SL Growing Old Before Becoming Rich – ADB

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Sri Lanka (SL) is growing old before becoming rich, an Asian Development Bank (ADB) report titled “Asian Development Outlook 2022” and released recently (last week)  warned.

Sri Lanka has the highest proportion of older persons (age 65 and above) in its population of any country in South Asia, it said. “Considering the sizeable informal economy, which has no recourse to Pensions and Employment Provident Funds (EPFs), it is important to encourage savings and expand access to adequate pensions for the informal sector, which accounts for 70 per cent of total employment and to take steps to formalise the sector through regulatory reforms, the ADB advised.

While the pattern of ageing in Sri Lanka’s population is similar to that in East Asian and Southeast Asian economies, the country’s demographic transition is unfolding at a lower level of per capita income compared with economies in the aforesaid subregions, the ADB further warned.

Sri Lanka reached this advanced stage of demographic transition because of low fertility rates (2.2 per 1,000 women) and rising life expectancy (77 years) relative to some other Asian countries and also to those at a similar stage of economic development, the ADB publication said.

A declining working-age population will constrain economic growth, it added. As it’s, growth is expected to slow to 2.4 per cent this year (2022), from 3.7 per cent in the last (2021), the ADB said, before marginally picking up to 2.5 per cent in the next (2023). Another negativism was the current account deficit widening to 4.2 per cent last year (2021), from 1.3 per cent in the previous (2020), it said. Public debt expanded to 115.1 per cent of gross domestic product (GDP) last year, from 109.4 per cent in the previous.

“Ageing populations will require greater spending for pensions, healthcare and the provision of long-term care, but this will add to fiscal pressures,” the ADB warned. “Providing these services, however, will contribute to promoting investments and generating employment in the long term,” it added.

“Sri Lanka’s response to population ageing should be focused on improving productivity; raising labour force participation, particularly for women to enter work; increasing the retirement age and promoting healthy ageing,” the publication said.

 Encouraging more women to participate in the labour force can alleviate labour shortages and raise productivity. The participation rates of Sri Lankan women in the labour force remain well below those of men, the ADB said.

Policies to improve the participation of women in the labour force include parental leave, raising awareness on sharing household responsibilities, flexible hours, work from home and access to affordable care services, such as childcare and care and support services for persons with disabilities, including older persons. Policy initiatives to promote the entrepreneurship of women are also critical for closing Sri Lanka’s prevalent gender gap, the ADB said.

“To improve productivity, education and training systems should allow for learning beyond the usual academic training and facilitate skills upgrading throughout working careers,” it said. Advanced technologies can be used to create a more flexible workplace through telecommuting and improving health. These technologies can also extend working-life spans and longevity by helping older people overcome impairments and facilitate their social connectivity, the ADB publication said.

Sri Lanka’s retirement age was recently raised from 60 to 65 for state workers and from 55 to 60 for workers in the private sector. This initiative should be complemented not only by training programmes, but also by improving the primary and secondary preventive care for older persons, the ADB advised. Developing a system for community-based social care, enhancing home-based care services and the psychological well-being of older persons, and strengthening training in geriatric medicine and long-term care are equally important.

To defray the costs of these initiatives, the contributory pension scheme for older persons announced in the Budget Speech 2022 is a step in the right direction, said ADB. This will allow the responsibility of paying for retirement to be shared. Here, employees and employers both contribute to a defined percentage based on monthly earnings toward retirement. The extended retirement age would also help raise contribution rates in the medium term, with workers saving more before retirement and starting to draw down pensions at a later age.

By Paneetha Ameresekere