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Greedflation, employment and poverty

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The Sri Lankan cabinet has approved a significant 40% increase in the minimum wage, aimed at assisting workers struggling with the high cost of living amidst an ongoing economic recovery from a severe financial crisis that began in early 2022. This crisis, triggered by a sharp decline in foreign exchange reserves, resulted in notable inflation, currency devaluation, and a default on foreign debt. The minimum wage will escalate from 12,500 rupees ($42) to 17,500 rupees, with the added objective of supporting those in poverty.

According to the National Minimum Wage of Workers Act (No. 03 of 2016), the current minimum national salary stands at Rs. 12,500/-. A subcommittee, composed of representatives from trade unions and small to medium-sized businesses, recommended raising this minimum salary to Rs. 17,500/-. The Cabinet of Ministers has sanctioned the proposal to elevate the national minimum salary by Rs. 5,000/-, from Rs. 12,500/- to Rs. 17,500/- (Figure 1). Amendments to the Act are anticipated to implement this change, with the aim of increasing the daily minimum wage from Rs. 500/- to Rs. 700/-. (See Figure 1)


Labour Department statistics show that the monthly average minimum wage in the public sector was at Rs. 34,550 at the end of 2021.

Vajira Ellepola, the Director General of the Employers’ Federation of Ceylon, noted that the increase in the minimum wage didn’t necessarily translate to a rise in the basic salary for many private sector employees. This was because most private sector basic salaries already exceeded the minimum wage threshold.

For instance, if the current minimum wage is Rs. 12,500 and an employee’s basic salary is Rs. 20,000, a rise in the minimum wage to Rs. 17,500 may not automatically lead to a proportional increase in that employee’s basic salary.

According to the Central Bank, the Non-Performing Loan (NPL) ratio in the Household sector has been steadily rising due to the constrained ability of households to repay debts. By June 2023, the NPL ratio for households had increased to 17.7%, a significant jump from the previous year’s 14.1%. The Central Bank’s Financial Stability Review for 2023 highlighted that the proportion of non-arrears loans in the Household sector has been decreasing since early 2022, while arrears loans have been increasing, indicating a continuous decline in credit quality, likely to persist if adverse economic conditions persist.

State Minister of Finance Shehan Semasinghe had mentioned that 22% of the estimated 6.2 million household units had fallen into debt due to the economic crisis. Among these units, 24.3% were urban, 20.9% rural, and 42.8% estate households. He further noted that 60.5% of household units experienced a decrease in income, while 90% saw an increase in expenses due to the economic downturn.

Greedflation

Inflation may not be the only factor increasing the price of consumer goods. There is a noticeable trend where competing manufacturers are raising their prices at varying rates, not just in comparison to each other but also in contrast to the inflation rate.

Greedflation is the concept suggesting that the pursuit of higher corporate profits is adding to the problem of high inflation. This notion has shifted from being a less common viewpoint to becoming widely discussed in Europe and the US over the past year. Similarly, there is ongoing debate about this issue in Australia.

As households struggle with the increasing cost of living, certain large companies are generating record profits. Inflation is cooling in Sri Lanka. The most recent data showed the Headline inflation of March 2024 is 0.9 percent, down significantly from last March 50.3 (Table 1)

Not only are manufacturers adjusting their prices, but various entities throughout the supply chain—including shipping/transporting companies, wholesalers, and retailers—are also updating their pricing strategies accordingly.

While the yearly change in prices has decreased, the overall prices remain elevated due to previous increases. For instance, a carton of 10 large eggs still costs Rs650.00. This demonstrates that low-income households will continue to struggle with the already heightened cost of living. Hence, it is imperative that any increase in the minimum wage is supplemented with additional support measures, rather than being seen as a sole solution.

The true indicator for reducing inflation, according to some economists, is unfortunately tied to increasing unemployment. Now we’re facing the challenging reality that to curb inflation, we need to raise the unemployment rate.

Employment and minimum wages

Some people do not perceive a minimum wage as beneficial. One economic perspective suggests that minimum wages can hinder job creation by causing employers to avoid hiring more expensive labor while enticing more individuals to enter the job market.

