Pension Burden

To address these challenges, the government has initiated the establishment of a Contributory Pension Fund to ensure an appropriate environment in which to spend pensioners’ retirement without burdening the country’s budget. The proposed fund would require contributions from employees and the government, creating a more sustainable financial structure for pension payments. Specifically, it is proposed that 8% of the employee’s basic salary and 12% from the government be credited to this fund. The proposed national contributory pension scheme would apply to individuals newly recruited to the government service.

Way Forward: The Role of Policy and Legislation

Addressing the PSP burden in Sri Lanka requires a multifaceted approach that includes structural reforms and a shift towards a contributory pension system. By implementing these changes, Sri Lanka can create a more sustainable and equitable retirement system that balances the needs of both current and future generations.

Establishing a National Contributory Pension Fund: Effective implementation of the proposed Contributory Pension Fund requires strong policy and legislative support. Although a contributory pension scheme was implemented in 2003 to strengthen the state finances, it was revoked in 2006. The government must enact laws that mandate contributions and regulate pension fund management. Regular reviews and adjustments to the pension system should be conducted to adapt to changing demographic and economic conditions.

Gradual transition to contributory scheme: Implementing a gradual transition from the current non-contributory system to a contributory scheme can help mitigate immediate financial constraints while setting the stage for long-term sustainability. New public sector employees could be enrolled in the contributory scheme, while existing employees might have the option to switch voluntarily, with appropriate incentives.

Enhancing pension fund management: Efficient management of pension funds is crucial for ensuring their sustainability. This includes adopting best investment management practices to ensure the funds generate adequate returns. Transparent and accountable governance structures should be established to oversee the management of these funds.

This blog is drawn from an analysis of ‘Progressivity and Pro-poorness of Taxes and Welfare Spending’ in the forthcoming Sri Lanka: State of the Economy 2024 report published by the IPS.



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Champa Stores Marks 70 Years of Trusted Service in Kandy

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Employees of Champa Stores in Kandy

A longstanding fixture in Kandy’s commercial landscape, Champa Stores marks its 70th anniversary this year, underscoring a legacy built on trust, reliability and consistent quality across a diverse range of products and services.

Founded in 1956 by Wimaladasa Weeraratne, the business traces its origins to a modest beginning when three brothers from Matara relocated to Kandy in the 1950s in search of opportunity. Their entrepreneurial drive would go on to shape a lasting contribution to the city’s commercial life.

While Wimaladasa established Champa Stores, his brothers carved out their own successful ventures. Dharmadasa Weeraratne founded Devon, while Daya Weeraratne established Bakehouse. Both enterprises have since become well-known names in the city’s hospitality and bakery sectors, with Devon further expanding to include the The Grand Kandyan Hotel. Today, all three businesses continue to operate under the stewardship of the family’s next generation.

Over the decades, Champa Stores has evolved into a prominent retail and service hub, offering a wide selection of products ranging from mobile phones and laptops to audio equipment, accessories and sports goods. Its printing division, in particular, has earned a strong reputation for delivering high-quality services in Kandy.

Despite its growth, the business has retained the personal touch that has endeared it to generations of customers. Longtime patrons point to knowledgeable staff, dependable after-sales service and a customer-focused approach as key factors behind its enduring appeal.

Currently employing over 50 staff members, the business is managed by Chapa Weeraratne, representing the second generation of family leadership.

As it celebrates seven decades in operation, Champa Stores stands as one of Kandy’s enduring family-run enterprises—demonstrating that a reputation built on trust and service can successfully span generations.

 By S.K Samaranayake 

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Dialog Voted Service Brand and Telecommunication Brand of the Year at SLIM-KANTAR People’s Awards 2026

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Dialog Axiata PLC, Sri Lanka’s #1 connectivity provider, announced that it has been recognised as the ‘Service Brand of the Year’ for the 5th time and the ‘Telecommunication Brand of the Year’ for the 15th consecutive year at the SLIM-KANTAR People’s Awards 2026, held on 18 March 2026. Voted by Sri Lankans through a nationwide consumer survey, the recognition reflects the continued preference for Dialog’s services and the trust placed in the brand across the country.

 Since its inception in 2007, the SLIM-KANTAR People’s Awards have been based on consumer sentiment across multiple categories, recognising brands and individuals through public perception as an independent measure of brand affinity.

Supun Weerasinghe, Director / Group Chief Executive of Dialog Axiata PLC said, “We are grateful for this continued confidence, which reinforces the responsibility we carry in serving millions of customers across the country. As we continue to evolve our services and digital platforms, our focus remains on delivering consistent, high-quality experiences while staying true to our purpose of empowering and enriching Sri Lankan lives and enterprises.”

As a recognition shaped by the voice of consumers across the country, these accolades reflect Dialog’s continued relevance in a rapidly evolving digital landscape, underscoring its role in supporting the connectivity needs of individuals, homes and businesses across Sri Lanka.

