Ranil Wickremesinghe’s government was jubilant after the International Monetary Fund (IMF) approved a nearly $3 billion Extended Fund Facility (EFF). Ecstatic supporters of the President’s political party the UNP, lit fireworks outside its headquarters. Others who saw it for the grim reality of what it is, where more debt was heaped on an already burgeoning load of nearly USD 50 billion, criticised the celebrations as a crass act of ignorance.
It was Wickremesinghe’s duty as president to rescue the country’s economy from an abyss. He feels he has accomplished his duty by the country and announced Sri Lanka will no longer be called a bankrupt nation. He explained that the EFF will allow Sri Lanka to solicit more funds of up to seven billion dollars, expected to use to boost the country’s forex reserves.
Despite the President’s optimism, many feel we have walked into a deep debt trap set by the IMF and that there is no way out of the impending catastrophe. In their view, no country has emerged from IMF-sponsored economic reform except doom.
The IMF package is indeed a lifeline for the ailing economy, although, compared to international standards, the sum is meager. With the recognition from the IMF, the country will be able to negotiate with other lenders on acceptable terms in order to improve the economy to an acceptable level. However, the status quo will not be restored since Sri Lanka will have to go a long way to uplift the economy.
The Janatha Vimukthi Peramuna (JVP)criticised the government and the IMF. JVP MP Vijitha Herath told parliament we should be ashamed of seeking IMF help for economic revival. He argued that the IMF’s proposed solutions to the country’s economic woes were likely to be too harsh. This would hurt the poor the most. They also felt that the government was not transparent enough about the terms of the IMF agreement. They seem to think that Sri Lankans have no say in the matter. There is some truth to what he says, but what is the alternative? Can the JVP come up with a pragmatic solution to replace the IMF agreement?
Sri Lanka managed its affairs for a period of time sans external assistance during the tenure of the first Prime Minister D.S. Senanayake. Afterwards, almost all governments that secured power through the electoral process had no choice but to obtain various loans from the World Bank, Asian Development Bank, and others. Now with the IMF approval, the country will have to endure a few difficult phases before taking a sigh of relief. The second stage will be harder, while the third stage will be challenging.
The JVP’s prognosis about the ailing economy is the key to what it proposes to do to break out of the economic abyss.
Their prescription is to achieve self-sufficiency by increasing national productivity, and it is imperative that the country earns the much-needed foreign reserves through enhancing national productivity goals. In a competitive market, there will be no relief for the people under that approach. Instead, there will only be hope, which must be achieved in a very difficult way. To be competitive, we need cutting-edge technology. This means that the country must invest in the latest technology to increase production and efficiency. In addition, it must improve the goods and services quality. This would not only increase exports but also make them more efficient in the global market. Additionally, it will help create more jobs and improve living standards.
In order to make the economy viable, the country must have the necessary technological transfers in place to increase production at a low cost. We must open up the economy and depend on market economic trends based on the global geopolitical environment. It will be difficult to maintain a closed economy or protectionism at the speed the world moves today.
The second phase of the IMF-sponsored scheme will also prove to be quite challenging unless Sri Lanka works towards increasing its production to boost its income while minimising corruption to the core.
The government will now have an onerous task of fulfilling the IMF conditions which will require
Debt restructuring plans to be submitted by April.
The drafting of anti-corruption laws aligned with United Nations norms.
The government to take steps to increase its revenue as soon as possible.
The introduction of a wealth tax with a higher contribution from high income earners.
The introduction of a property tax in 2025.
Reducing inflation to 12%–18% by 2023.
Current import and export restrictions to be lifted by June.
Maintaining currency exchange rate flexibility.
Making the Central Bank more independent.
Introducing a strong social safety net.
The President told parliament on Wednesdaythat Sri Lanka received the first tranche of the bailout package from the IMF.
“This sets the stage for Sri Lanka to have better fiscal discipline and improved governance,” he said.
The IMF package is expected to catalyze additional support of $3.75 billion from the World Bank, the Asian Development Bank, and other lenders. It clears the way for Sri Lanka to refinance a substantial part of its $84 billion public debt.
China, Sri Lanka’s biggest bilateral creditor, agreed earlier this month to restructure its loans. This cleared the final hurdle to receive the EFF.
Sri Lanka also aims to reduce inflation to a single digit by mid-2023 and later to 4-6 per cent, Wickremesinghe said. The country’s national consumer price index rose to 53.6% in February.
The first tranche of the IMF bailout package is likely to be used for essential healthcare and tourism. Within the next few years, tourism will be one of Sri Lanka’s money-making ventures.