Nobel laureate economist George Stigler expressed this viewpoint in 1976, stating that good economists typically do not support protectionist programs or minimum wage laws. However, other economists, such as David Card and Alan Krueger, have contested this notion. Their empirical studies in the 1990s found that increasing the minimum wage does not necessarily result in fewer jobs. Despite this, not all economists agree with Card and Krueger. David Neumark and William Wascher examined the evidence and argued that minimum wages do diminish employment opportunities for less skilled workers, particularly those directly impacted by the minimum wage. Consequently, there is no definitive academic consensus on minimum wages, and there is limited agreement on the conclusions drawn from the research literature.

Poverty and minimum wages

In Sri Lanka, the question arises whether minimum wage policies effectively alleviate poverty. However, research findings on this matter have been conflicting. A 2012 study conducted in New Zealand concluded that minimum wages do not necessarily lift people out of poverty. Similarly, an analysis using Irish data suggested that minimum wages might not be an effective tool for addressing poverty, describing them as “a blunt instrument.” Conversely, a 2021 study in the United States discovered significant positive employment outcomes for single mothers with young children, indicating that minimum wages could serve as a means to reduce child poverty. This issue holds particular significance in Sri Lanka due to the high prevalence of poverty among certain demographic groups.

Conclusions

In conclusion, the approval of a substantial 40% increase in the minimum wage by the Sri Lankan cabinet reflects efforts to alleviate the strain on workers facing the challenges of a recovering economy from a severe financial crisis. Triggered by a sharp decline in foreign exchange reserves, this crisis led to significant inflation, currency devaluation, and a default on foreign debt. The minimum wage rise from 12,500 rupees ($42) to 17,500 rupees aims to support those in poverty, but it may not proportionally affect all sectors due to existing salary structures.

However, the increase in minimum wage alone may not be sufficient to address the overarching issue of inflation. A broader approach, encompassing additional support measures, is necessary to mitigate the impact of the rising cost of living on low-income households. This is particularly crucial considering the steady increase in non-performing loans in the household sector, indicating ongoing financial strain. Furthermore, discussions around “greedflation” highlight the role of corporate profit expansion in exacerbating inflation, further underscoring the need for comprehensive policy responses.

In navigating these economic challenges, it is imperative to consider the interconnected nature of various factors, such as employment, poverty alleviation, and interest rates. While minimum wage policies may have differing effects on employment and poverty reduction, there is no definitive consensus, highlighting the complexity of the issue. Additionally, the management of interest rates and their impact on investors further underscores the need for careful consideration and coordination of monetary policies.

Ultimately, addressing these economic challenges requires a holistic approach that considers the diverse needs of different sectors of society and balances economic growth with social welfare objectives. It is essential for policymakers to remain vigilant and responsive to evolving economic conditions to ensure sustainable and inclusive development.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for. He can be contacted at saliya.a@slit.lk and www.researcher.com)



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Features

Rebuilding the country requires consultation

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A positive feature of the government that is emerging is its responsiveness to public opinion. The manner in which it has been responding to the furore over the Grade 6 English Reader, in which a weblink to a gay dating site was inserted, has been constructive. Government leaders have taken pains to explain the mishap and reassure everyone concerned that it was not meant to be there and would be removed. They have been meeting religious prelates, educationists and community leaders. In a context where public trust in institutions has been badly eroded over many years, such responsiveness matters. It signals that the government sees itself as accountable to society, including to parents, teachers, and those concerned about the values transmitted through the school system.

This incident also appears to have strengthened unity within the government. The attempt by some opposition politicians and gender misogynists to pin responsibility for this lapse on Prime Minister Dr Harini Amarasuriya, who is also the Minister of Education, has prompted other senior members of the government to come to her defence. This is contrary to speculation that the powerful JVP component of the government is unhappy with the prime minister. More importantly, it demonstrates an understanding within the government that individual ministers should not be scapegoated for systemic shortcomings. Effective governance depends on collective responsibility and solidarity within the leadership, especially during moments of public controversy.

The continuing important role of the prime minister in the government is evident in her meetings with international dignitaries and also in addressing the general public. Last week she chaired the inaugural meeting of the Presidential Task Force to Rebuild Sri Lanka in the aftermath of Cyclone Ditwah. The composition of the task force once again reflects the responsiveness of the government to public opinion. Unlike previous mechanisms set up by governments, which were either all male or without ethnic minority representation, this one includes both, and also includes civil society representation. Decision-making bodies in which there is diversity are more likely to command public legitimacy.

