When IMF targets become Sri Lankan law

A meeting between President Ranil Wickremesinghe and the IMF team at the Finance Ministry in March 2024

Even as Sri Lanka prepares for elections, laws are being rushed through a parliament without legitimacy. Among those many draft laws– the President in his Budget Speech in November 2023 said he wants to create or amend sixty new laws–one of the most notorious so far is the Economic Transformation Bill. If the citizenry is being devastated by the severe austerity measures imposed by the International Monetary Fund (IMF), this new bill seeks to legislate the very conditionalities and targets set by the IMF. 

Third World Sovereignty since decolonisation has always been circumscribed by international treaties and laws, including in relation to economic affairs. This has been the story of neo-colonialism where countries like ours suffered from the unequal trade agreements, including for example with the formation of the World Trade Organisation (WTO). Although these treaties are claimed to be part of the rules-based international order, the rules are stacked in favour of the powerful nations in the West like the US, which also break those rules as they wish. 
In this context, Sri Lanka’s comprador political elite and neoliberal think tanks have consistently promoted this so-called rules-based order emphasising the importance of the “rule of law”, and in the process reifying the interests of the West. The Economic Transformation Bill, however, descends to new lows, where the arbitrary targets set by the IMF itself are going to be made into law. The IMF is now going to be ruling Sri Lanka, not just by dictating national policies, but also through domestic law.

The President in his Budget Speech in November 2023 said he wants to create or amend sixty new laws–one of the most notorious so far is the Economic Transformation Bill

Economic Transformation Bill

Over the last two years since Sri Lanka turned to the IMF and started implementing its recommendations and then the conditionalities following the IMF Agreement of March 2023, it has become increasingly clear that Sri Lanka’s economic policies are not created in the Finance Ministry or for that matter at the Presidential Secretariat, but rather in Washington within the offices of the IMF and the World Bank. Indeed, if one wishes to follow Sri Lanka’s economic policies, one only needs to read the IMF Agreement and the World Bank’s Country Partnership Framework for 2024 to 2027. The benchmarks in the IMF agreement and the proposed laws as well as the programmes listed in the World Bank agreement are being followed to the dot.

In this context, the Economic Transformation Bill claims to provide for national policy on economic transformation, and sets up mechanisms such as commissions and institutions for implementation, while repealing the Board of Investments. The Bill is based on an ideological belief in prosperity through “export-oriented growth” with integration into the “global marketplace.” 

The World Bank’s push for agricultural exports and modernization without considering the importance of self-sufficiency in food and our small-scale farmers, is bound to lead to repeated food crises and dispossession; that too will not just be bad policies but now made law

Many of the provisions of this Bill are the arbitrary targets of the IMF and the reform proposals of the World Bank.
“The National Policy on Economic Transformation shall provide for – (a) the restructuring of the debt owed by the Government, that the - (i) Public Debt to Gross Domestic Production ratio shall be below ninety-five per centum by the year 2032 and thereafter … Central Government Annual Debt Service in Foreign Currency to Gross Domestic Production ratio shall be below four decimal half per centum by 2027 … modernise agriculture to boost farmer productivity, farmer incomes, and agriculture exports … Female Labour Force Participation to reach - (i) not less than forty per centum by the year 2030; and (ii) not less than fifty per centum by the year 2040 … Primary Balance in the Government Budget to reach two decimal three per centum of Gross Domestic Production until the year 2032 and at least two per centum of Gross Domestic Production from the year 2032 onwards …”

I quote the bill at length above, so we get a taste of its ridiculousness. There are many debates on the arbitrariness of these IMF targets, which I have argued are mainly there to serve creditor interests with the ongoing debt restructuring process. For example, are the IMF’s Debt Sustainability Analysis targets of 95% of Gross Domestic Product (GDP) in public debt and 4.5% in GDP in foreign debt servicing really sustainable, or do they merely serve creditor interests of minimal debt relief? Next, the current austerity push with a primary budget surplus (government revenues exceeding expenditure) target of 2.3% is way above the consistent budget deficits of Sri Lanka’s peer countries with higher growth. If such primary budget surplus targets are made into law, it will result in decades of economic stagnation, but serve the interest of creditors who will be assured repayment of their future loans.

Next, the World Bank push for agricultural exports and modernization without considering the importance of self-sufficiency in food and our small-scale farmers, is bound to lead to repeated food crises and dispossession; that too will not just be bad policies but now made law. Furthermore, without considering the myriad challenges of women’s labour, targets are arbitrarily being set to push women into the formal labour force; little social support without adequate social protection and horrible working conditions are what women will have to face.

The Economic Transformation Bill descends to new lows, where the arbitrary targets set by the IMF are going to be made into law; the IMF is going to be ruling Sri Lanka, not just by dictating national policies, but also through domestic law

Executive of the IMF

Where is Sri Lanka headed, and to what extent will the Government screw its own people to serve the neo-colonial global order?
Karl Marx had the following to say about the modern state in the Communist Manifesto: “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” Sri Lanka’s Executive President is taking that forward to new heights, of not just managing the affairs of the IMF–the guardian of global finance capital–inside the country, but making them into the law of the country itself!

The weeks and months ahead will be a time for the working people to put forward their vision for the state and sovereignty. In the meantime, what is the political opposition going to do? Are they going to merely plead in the courts, wait for the elections or come out to the streets?