According to President Wickremesinghe, Sri Lankan officials will start a second round of talks with the IMF in April. The talks will cover the debt restructuring plan for bilateral, multilateral, and private lenders and bondholders.
In parliament, President Wickremesinghe asked for the opposition’s support to adopt the IMF bailout package, though it is not a legal requirement. I am not forcing anybody to support me,” he said, “but you could go through all the documents available and debate, discuss, and agree on a common program.”
He said that he had asked for cooperation on three occasions, but the opposition’s support was not forthcoming.
Opposition Leader Sajith Premadasa, meanwhile, agreed to debate the matter and said that there are many areas where they could work together with the President. However, there are areas where they disagree.
SJB MP Harsha de Silva, through a tweet, congratulated the president for his relentless effort to obtain the IMF package.
‘We often urged the government to contact the IMF but they refused. If they had gotten a rescue package earlier, the people would not have suffered so much’, he said.
However, in parliament, he said the Sri Lanka-IMF agreement has not been submitted. He said the document was vital to moving the debate forward in parliament.
Eran Wickramaratne, commenting on the president’s speech, said they could not focus on building the future while forgetting the past. Bringing the country’s plunderers to justice is imperative, he stressed while emphasizing its priority.
Ranil Wickremesinghe responded that the anti-corruption bill in line with UN conventions will be in place shortly and invited the opposition to study it with care and adapt it accordingly. He argued that the bill was in line with UN conventions and necessary to ensure transparency and accountability in the government. He also said that the opposition was welcome to review the bill and make any necessary changes.
Wickremesinghe also used his parliamentary speech to take swipes at his critics.
He said his critics suggested that he supported the Rajapaksas and defended them while carrying Namal Rajapaksa along the difficult terrain (the vine bridge) like Grusha’s baby in the Caucasian Chalk Circle. The President said now the world has accepted that I carried none other than mother Lanka to safety.
The President was applauded by the government benches as he quipped this in a lighter vein.
Furthermore, the opposition wanted the government to remove obstacles to a clean and democratic local government election. However, the government was adamant about the score and seemed reluctant to decide on elections until 2024, when the next presidential election is due.
The Elections Commission announced on Thursday that several bureaucrats attached to the Presidential Secretariat are trying to block elections, which is likely to have a snowball effect in time to come. JVP lawyers alleged that the President, the cabinet, and a few bureaucrats obstructed local government elections. They pointed out that the Elections Commission has set the election date for April 25, and there is still plenty of time to hold the election. They could not allow the Elections Commission to put off the election, toeing the government line.
The SJB and the JVP have not given up their enduring effort and are fighting relentlessly to force the government to hold elections, but to no avail. The government has already ignored a Supreme Court order that restrained the finance secretary from holding on to election funds allocated in the annual budget.
The government, instead of abiding by the Supreme Court’s directions, has now decided to summon the bench that delivered the order. This bench has been summoned to appear before the Parliamentary Privileges Committee for scrutiny.
This was after parliamentarian Premanath Dolewatte told the House that the Supreme Court judgment violates parliamentary privileges. Lawyers in Hulftsdorp and elsewhere in the country demonstrated against what they call a repulsive move by the government. Anarray of jurists and organisations worldwide have cautioned the government and called for it to cease making inroads into judicial independence and desist from undermining the judicial process since it could lead to people losing confidence in the judiciary. This has led to an outcry of concern from the international community too, as they fear a deterioration in the quality of justice and an undermining of the rule of law. In any case, the judiciary itself has to decide on the parameters within which it could extend its writ unless otherwise restricted by law.
Yet again, it has taken a different turn after the SJB general secretary filed contempt papers before the Supreme Court against the Finance Secretary who failed to follow the court’s directions.
Meanwhile, opposition party representatives, including the Leader of the Opposition, met with several diplomats in Colombo on Wednesday night. They briefed them on the current political situation and the local government elections’ fate.
Besides, the opposition and many employees in state enterprises are perturbed by the decision to embark on a privatization program for seven vital state-owned organizations, including Sri Lanka Telecom. This was brought up during a meeting with media personnel, during which the president asked why the government should do business when it is happening all over the world, in the UK, India, and elsewhere, and that the government could only regulate and maintain law and order while the others do business. So in other words, there will be a restructuring of important state-owned organisations, including the Ceylon Electricity Board and Ceylon Petroleum, adding three new retail sellers and the CEB breaking into many smaller companies, making the private sector the engine of growth as described by the government.