Task Force

The Presidential Task Force to Rebuild Sri Lanka overlooks eight committees to manage different aspects of the recovery, each headed by a sector minister. These committees will focus on Needs Assessment, Restoration of Public Infrastructure, Housing, Local Economies and Livelihoods, Social Infrastructure, Finance and Funding, Data and Information Systems, and Public Communication. This structure appears comprehensive and well designed. However, experience from post-disaster reconstruction in countries such as Indonesia and Sri Lanka after the 2004 tsunami suggests that institutional design alone does not guarantee success. What matters equally is how far these committees engage with those on the ground and remain open to feedback that may complicate, slow down, or even challenge initial plans.

An option that the task force might wish to consider is to develop a linkage with civil society groups with expertise in the areas that the task force is expected to work. The CSO Collective for Emergency Relief has set up several committees that could be linked to the committees supervised by the task force. Such linkages would not weaken the government’s authority but strengthen it by grounding policy in lived realities. Recent findings emphasise the idea of “co-production”, where state and society jointly shape solutions in which sustainable outcomes often emerge when communities are treated not as passive beneficiaries but as partners in problem-solving.

Cyclone Ditwah destroyed more than physical infrastructure. It also destroyed communities. Some were swallowed by landslides and floods, while many others will need to be moved from their homes as they live in areas vulnerable to future disasters. The trauma of displacement is not merely material but social and psychological. Moving communities to new locations requires careful planning. It is not simply a matter of providing people with houses. They need to be relocated to locations and in a manner that permits communities to live together and to have livelihoods. This will require consultation with those who are displaced. Post-disaster evaluations have acknowledged that relocation schemes imposed without community consent often fail, leading to abandonment of new settlements or the emergence of new forms of marginalisation. Even today, abandoned tsunami housing is to be seen in various places that were affected by the 2004 tsunami.

Malaiyaha Tamils

The large-scale reconstruction that needs to take place in parts of the country most severely affected by Cyclone Ditwah also brings an opportunity to deal with the special problems of the Malaiyaha Tamil population. These are people of recent Indian origin who were unjustly treated at the time of Independence and denied rights of citizenship such as land ownership and the vote. This has been a festering problem and a blot on the conscience of the country. The need to resettle people living in those parts of the hill country which are vulnerable to landslides is an opportunity to do justice by the Malaiyaha Tamil community. Technocratic solutions such as high-rise apartments or English-style townhouses that have or are being contemplated may be cost-effective, but may also be culturally inappropriate and socially disruptive. The task is not simply to build houses but to rebuild communities.

The resettlement of people who have lost their homes and communities requires consultation with them. In the same manner, the education reform programme, of which the textbook controversy is only a small part, too needs to be discussed with concerned stakeholders including school teachers and university faculty. Opening up for discussion does not mean giving up one’s own position or values. Rather, it means recognising that better solutions emerge when different perspectives are heard and negotiated. Consultation takes time and can be frustrating, particularly in contexts of crisis where pressure for quick results is intense. However, solutions developed with stakeholder participation are more resilient and less costly in the long run.

Rebuilding after Cyclone Ditwah, addressing historical injustices faced by the Malaiyaha Tamil community, advancing education reform, changing the electoral system to hold provincial elections without further delay and other challenges facing the government, including national reconciliation, all require dialogue across differences and patience with disagreement. Opening up for discussion is not to give up on one’s own position or values, but to listen, to learn, and to arrive at solutions that have wider acceptance. Consultation needs to be treated as an investment in sustainability and legitimacy and not as an obstacle to rapid decisionmaking. Addressing the problems together, especially engagement with affected parties and those who work with them, offers the best chance of rebuilding not only physical infrastructure but also trust between the government and people in the year ahead.

 

by Jehan Perera

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PSTA: Terrorism without terror continues

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When the government appointed a committee, led by Rienzie Arsekularatne, Senior President’s Counsel, to draft a new law to replace the Prevention of Terrorism Act (PTA), as promised by the ruling NPP, the writer, in an article published in this journal in July 2025, expressed optimism that, given Arsekularatne’s experience in criminal justice, he would be able to address issues from the perspectives of the State, criminal justice, human rights, suspects, accused, activists, and victims. The draft Protection of the State from Terrorism Act (PSTA), produced by the Committee, has been sharply criticised by individuals and organisations who expected a better outcome that aligns with modern criminal justice and human rights principles.

