Social services


Sri Lankan trade unions call out IMF and World Bank’s dismantling of country’s social protection system in favour of ineffective targeting schemes

4 October 2023

As the fallout from Sri Lanka’s economic breakdown and severe austerity response worsens, an open letter from 82 trade unions in August raised the alarm on the latest plan to dismantle the country’s social security policies by submitting the Employees Provident Fund and Employees Trust Fund to domestic debt restructuring. With soaring inflation including 95 per cent food inflation, IMF-demanded measures such as doubling value-added tax (VAT), removing fuel subsidies and raising electricity prices by 165 per cent have left the population reeling. The Fund claims these impacts will be offset by a new assistance programme called Aswesuma, designed together with the World Bank, replacing Sri Lanka’s existing social protection system Samurdhi. However, critics fear this targeted cash transfer scheme will exhibit all the failures of similar “means-tested” programmes, including targeting errors, exclusion, corruption, costly bureaucracy and social stigma (see Observer Winter 2022, Summer 2019, Spring 2018, Summer 2017).

An April report from Oxfam showed that the Fund’s social spending floors regularly limited rather than secured social security spending while encouraging austerity cuts four times the size. The Bank is part of a multi-stakeholder initiative to achieve universal social protection by 2030, yet continues to promote widely criticised targeted schemes like in Sri Lanka. In response, a new civil society campaign led by members of the Global Coalition for Social Protection Floors launches in October, calling on the Bank and Fund to commit to supporting universal public social security systems instead of dismantling them.