CB Governor sheds light on grave ageing problem Sri Lanka yet to fathom

Dr. Indrajit Coomaraswamy
Pic by : Nisal Baduge

Sri Lanka has made its demographic transition well before making the economic transition in stark contrast to many other countries which have either made those shifts in concert or in a much balanced manner, making driving the country’s economy forward an uphill task, according to Central Bank Governor Dr.Indrajit Coomaraswamy. 

Hence Dr. Coomaraswamy argues Sri Lanka could no longer leverage labour as a source for driving growth as the numbers joining the labour force have been clearly coming down. 
Sri Lanka has a fast ageing population, and according to World Bank data, the share of elderly population over 60 years is expected to increase from 12.5 percent to 16.7 percent in 2021. By 2041, one out of every four is expected to be an elderly person, making Sri Lanka having the oldest population in South Asia. “Sri Lanka is almost unique. We have had our demographic transition before a major economic transition. Usually countries have this ageing process (demographic transition) much further down in terms of their development process. We have got this early,” Dr. Coomaraswamy opined during a work shop on ‘Continuous Professional Development’, organized by the Institute of Certified Management Accountants of Sri Lanka (CMA), last week. 
Dr. Coomaraswamy, a well respected economist, attributed this phenomenon, among other things, to educating the girl child who ultimately turns into a more career-minded person and delays giving birth to children.   

“One of the major causes is the success in educating the girl child. The fact that girls having very high participation rates in formal education means that they plan to marry later, they plan their families and all that have had positive effects but also brought us to this ageing process quicker than what normally expects,” he told a packed house of corporate executives. 

Countries which go through economic development journeys are supported by the demographic dividend—a natural process where increasing number of people joining the labour force, naturally driving the economic growth. 

“If a demographic bonus is available, it is very conducive for economic take off,” W. Indralal De Silva, a Senior Professor of Demography (Chair) and former Dean of the Faculty of Arts, University of Colombo, who has conducted extensive research into this area said in a World Bank study on the same issue few years ago. 
Given the gravity of the issue, ageing population could be considered the single most serious socio-economic issue faced by policy makers in Sri Lanka at this juncture and probably in the future.
The situation gets further aggravated by the absence of adequate social protection for elders, particularly low income families supporting the elderly. 
According to World Bank data, Sri Lanka’s existing pension scheme only covers an estimated 10 to 15 percent of the elderly who were employed in the formal sector. But the country has a large informal sector, which has no social protection whatsoever. This is completely a separate matter Sri Lanka will have to deal with sooner or later. 
Under these circumstances Dr. Coomaraswamy re-iterated the growth had to be driven by productivity and efficiency of the existing labour force, which are both challenging and time consuming. 

“So it has to be all about innovation, total factor productivity, and about competitiveness. (But) that is a much tougher challenge to drive growth through total factor productivity rather than based on labour augmentation,” he stressed. 

Though Sri Lanka has a fast ageing population, the longevity has also increased in recent times due to relatively higher quality of life, relative improvement in healthcare and health consciousness of the population.
As a result the policy makers are considering whether to raise the retirement age, which currently has become a popular debating point—both in state sector and private sectors. 
However, the current administration is attempt to bring labour from neighbouring markets to address this issue, which has now become a highly contentious subject matter in Sri Lanka.