Lankan Presidential election will show if IMF is a boon or a bane  

By P.K.Balachandran

Colombo, September 19: The Sri Lankan Presidential election, to be held on September 21, will be a referendum on how the IMF has helped or hindered Sri Lanka’s recovery from the unprecedented economic crisis that struck the island nation in mid-2022.

More precisely, it will be a referendum on President Ranil Wickremesinghe’s decision to implement the IMF’s prescriptions given the opposition that these have generated in the country.  

And as the Brussels-based International Crisis Group (ICG) put it, the election will also indicate the degree to which the 2022 Aragalaya protest movement’s demand for a “system change” still resonates with Sri Lankans.

Recent opinion polls predict serious challenges to Wickremesinghe, who is standing as an “Independent” with an assortment of political groups as his supporters.  

Wickremesinghe’s election plank is the IMF package he had negotiated, with the backing of India, the Paris Club of donors and China. But the IMF package has come under severe criticism for its prescriptions which are seen by the opposition to have a disproportionately adverse impact on the poor while being soft on the wealthy.

However, the concern among Sri Lanka’s international partners is that a victory for an opposition candidate like Anura Kumara Dissanayake of the National Peoples’ Power (NPP) or Sajith Premadasa of the Samagi Jana Balawegaya (SJB) will upset the apple cart as these candidates seek a revision of the IMF prescriptions to make them suit the pockets of the poor, the constituency they are catering to.

In Western circles it is feared that the victory of the ultra-leftist Dissanayake will adversely affect the implementation of the IMF reform program and that Sri Lanka might have to go into a crisis again reaching out to the IMF for the seventeenth time in its economic history.

A senior IMF official in Sri Lanka actually warned that any shift in government policy would have to be “realistic and achievable within the timeframe of the program since the country is on a knife-edged path to recovery.”

However, the upside of any such situation will be that the IMF might get a chance to make important adjustments to craft a more inclusive, equitable reform program so that it is welcomed in the Global South as a benevolent organization and not an arm of Western imperialism.    

Opinion polls do not always reflect realties accurately, but the ones taken in Sri Lanka in the past few months do indicate widespread dissatisfaction with the economy. This is the cross that President Ranil Wickremesinghe is bearing though he has many solid achievements to show.

In opinion polls, Wickremesinghe is seen as being behind his two main rivals, Sajith Premadasa (SJB) and Anura Kumara Dissanayake (NPP). But even so, the general feeling is that the election could so close that the second or even the third choice may have to be counted. Each voter has three choices, first, second and third.

Wickremesinghe

Independent candidate Wickremesinghe has impressive statistics to show off. Comparing mid-2022 with 2024, the inflation rate has come down from 69.8% to 0.5%; lending rates are down from 29% to 8.25%; the price of a 12.5 kg cooking gas cylinder has come down from LKR 4664 to 3690; and diesel has come down from LKR 460 to 307 a litre.

Prices of food stuffs have also come down drastically: Wheat is down from LKR 420 to 160 per kg. Lentils are down from LKR 430 to 290 per kg.; Milk powder has come down from LKR1240 to 950 per kg; and chicken has come down from LKR 1506 to 1050 per kg.

Foreign exchange reserves have gone up from US$ 1.82 to US$ 5.65 billion. And government revenue had gone up from LKR 21 billion to 31 billion.  

Wickremesinghe said on Wednesday that the IMF will give the next tranche in two weeks’ time. He also said that Sri Lanka will be signing an agreement with private creditors to end its bankruptcy status.   

In contrast to Wickremesinghe’s ability to cite achievements, his rivals have only been able to highlight the income squeeze felt by the middle and lower income groups especially in the urban areas and the high prices that still prevail in the market.

His opponents struggle to articulate a clear vision or a convincing platform. All they say is that if voted to power, they will place the interests of the common man at the top.

Surprisingly, they do not promise a wealth tax on the rich. Increased cash transfer to the poor is all that they offer to the needy but without saying that such transfers will be better targeted so that only the really poor benefit.

However, some of their criticisms are valid such as the fact that the IMF facility amounts to only US$ 3 billion to be disbursed over a three-year period and that its prescriptions are soft on the rich while asking the poor to tighten their belts.

The IMF is not the only foreign entity to be worried about who will come to power. Regional power India, and global power US, also have reasons to worry. The ultra-leftist and nationalist leader Anura Kumara Dissanayake has talked about the need to restrict the import of consumer goods from India as these dominate the Sri Lankan market. He has also said that he will take away the 99 giant oil tanks at Trincomalee that were given to India decades ago for development and use. Dissanayake has said that he will float an international tender for them.

The Janatha Vimukthi Peramuna (JVP), which is the main component of the National Peoples’ Power (NPP), has been virulently anti-India for decades. It cannot change its spots so easily as anti-Indian nationalism has been its USP since its birth.

As an ultra-leftist (Marxist-Leninist) party, the JVP is anti-West and pro-China. This is not going to be liked by the US, which is keen on drafting Sri Lanka into its anti-China Indo-Pacific alliance.

The September 21 Sri Lanka Presidential election is the first in recent years when there is no “wave” in favour of one candidate or the other. The issues are deeply felt, but there is no popular anxiety to either to vote out or vote in, any candidate. This is keeping the candidates, voters and interested parties, both within and outside Sri Lanka, on tenterhooks.

If sitting President Ranil Wickremesinghe is elected, it will be more of the same. If Sajith Premadasa is elected, policies will be a pale imitation of Wickremesinghe’s with a few populist elements thrown in. But if Anura Kumara Dissanayake is elected, the apple cart may  be upset, though his non-leftist supporters who want “change” for change’s sake, expect him to be less doctrinaire and more pragmatic taking into account the realities in Sri Lanka and in the world it is part of.

END