Ukraine war, Sri Lanka and IMF prescriptions

While an International Monetary Fund delegation is in Sri Lanka to hold further talks on a staff-level agreement, a preliminary step towards the final deal for the disbursement of a few billion dollars the government is desperate to obtain, war-torn Ukraine appears to have little difficulty in receiving IMF assistance running into tens of billions of dollars.

Despite the war which entered its sixth month yesterday, Ukraine was confident it could strike a deal for a US$15-20 billion programme over the next three to four years. In addition, donors have pledged more than US$ 80 billion to Ukraine to cope with the war-driven economic slide.

While Sri Lanka is expected to record a 5 percent contraction of the economy for the current year, Ukraine faces a 35 to 45 percent economic contraction. Like Sri Lanka, sections of Ukraine’s economy are facing bankruptcy. Last month, the state-run energy firm, Naftogaz, declared bankruptcy and announced a freeze on debt repayments. 
Yet, the IMF appears to be more inclined to channel the funds to Ukraine, the West’s linchpin or pawn to check Russia. Yes, there are conditions, but they are not as tough as countries like Sri Lanka have to fulfil. Ukraine’s GDP is US$ 156 billion, almost twice that of Sri Lanka’s US$ 80 billion. Ukraine’s population is also double Sri Lanka’s population of 22 million.

The Sri Lankan government’s recent moves indicate that tough IMF conditions are already subtly and sometimes aggressively being introduced. The recent increases in fuel prices, especially the 290 percent hike in the kerosene price from Rs. 87 to 340, point to the hallmarks of IMF prescriptions, which, of course, diligently carry an obscure footnote that the vulnerable segments should be protected. 

Apart from the merciless lifting of the subsidies and the outrageous abandonment of the state’s responsibility to protect the vulnerable segments of society, the government is also seen to be trimming the public sector and moving ahead with an IMF-placating programme to privatize loss-making state enterprises. 
Such a move is long overdue and necessary, for a government’s job is not to do business and earn profits or, in Sri Lanka’s case, suffer losses. Sri Lanka’s state-owned enterprises (SOEs) have been over the years incestuously raped and plundered by corrupt politicians, officials and those who masquerade as union leaders or self-styled protectors of state resources. 

From 1977 to 1994, to avail IMF assistance, the United National Party governments privatized the management of the state-run plantations. The move did drastically reduce the state’s fiscal burden. To counter resistance from trade unions and opportunistic opposition parties, the Ranasinghe Premadasa government devised a strategy called peoplization with employees being offered shares in the privatized or restructured entity. The present Ranil Wickremesinghe-led government would do well to adopt the strategy or similar strategies Chinese leader Deng Xiaoping adopted in the 1980s and 1990s to make China the global economic giant it is today.

Deng’s liberal reforms for a social market economy transformed the country’s state-owned enterprises from a debt-ridden burden into a powerful engine of growth within a few years. In what is called 60-70-80-90 progress, in China, the private sector, which includes 109 Fortune 500 companies and the once loss-making SOEs, contributes 60% of China’s GDP, and is responsible for 70% of innovation, 80% of urban employment and provides 90% of new jobs.

Deng’s China did not have to bow to the humiliating dictates of the IMF. Therefore, he could adopt a balanced economic reforms programme, with one foot on the accelerator and the other on the brakes.
But countries like Sri Lanka have long lost that luxury because of corrupt unstatesmanlike politicians and their mismanagement of the economy. Sri Lanka is kneeling before the IMF’s Washington altar, going behind intercessors and doing shanthikarmas to break the curse and have its prayers answered. 

Backed by Western nations, Ukraine is confident it could get the US$ 20 billion – one of the biggest assistance programmes -- from the IMF, a United Nations agency which claims to operate with unyielding independence, though Western powers have a stronger say in its decision-making. 
In a recent interview with Reuters, Ukraine’s Central Bank Governor Kyrylo Shevchenko said, “The IMF has always acted as Ukraine’s partner during the war.”

Wars and disasters are like honeypots to greedy capitalists. This was the gist of renowned socialist author Naomi Klein’s famous book The Shock Doctrine. She writes, “Not so long ago, disasters were periods of social levelling, rare moments when atomized communities put divisions aside and pulled together. Increasingly, however, disasters are the opposite: they provide windows into a cruel and ruthlessly divided future in which money and race buy survival.”

The beneficiaries of wars and disasters are mostly multinationals and big companies which salivate for profits.  In Sri Lanka, it was largely the mighty Chinese companies that rushed to profit from the corruption-ridden post-war reconstruction process. 
Applying Klein’s Disaster Capitalism theory to the Ukraine war, big construction companies of the West or from Russia if Ukraine capitulates to Russia must be ready with plans to make profits from the misery of the Ukrainian people. A conservative estimate puts that the rebuilding cost alone will be around US$ 200 billion at the present destruction level.

Already the Western arms industry is making a killing from the Ukraine war. It is not perturbed by warnings that the war is unleashing an international disaster in the form of a global food crisis that could cause economic genocide in poor nations. 

When countries were opening up after more than two years of lockdowns due to the Covid-19 pandemic, the last thing the suffering people all over the world want is a war that can disrupt food and fertilizer supply chains, shoot up food and energy prices, and slow down economic growth. But this is exactly what is happening now. The Ukraine war could have been averted, if only the West had set aside its geopolitical agendas, understood Russia’s security worries, and thought altruistically about the welfare of suffering people, especially in vulnerable nations.
Instead of channelling billions of dollars required to bail out nations suffering from economic hardships or alleviate global poverty, the West is pumping money into Ukraine’s war effort. On Wednesday, United States President Joe Biden pledged an additional $3 billion worth of weapons to Ukraine, taking the total US military aid and other assistance to that nation since the start of the war to US$ 50 billion. The amount will be much higher if we were to include the assistance provided by Washington’s western allies. The war chest swells while in the West people complain of the rising cost of living and energy prices. Certainly, food and energy prices would have been much less, if the West had not triggered the war. Yes, the Ukraine war did not start in February this year with Russia’s invasion. It began with the West-engineered 2014 coup which ousted Ukraine’s pro-Kremlin President. 
It appears Western leaders have mixed up priorities when they put geopolitics ahead of moves to alleviate hunger and economic hardships.