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Ageing of the population is one of the few certainties about
Sri Lanka’s long-term future. Although ageing does
not operate in isolation from other social and economic
forces, it is one of the few aspects of the future where
it is possible to make meaningful and reasonably accurate
projections well into the next century. At the same time,
these other forces are likely to be of greater relevance
to policy, but they cannot by their very nature be projected
into the long-term future with any accuracy.
While ageing and demographic trends are
not likely to be the most important trends shaping future
outcomes, they are the most predictable, and an ageing perspective
based on demographic forecasts can provide policy makers
with valuable insights on future challenges and potential
policy options. In Sri Lanka’s case, the expected
rate of population ageing will be unusually rapid in comparison
with other countries both in the region, as well as the
historical experience of the advanced economies of Europe
and North America. In comparison with the European countries
where this took 50 to 150 years, the percentage of people
aged 65 years and over will double from 7% to 14% in Sri
Lanka in les than 20 years. Similarly, the median age of
the population will increase rapidly from 25 currently to
reach 50 in less than sixty years, or less than one life
span.
The ability to take a longer-term perspective
with the demographic future does not mean that policy action
can be postponed. Sri Lanka has a short window of opportunity
during the next two decades in which steps can be taken
to modify existing policies, and develop new policy frameworks
to cope with and mitigate the potentially negative impacts
of population ageing on the country’s economy and
society. Measures can be taken which address both short-
and long- term policy goals in ways that are mutually reinforcing.
Separately, each of these measures are unlikely to have
much impact, but combined they will be much effective. If
those steps are not taken, and policy adjustments are not
made, it will be immeasurably more difficult for the country
to adjust or recover lost opportunities when the problems
are no longer undeniable and upon the country.
Much of the current discussion of the implications
of population ageing by senior Sri Lankan policy makers
and by the international financial institutions focuses
on reform of the existing pension system only. However,
population ageing will have impacts in all areas of the
economy and society. The changes in each sector will in
turn have implications for other sectors, and unless the
problem is tackled in a comprehensive manner, no single
set of measures focused only on one set of issues will succeed.
The current narrow focus is unlikely to lead to sustained
or effective reforms unless a broader perspective is taken,
which understands the interrelationships between each sector,
and which comprehends that the element of current pensions
expenditures may only be the smaller part of the potential
increase in fiscal pressures facing the government as a
consequence of population ageing, and which takes into account
the political and social feasibility of any reform options.
For example, pensions reform and the establishment of a
comprehensive pension system will not be possible for the
whole population without commensurate changes in labour
market policy, education and training strategies, and a
sustained improvement in the underlying rate of economic
growth and job creation. Similarly, if the experience of
other democracies is relevant, a pension system based on
individual savings accounts with no safety net or redistributive
element is unlikely to be socially or electorally acceptable.
This report attempts to identify the key
issues in each of the major sectors that are raised by population
ageing in developing countries and Sri Lanka, review the
literature, and to explore potential policy responses. It
is not meant to be comprehensive or final in its conclusions.
Given the importance of pensions policy in current discussions
in Sri Lanka, this area is also covered in greater detail.
Table of Contents:
- Overview
- Developing a Comprehensive Approach to Policy Analysis
of Population Ageing
- Demographic Background
- Domestic and International Macoeconomic Implications
of Ageing
- Ageing Populations and Labour Markets
- Education and Training
- Health
- Long-term Care
- Old-Age Income Security
- Issues in Pensions Funding
- Bibliography
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