INSIGHT

COVID-19 an Eye-Opener for Sri Lanka to Gear Up for Population Aging

By 2030, Sri Lanka's working-age population will start declining. Photo credit: ADB.
By 2030, Sri Lanka's working-age population will start declining. Photo credit: ADB.

Published: 21 September 2020

The pandemic has called attention to the health and financial well-being of older persons.

Introduction

The coronavirus disease (COVID-19) pandemic has disproportionately affected older persons and more so those with co-morbidities. This unprecedented global health crisis has laid bare the importance of having suitable systems in place to care for older persons.

Sri Lanka has weathered the crisis well with 3,287 cases and 13 deaths (of which nearly half the deaths were above the age of 60 years) as of 21 September 2020. Yet, despite the low COVID-19 mortality rate, the country’s older population continues to be impacted by less visible but worrisome broader effects brought on by the pandemic (such as an increase in poverty and unemployment and impact of social distancing on psychological well-being), which are not health-related.

Sri Lanka, while still comparatively young, is aging fast. According to United Nations data, its share of those aged 65 years and above is set to increase from 7% to 21% (to 4.6 million) in just under 4 decades between 2007 to 2045, much faster than many other economies. An Asian Development Bank (ADB) report highlights that population aging is challenging the fiscal sustainability of public pension and health care system in the country. In response, policymakers need to ensure adequate benefits for the rising share of older people by supporting formal employment and gradually reforming pension and healthcare systems.

As the population grows older, there will be fewer working-age adults. By 2045, individuals aged 65 and older in Sri Lanka will be greater in number than children younger than 14, and its working-age population will start declining by 2030. These numbers are striking. Over time, an aging population puts pressure on the fiscal sustainability of health and pension systems, and a shrinking working population translates into lower growth, unless the country has policies that support productivity and high-quality jobs.

Growing Old Before Becoming Rich

Sri Lanka is not alone in the aging experience. In South Asia, however, it is demographically unique as the only country with an aged population. While the aging of its population resembles the experience of East Asian and Southeast Asian economies, Sri Lanka’s demographic transition is unfolding at a lower level of per capita income, i.e., it is growing old before becoming rich.

It is important to recognize that aging is not a “problem” per se, but rather it mirrors Sri Lanka’s development success on the education and health fronts. However, it can have far-reaching social and economic consequences if the social, physical, economic, and policy environment is not adapted to allow for this demographic change. 

As these demographic trends shape the country’s future, the role of policies does matter.  How can we spur action to proactively address the impacts of aging on peoples’ physical, mental, and financial well-being? Policy responses will need to be multifaceted to improve income security, enhance health and long-term care for the elderly, provide income security, remove constraints on growth, increase young and old people’s and female labor force participation, and promote the use of new technologies.

Policy Recommendations

Here are six recommendations:

1. Adapt the health care system to the needs of those aging.

The health sector has performed well throughout, which has not only improved life expectancy but also ensured that much of that increased longevity is spent in good health. Sri Lanka needs to safeguard these achievements. The system needs to continue to adapt to a changing epidemiological profile of an aging population and provide prevention, management, and treatment for noncommunicable diseases.

2. Integrate and expand existing long-term care services.

The existing long-term care-related services (health, social, and care) need improvement, integration, and oversight. A mechanism with clearly defined leadership and accountability for involved government agencies should be created and be functioning to ensure coordinated implementation. Workforce planning and training are needed to increase the numbers, quality, and capacity of the long-term care workforce. This includes training about long-term care for existing health and social welfare staff as well as developing a cadre to provide social care support in the home and community.

3. Expand pension coverage and benefit adequacy.

Personal savings and pension provide income security during old age. In Sri Lanka, considerable gaps exist in current income support coverage initiatives, with half the working-age population lacking access to a pension post-retirement. A coherent pension policy framework consisting of multiple pillars, including a nationwide contributory pension scheme supplemented by an expanded non-contributory Senior Citizen Allowance to ensure coverage and a minimum level of income for all older persons, may be considered. This way it addresses issues of both coverage and benefit adequacy for the whole population, including low-income Sri Lankans. For pensions to be adequate, it is essential that they keep up with inflation. Lack of adequate coverage and the problem of inadequate benefits in current pension schemes is likely to exert pressure on fiscal costs.

4. Improve female labor force participation and extend working lives.

Improving female labor force participation, which remains low despite high educational attainment among women, will be essential to buttress a shrinking workforce. Raise the labor force participation of women through, for example, expanding care services for children and senior citizens, extending generous parental leave benefits, raising awareness about sharing of household responsibilities, flexible work arrangements, and promoting flexible employment (with adequate worker protection). These can help not only bring more women into the workforce but also make them stay longer, mitigating the adverse growth effects of aging on the economy.

Surprisingly, the current effective retirement age norms in Sri Lanka date back to the 1950s. The country could reap a longevity dividend if older people are enabled to work longer by raising the retirement age and introducing flexible work arrangements to match the increased life expectancy through a well-thought-out pension strategy. For the pension system, this will help build buffers and pay for future increases in pension expenditures associated with aging.

5. Upgrade workers’ skills.

Policies and programs to systematically upgrade and diversify the skills of older workers will enable individuals to keep up with the needs of the time and acquire skills they may need for employment after retirement. With the aim of creating global technocrats and positioning Sri Lanka as the epicenter for human resource development in Asia, the government, in July 2020, declared 2021–2030 as the decade of skills development through which a transformational agenda will be finalized to ensure universal access to higher education.

6. Develop technologies.

Technological solutions are essential to improve productivity, labor force participation, and health; extend working lifespans as well as longevity; and create a more flexible work arrangement. Work from home experience during the COVID-19 lockdown has opened doors to new possibilities, such as hybrid work modalities that could encourage greater female labor force participation as well as extend the working lives of older persons.

COVID-19 is an eye-opener to improve policy responses to population aging. While Sri Lanka's state-funded universal health care service stood well in managing COVID-19, there still is an urgent need to strengthen programs and policies affecting older persons in the areas of health and care and support services. It is of high importance to ensure the income security of older persons through universal pension coverage and adequate entitlement levels.

The challenges brought about by aging provide unique opportunities (if we are ready to seize them) and considerable pressures (if we fail to act soon). When it comes to tackling this sort of demographic change, there is no one-size-fits-all strategy for policymakers, but regional experience, innovation, and constant adaption need to be factored in. The government, therefore, needs to articulate a well-designed medium-term plan to address the challenges of financing health and pension costs accompanied by measures to exploit the benefits of an aging population.

Resources

Asian Development Bank. 2020. Growing Old Before Becoming Rich: Challenges of an Aging Population in Sri Lanka. Manila.

Ask the Experts

  • Savindi Jayakody
    Associate Economic Officer, Sri Lanka Resident Mission, Asian Development Bank

    Savindi is responsible for ADB’s country programming, finance, and public financial management project processing and implementation, and macroeconomic analysis in Sri Lanka. She holds a master’s degree in Finance and Economic Policy from the SOAS, University of London.

  • Asian Development Bank (ADB)

    The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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