2006年-世界发展银行全球_Sri_Lanka_-_Selected_Public_Expenditure_Issues_20032004_66页_4mb

Summary of Report No. 36630-LK1: Sri Lanka Public Expenditure Issues (2003/2004)

Core Content

This report summarizes the findings of a World Bank-led public expenditure review (PER) program conducted in Sri Lanka between 2003 and 2004. It outlines key fiscal and sector-specific expenditure issues, focusing on fiscal sustainability, pension schemes, public sector employment, and spending in health, education, social welfare, and irrigation. The report aims to provide a snapshot of the state of knowledge on these issues and supports the development of a more strategic and efficient budget process.

Main Views and Key Information

I. Introduction

• The report is a summary of background policy notes prepared under the PER program.
• The PER process involved collaboration between the World Bank, Ministry of Finance, and several other government ministries and institutions.
• The program was interrupted by the change of government in April 2004 and the tsunami, but resumed in late 2005.
• The main goal is to assist the government in aligning policies with resource allocation, improving the budget formulation process, and developing a Medium Term Budget Framework (MTBF) for 2005–2007.

II. Fiscal Policy and Debt Sustainability

Fiscal Sustainability

• The 2002 Fiscal Management Responsibility Act (FMRA) targets remain unmet.
• In 2004, the fiscal deficit was 8.2% of GDP, and public debt reached 105% of GDP.
• The fiscal situation is strained, with a significant portion of tax revenue used to service debt and pay civil service wages and interest payments.
• The government’s reliance on domestic borrowing has crowded out productive spending and private credit.

Key Challenges

• Tax revenue has declined from 22.3% of GDP in 1985 to 15.3% in 2004.
• The fiscal deficit has increased despite a reduction in total expenditures since 1995.
• Public debt is unsustainable, with the domestic debt ratio rising from 49% in 1999 to 56.3% in 2004.

Reform Priorities

• Reduce public debt: The primary deficit must be eliminated, and non-concessional borrowing limited.
• Reform wage and recruitment policies: Address overstaffing and inefficiencies in the public sector.
• Rationalize public spending: Link spending to poverty reduction and enhance the development impact of public expenditure.
• Improve performance of state-owned enterprises (SOEs): Restructure SOEs, allow commercial operations, and impose hard budget constraints.
• Strengthen tax administration and expand tax base: Focus on VAT and income tax, and reverse the decline in tax-to-GDP ratio.

III. Pension Schemes for Public Sector Employees

• The Public Service Pension Scheme (PSPS) is a significant contingent liability.
• The pension expenditure as a percentage of GDP is projected to rise, with the baseline scenario showing an increase from 2.2% in 2003 to 2.4% in 2004.
• The system faces challenges such as unsustainable long-term financial viability and the need for structural reform.
• Policy options include increasing the retirement age, introducing private pension options, and implementing a more sustainable funding mechanism.

IV. Public Sector Employment and Pay Issues

• Sri Lanka has one of the highest per capita staffing rates in the developing world (3.9 civil servants per 100 people).
• The wage bill is currently around 3% of GDP, but trends indicate a risk of increasing pressure on the budget.
• Challenges include overstaffing, salary compression (8:1), administrative fragmentation, and outdated processes.
• Reform requires political commitment, a strategic budget process, and addressing trade-offs within and across sectors.

V. Sector-Specific Expenditure Reviews

Health

• Sector performance has improved, but challenges remain in addressing the aging population and rising non-communicable diseases.
• Health expenditure as a percentage of GDP has declined, and there is a need for greater focus on prevention.
• Policy recommendations include improving service delivery and enhancing the effectiveness of health programs.

Education

• Education achievements have been significant, but access beyond the primary level and quality of education remain challenges.
• Public spending in education is below the global average, and the share of education expenditure in national income has declined.
• Policy development for the MTBF is needed to improve the quality of education and align spending with strategic goals.

Social Welfare

• The Ministry of Samurdhi and Social Welfare faces challenges in benefit incidence and social protection.
• Expenditure patterns show a need for reform to ensure equitable distribution and better targeting.
• Policy recommendations include strengthening the social protection framework and improving the efficiency of welfare programs.

Irrigation

• Public spending on irrigation has declined, and there is a need to re-examine the budget allocation and water resource management policies.
• The sector has a history of investment in major irrigation projects, but current spending is insufficient.
• Policy recommendations include improving the efficiency of irrigation projects and ensuring sustainable water management practices.

Conclusion

• The report highlights the urgent need for fiscal and expenditure reforms in Sri Lanka to ensure sustainability, efficiency, and alignment with poverty reduction goals.
• Key areas for reform include public debt management, pension system restructuring, public sector employment rationalization, and sector-specific spending reviews.
• The development of a Medium Term Budget Framework (MTBF) is critical to improving the strategic focus of the budget process and enhancing the impact of public spending.