This article is limited to a discussion of the definition of terrorism. As the writer explained previously, the dangers of an overly broad definition go beyond conviction and increased punishment. Special laws on terrorism allow deviations from standard laws in areas such as preventive detention, arrest, administrative detention, restrictions on judicial decisions regarding bail, lengthy pre-trial detention, the use of confessions, superadded punishments, such as confiscation of property and cancellation of professional licences, banning organisations, and restrictions on publications, among others. The misuse of such laws is not uncommon. Drastic legislation, such as the PTA and emergency regulations, although intended to be used to curb intense violence and deal with emergencies, has been exploited to suppress political opposition.

 

International Standards

The writer’s basic premise is that, for an act to come within the definition of terrorism, it must either involve “terror” or a “state of intense or overwhelming fear” or be committed to achieve an objective of an individual or organisation that uses “terror” or a “state of intense or overwhelming fear” to realise its aims. The UN General Assembly has accepted that the threshold for a possible general offence of terrorism is the provocation of “a state of terror” (Resolution 60/43). The Parliamentary Assembly of the Council of Europe has taken a similar view, using the phrase “to create a climate of terror.”

In his 2023 report on the implementation of the UN Global Counter-Terrorism Strategy, the Secretary-General warned that vague and overly broad definitions of terrorism in domestic law, often lacking adequate safeguards, violate the principle of legality under international human rights law. He noted that such laws lead to heavy-handed, ineffective, and counterproductive counter-terrorism practices and are frequently misused to target civil society actors and human rights defenders by labelling them as terrorists to obstruct their work.

The United Nations Office on Drugs and Crime (UNODC) has stressed in its Handbook on Criminal Justice Responses to Terrorism that definitions of terrorist acts must use precise and unambiguous language, narrowly define punishable conduct and clearly distinguish it from non-punishable behaviour or offences subject to other penalties. The handbook was developed over several months by a team of international experts, including the writer, and was finalised at a workshop in Vienna.

 

Anti-Terrorism Bill, 2023

A five-member Bench of the Supreme Court that examined the Anti-Terrorism Bill, 2023, agreed with the petitioners that the definition of terrorism in the Bill was too broad and infringed Article 12(1) of the Constitution, and recommended that an exemption (“carve out”) similar to that used in New Zealand under which “the fact that a person engages in any protest, advocacy, or dissent, or engages in any strike, lockout, or other industrial action, is not, by itself, a sufficient basis for inferring that the person” committed the wrongful acts that would otherwise constitute terrorism.

While recognising the Court’s finding that the definition was too broad, the writer argued, in his previous article, that the political, administrative, and law enforcement cultures of the country concerned are crucial factors to consider. Countries such as New Zealand are well ahead of developing nations, where the risk of misuse is higher, and, therefore, definitions should be narrower, with broader and more precise exemptions. How such a “carve out” would play out in practice is uncertain.

In the Supreme Court, it was submitted that for an act to constitute an offence, under a special law on terrorism, there must be terror unleashed in the commission of the act, or it must be carried out in pursuance of the object of an organisation that uses terror to achieve its objectives. In general, only acts that aim at creating “terror” or a “state of intense or overwhelming fear” should come under the definition of terrorism. There can be terrorism-related acts without violence, for example, when a member of an extremist organisation remotely sabotages an electronic, automated or computerised system in pursuance of the organisation’s goal. But when the same act is committed by, say, a whizz-kid without such a connection, that would be illegal and should be punished, but not under a special law on terrorism. In its determination of the Bill, the Court did not address this submission.

 

PSTA Proposal

Proposed section 3(1) of the PSTA reads:

Any person who, intentionally or knowingly, commits any act which causes a consequence specified in subsection (2), for the purpose of-

(a) provoking a state of terror;

(b) intimidating the public or any section of the public;

(c) compelling the Government of Sri Lanka, or any other Government, or an international organisation, to do or to abstain from doing any act; or

(d) propagating war, or violating territorial integrity or infringing the sovereignty of Sri Lanka or any other sovereign country, commits the offence of terrorism.