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ISRAs of Sri Lanka – Protecting Hidden Shark and Ray Hotspots

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Palk Bay ISRA

When you think of sharks in Sri Lanka, your mind probably goes to the sleek blacktip reef sharks gliding through the reefs of Pigeon Island. But what most people don’t realise is that Sri Lanka is home to over 100 species of sharks and rays—ranging from reef dwellers and open-ocean giants to mysterious deep-sea, with some juvenile bull sharks being found even in freshwater!. They’re scattered across almost every part of the coastline, from coral reefs and estuaries to muddy lagoons and inland waterways. Yet despite their presence, these fascinating creatures remain deeply misunderstood and largely unprotected in national conservation efforts.

Chances are, if you’ve eaten karawala (dried fish) in Sri Lanka, you’ve possibly eaten shark—without even knowing it. Shark meat often ends up in local markets with no species names, and no questions asked. But here’s the catch: unlike fast-growing fish like sardines or mackerel, most sharks and rays grow slowly, mature late, and have very few offspring. Some only give birth once every couple of years. That means that their populations are usually precarious and they are sensitive even to small-scale fishing operations, which push their populations into serious decline. And in Sri Lanka, while vessel sizes are smaller in comparison to many developed countries, the number of vessels combined with their fishing techniques has resulted in the depletion, and in the case of sawfishes, a likely local extinction.

That’s where Important Shark and Ray Areas (ISRAs) come in. ISRAs are a global science-based tool designed to designate places that matter most for sharks, rays, and chimaeras. They aren’t marine protected areas and don’t come with legal restrictions—but they highlight critical habitats based on rigorous scientific criteria. These include areas used for breeding, feeding, migration, or home to rare, threatened, or range-restricted species.

In 2024, after a thorough review and vetting process, five (of the seven) proposed areas from Sri Lanka were formally designated as ISRAs

Bathalangunduwa Island, located on the fringes of the shallow coastal Puttalam Lagoon and off the coast of Wilpattu National Park in northwestern Sri Lanka, qualifies as an ISRA based on the presence of the threatened Winghead Shark (Eusphyra blochii). This area meets two ISRA criteria: it supports a vulnerable species and functions as a reproductive habitat.

Palk Bay, a shallow, semi-enclosed water body shared between India and Sri Lanka, qualifies as an ISRA due to the presence of multiple important species. These include the threatened Shorttail Whipray (Maculabatis bineeshi), the range-restricted Sharpnose Guitarfish (Glaucostegus granulatus), and reproductive populations of the Grey Sharpnose Shark (Rhizoprionodon oligolinx). This was one of the few trans-boundary ISRAs covering both Indian, and Sri Lankan waters.

Pasikudah & Kalkudah, a coastal stretch in Sri Lanka’s Batticaloa District, is known for its coral reefs and nearshore shark activity. This ISRA qualifies due to the presence of threatened and range-restricted species, such as the Stripenose Guitarfish (Acroteriobatus variegatus).

Punnakuda Canyon, a deep-sea canyon located just offshore from Pasikudah & Kalkudah and beyond the boundaries of the coastal ISRA, qualifies based on the presence of threatened and range-restricted deep-sea species, including the Indian Swellshark (Cephaloscyllium silasi).

Pigeon Island, the only ISRA in Sri Lanka that overlaps with a Marine Protected Area—the Pigeon Island Marine National Park—qualifies due to the presence of threatened species and undefined aggregations, notably the Blacktip Reef Shark (Carcharhinus melanopterus).

These areas are already designated ISRAs. In addition to this Sri Lanka also has two “Areas of Interest”; Koddiyar Bay and Hikkaduwa.

While these ISRAs don’t enforce protection on their own, except for Pigeon Island, which happens to overlap with an already established National Park, they’re a vital starting point. They help guide where marine protected areas might be placed, where fishing regulations could be refined, and where development should tread carefully. For Sri Lanka, ISRAs offer a powerful chance to align conservation and fisheries planning before it’s too late.

Most importantly, ISRAs are created using available scientific knowledge. Organisations like Blue Resources Trust (BRT) were able to contribute to the designation of ISRA’s due to long-term monitoring of shark and ray fisheries across the country. BRT has built the largest dataset on Sri Lankan sharks and rays, thanks to contributions from the Tokyo Cement Group, the Save Our Seas Foundation (SOSF), the Marine Conservation and Action Fund (MCAF) of the New England Aquarium, the Hong Kong Ocean Park Conservation Foundation (OPCFHK), the Prince Bernhard Nature Fund, amongst others.

By designating our ISRAs, Sri Lanka now has the recognition to make smarter, science-led decisions for the ocean’s most vulnerable species.

As shark and ray populations decline under pressure from overfishing, habitat loss, and climate change, knowing where they still have a chance to thrive is the first step toward saving them. Through ISRAs, Sri Lanka can take the lead in showing how conservation and coastal livelihoods can go hand in hand.

To explore ISRA maps and learn more, visit: https://sharkrayareas.org

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