The Treasury Secretary emphasised that Sri Lanka’s economic future depends on moving away from unsustainable stimulus-driven growth and focusing on structural reforms that enhance productivity.

Sri Lanka’s economic recovery and long-term growth prospects hinge on boosting productivity rather than relying on unsustainable fiscal and monetary stimulus, Treasury Secretary Mahinda Siriwardana stated during a forum organized by the Asian Development Bank (ADB) in Colombo. A key factor in this strategy, he emphasized, is increasing female labor force participation, which remains significantly low despite high levels of education among Sri Lankan women.

Sri Lanka’s labour force participation rate currently stands at 47.8 per cent, with female participation at just 30 per cent. “Labour productivity is a key factor of production, and the Sri Lankan labour market has faced a longstanding impediment of weak labour force participation, which is in turn driven by low female labour force participation,” Siriwardana explained.

Encouraging more women to enter the workforce and supporting female entrepreneurs in accessing credit could significantly enhance economic productivity, he added. Among the measures discussed at the event was the Women Entrepreneurs Finance (WE Finance) Code, a collaborative initiative involving regulators and financial institutions aimed at removing barriers to female entrepreneurship and credit access.

“Increasing female labour force participation would contribute to sustained economic growth, which is crucial for ensuring Sri Lanka’s fiscal and debt sustainability over the medium to long term,” Siriwardana noted.

Challenges Hindering Women’s Workforce Participation

Despite significant educational attainment among women in Sri Lanka, various barriers prevent their full participation in the labour force. Research has identified several supply-side and demand-side constraints that continue to hinder women’s entry and advancement in the workforce.

Supply-Side Factors:

• Household Responsibilities: Women bear a disproportionate burden of unpaid household and caregiving work, limiting their ability to seek employment.
• Skills Gaps: Some studies suggest that women may lack the skills most in demand by the job market, restricting their job prospects.
• Gender Discrimination: Women face biases during job searches, hiring, and promotions, reducing their opportunities for career progression.

Demand-Side Factors:

• Employer Attitudes: Some employers hold unconscious biases against hiring women, particularly in leadership roles or male-dominated industries.
• Legal Constraints: Rigid labour laws, inflexible work hours, and inadequate maternity benefits discourage employers from hiring women.
• Occupational Segregation: Women are often concentrated in lower-paying, informal-sector jobs with little job security or career advancement opportunities.
• Wage Discrimination: Even when employed, women tend to earn lower wages than their male counterparts in the same roles.

Prime Minister Harini Amarasuriya acknowledged these challenges, highlighting the lack of safe and reliable public transport as a major deterrent for women entering the workforce. Additionally, the high cost of scooters in Sri Lanka — often priced as much as a small used car due to heavy taxation — has further limited mobility for women seeking employment.

The Case for Financial Inclusion and Policy Reforms

According to a 2016 report of the International Labour Organisation (ILO), “female labour force participation rate in Sri Lanka has remained low between 30 – 35 per cent in the past two decades, which is surprising given the consistently high educational attainment levels and other social indicators of women in the country.”

As per a latest ILO study “Women at work Trends 2016” the global female labour for rate has decreased from 52.4 to 49.6. The corresponding figures for men are 79.9 and 76.1, indicating that worldwide, the chances for women to participate in the labour market remains 27 per cent lower than those for men.

To address these issues, Sri Lanka’s central bank has been working on financial inclusion initiatives, including collecting gender-disaggregated data to better understand female participation in the economy. The WE Finance Code is expected to facilitate access to credit for female entrepreneurs, providing them with the necessary capital to start and expand their businesses.

Experts suggest several key policy interventions to boost female labour force participation:

• Expanding Skills Training Programs: Ensuring women receive training in high-demand fields can help bridge the skills gap and improve their employability.
• Promoting Gender Equality in the Workplace: Implementing policies to eliminate hiring biases and enforce equal pay can improve women’s job prospects.
• Enhancing Work-Life Balance: Flexible working hours, remote work options, and better maternity benefits can encourage more women to join and stay in the workforce.
• Investing in Childcare Services: Access to affordable childcare facilities can help women balance work and family responsibilities, reducing barriers to employment.
• Socializing Maternity Benefits Costs: Employers often hesitate to hire women due to the costs associated with maternity leave. Government policies that distribute these costs more equitably could encourage female hiring.

A Broader Economic Perspective

Sri Lanka’s history of economic instability, marked by multiple currency collapses and inflation crises, has been exacerbated by excessive monetary stimulus and fiscal mismanagement. Critics argue that the country’s reliance on stimulus measures — such as the aggressive tax cuts in 2020 — led to the eventual sovereign default.

(Classical economists like Friedrich Hayek have long criticized the Keynesian approach to monetary stimulus, arguing that such policies often lead to inflationary cycles rather than sustained growth. Hayek warned that expanding the money supply to drive short-term economic gains ultimately results in long-term financial instability.)

Recent economic data suggests that Sri Lanka’s economy has begun recovering following a period of strict fiscal discipline and monetary stabilization. However, calls for renewed monetary accommodation have raised concerns among experts about the risks of repeating past mistakes.

The Role of Migration and Informal Employment

The low participation of women in Sri Lanka’s formal workforce has contributed to significant outmigration, particularly among women seeking employment opportunities in the Middle East. Millions of Sri Lankans have left the country in search of better wages and working conditions, especially in the wake of economic crises.

While migration provides a source of foreign remittances, it also reflects the lack of viable employment opportunities at home. Many women who remain in Sri Lanka are employed in the informal sector, where they face precarious working conditions, lower wages, and limited social protections.

The Treasury Secretary emphasised that Sri Lanka’s economic future depends on moving away from unsustainable stimulus-driven growth and focusing on structural reforms that enhance productivity. Increasing female labour force participation is a key component of this strategy, offering a sustainable pathway to economic resilience and growth, he said.

Siriwardana said that to achieve this, the government, private sector, and financial institutions must work together to remove barriers to women’s employment and entrepreneurship. He added that by fostering an inclusive and equitable labour market, Sri Lanka can harness the full potential of its workforce, ensuring long-term economic stability and prosperity.

As Siriwardana emphasised, “Sustained economic growth is critical for Sri Lanka’s fiscal and debt sustainability. Encouraging more women to participate in the workforce is not just a social issue but an economic imperative.”