As Sri Lanka’s presidential and parliamentary elections approach, accusations are growing that politicians have contributed to the inefficiency of the state sector (under each other’s regime). This is in addition to claims by various organizations that Sri Lanka’s public sector deteriorated in the post-colonial period, and that the “bloated” public sector has become a burden on society and taxpayers. Many such organizations emphasize the need to reduce the size of government and cut government spending.

However, when we examine data across developed and developing world countries, we cannot support an argument that Sri Lanka’s (overall) public sector is either excessively large, or inefficient – ​​especially given Sri Lanka’s high Human Development Index (HDI ) and Sri Lanka’s very low government spending.

Sri Lanka’s public sector employment as a share of total employment averaged 14.9% over the five-year period to 2023. The table below compares this figure with the level of government employment in other regions.

Government employment as a share of total employment

We can observe from the table above that employment in the government sector tends to increase as economies develop. The distribution of public employment per sector varies depending on the region and national income level. On average, 72% of public sector employment is in non-market services in high-income countries, compared to 54% in low-income countries. In Sri Lanka, an estimated 85% of public sector workers are in non-market jobs (ie, jobs in commercial organizations). This suggests that even in high-income countries a significant proportion of government jobs are in state-owned commercial organisations.

From the table above, we can also observe that Sri Lanka’s government employment rate is comparatively high when compared to Asia Pacific and higher middle income countries. Sri Lanka’s government employment levels are somewhat closer to high-income countries and European and Central Asian countries, which are mostly welfare states. This is not surprising since almost all post-colonial governments focused on achieving a higher level of social welfare. In fact, Sri Lanka’s many social welfare programs have a history dating back to colonial times.

We can also evaluate whether Sri Lankan government workers are efficient (and thus not wasting taxpayers’ money) in delivering what they are supposed to deliver. Public servants are responsible for providing essential services that directly affect the lives of citizens and communities. This includes education, health care, transportation, social services and public safety. Successful delivery of these essential services results in the country’s HDI score improving. Sri Lanka’s current HDI score stands at 0.78, the highest in South Asia.

Another perspective we need to look at alongside the HDI score is the effective use of ‘finance’ to deliver government services. This can be evaluated by comparing the level of government (budgetary) spending. Sri Lanka has a track record of very low public expenditure (as a share of GDP). Over the ten-year period ending in 2023, average government spending was 18.8% of GDP (government spending has never exceeded 20% of GDP in recent decades). Sri Lanka is one of the 24 countries in the world with government expenditure of less than 20% of GDP. The table below shows some of these countries along with their HDI scores.

Government spending and HDI scores

Looking at the table above, it is not possible to say that Sri Lanka’s public sector is inefficient because it has successfully managed to achieve high human development under limited resources (or low budget expenditure). In the UK, public spending is 45% of GDP and public sector jobs are 17.3% of the country’s jobs. In the United States, where there is no free public health care system, the government accounts for 16% of the country’s employment while public spending amounted to 23% of GDP.

Achieving high HDI rating while maintaining a government cadre amounting to almost 15% of total employment, while managing many welfare programs within a government budget of less than 20% of GDP looks like a job well done. Sri Lanka’s public sector may not be perfect and may have many weaknesses that need to be reformed, but it cannot be said that the overall Sri Lankan public sector is inefficient.

(The writer is a Colombo based independent private market investment advisory expert and a handwoven entrepreneur. Opinions are personal. He can be contacted at [email protected] )