The consequences listed in sub-section (2) include: death; hurt; hostage-taking; abduction or kidnapping; serious damage to any place of public use, any public property, any public or private transportation system or any infrastructure facility or environment; robbery, extortion or theft of public or private property; serious risk to the health and safety of the public or a section of the public; serious obstruction or damage to, or interference with, any electronic or automated or computerised system or network or cyber environment of domains assigned to, or websites registered with such domains assigned to Sri Lanka; destruction of, or serious damage to, religious or cultural property; serious obstruction or damage to, or interference with any electronic, analogue, digital or other wire-linked or wireless transmission system, including signal transmission and any other frequency-based transmission system; without lawful authority, importing, exporting, manufacturing, collecting, obtaining, supplying, trafficking, possessing or using firearms, offensive weapons, ammunition, explosives, articles or things used in the manufacture of explosives or combustible or corrosive substances and biological, chemical, electric, electronic or nuclear weapons, other nuclear explosive devices, nuclear material, radioactive substances, or radiation-emitting devices.

Under section 3(5), “any person who commits an act which constitutes an offence under the nine international treaties on terrorism, ratified by Sri Lanka, also commits the offence of terrorism.” No one would contest that.

The New Zealand “carve-out” is found in sub-section (4): “The fact that a person engages in any protest, advocacy or dissent or engages in any strike, lockout or other industrial action, is not by itself a sufficient basis for inferring that such person (a) commits or attempts, abets, conspires, or prepares to commit the act with the intention or knowledge specified in subsection (1); or (b) is intending to cause or knowingly causes an outcome specified in subsection (2).”

While the Arsekularatne Committee has proposed, including the New Zealand “carve out”, it has ignored a crucial qualification in section 5(2) of that country’s Terrorism Suppression Act, that for an act to be considered a terrorist act, it must be carried out for one or more purposes that are or include advancing “an ideological, political, or religious cause”, with the intention of either intimidating a population or coercing or forcing a government or an international organisation to do or abstain from doing any act.

When the Committee was appointed, the Human Rights Commission of Sri Lanka opined that any new offence with respect to “terrorism” should contain a specific and narrow definition of terrorism, such as the following: “Any person who by the use of force or violence unlawfully targets the civilian population or a segment of the civilian population with the intent to spread fear among such population or segment thereof in furtherance of a political, ideological, or religious cause commits the offence of terrorism”.

The writer submits that, rather than bringing in the requirement of “a political, ideological, or religious cause”, it would be prudent to qualify proposed section 3(1) by the requirement that only acts that aim at creating “terror” or a “state of intense or overwhelming fear” or are carried out to achieve a goal of an individual or organisation that employs “terror” or a “state of intense or overwhelming fear” to attain its objectives should come under the definition of terrorism. Such a threshold is recognised internationally; no “carve out” is then needed, and the concerns of the Human Rights Commission would also be addressed.

 

by Dr. Jayampathy Wickramaratne
President’s Counsel

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Features

ROCK meets REGGAE 2026

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JAYASRI: From Vienna, Austria

We generally have in our midst the famous JAYASRI twins, Rohitha and Rohan, who are based in Austria but make it a point to entertain their fans in Sri Lanka on a regular basis.

Well, rock and reggae fans get ready for a major happening on 28th February (Oops, a special day where I’m concerned!) as the much-awaited ROCK meets REGGAE event booms into action at the Nelum Pokuna outdoor theatre.

It was seven years ago, in 2019, that the last ROCK meets REGGAE concert was held in Colombo, and then the Covid scene cropped up.

Chitral Somapala with BLACK MAJESTY

This year’s event will feature our rock star Chitral Somapala with the Australian Rock+Metal band BLACK MAJESTY, and the reggae twins Rohitha and Rohan Jayalath with the original JAYASRI – the full band, with seven members from Vienna, Austria.

According to Rohitha, the JAYASRI outfit is enthusiastically looking forward to entertaining music lovers here with their brand of music.

Their playlist for 28th February will consist of the songs they do at festivals in Europe, as well as originals, and also English and Sinhala hits, and selected covers.

Says Rohitha: “We have put up a great team, here in Sri Lanka, to give this event an international setting and maintain high standards, and this will be a great experience for our Sri Lankan music lovers … not only for Rock and Reggae fans. Yes, there will be some opening acts, and many surprises, as well.”

Rohitha, Chitral and Rohan: Big scene at ROCK meets REGGAE

Rohitha and Rohan also conveyed their love and festive blessings to everyone in Sri Lanka, stating “This Christmas was different as our country faced a catastrophic situation and, indeed, it’s a great time to help and share the real love of Jesus Christ by helping the poor, the needy and the homeless people. Let’s RISE UP as a great nation in 2026.”

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