Who’s afraid of the IMF

The details of the agreement with the International Monetary Fund (IMF) regarding our debt restructuring facility, have finally been made public and the debate in Parliament is ongoing. The persons, who designed the IMF framework at Bretton Woods in 1944, claimed the Fund would be an independent and objective body, subject to broad political constraints and limited by financial resources.

However, the limitation of the IMF’s role is obvious.Creditor countries, which provide the bulk of financing, will obviously retain control over how their funds are spent.

Countries that seek assistance from the Fund, on the other hand, are obviously in a much weaker position. They must necessarily sacrifice some policy autonomy in exchange for international financial assistance channelled through the organisation. This is the reality we Sri Lankans have to understand, regarding conditions placed on us by the IMF, to receive the bailout application we have long been expecting.We will therefore necessarily have to sacrifice part of our autonomy in exchange for financial aid made available to us.

Making a special statement in Parliament (26 April 2023) on the agreement with the IMF, President Wickremesinghe said Sri Lanka is expected to receive financial assistance of USD 3 billion within the next four years. He added the country could expect to obtain a total of USD 7 billion as financial assistance from various institutions following the conclusion of discussions.

He added that to receive the loan Lanka will need to enact a Public Finance Law and a Revenue Authority Law among other new legislations to implement aspects of the agreement with the International Monetary Fund (IMF).

The new laws, he said, would be drafted in consultation with the Opposition and called on members of Parliament to support the agreement across party political lines.During his short tenure, the President was able to eliminate critical shortages of basic food, to fuel to medicines, to rolling power cuts, which the country experienced during the first half of the last year. 

A large section of our people still face many pressing problems. Though inflation has been brought down, the cost of living is still way beyond the reach of ordinary folk. Many families continue to eat a meal less per day, due to insufficient income.Due to its indebted state, subsidies will not be available in the future and prices will depend on the vagaries of world market price fluctuations.

UNICEF reports almost half of children in our country already require some form of emergency assistance. The education of 4.8 million children, already severely hampered by two years of interrupted learning during COVID, is at risk as school attendance continues to be jeopardized. 

Children’s education is being hindered by the current crisis in many ways. Children no longer get the warm and nutritious school meals they used to have before the crisis. They also lack basic stationery, and teachers struggle with transportation costs.Trade unions are up in arms over the proposed sell-off of particular State Owned Enterprises. Yet, losses of SriLankan Airlines and Ceylon Electricity Board cost the Government around Rs 113-117 billion in the past eight months. 

The Ceylon Petroleum Corporation’s annual loss is close to Rs. 600 billion. No financial institution -IMF or any other- will accept the continuance of these loss-making enterprises. 
As a result, there is an urgent need to reform these bodies. Privatisation is one of the options which will have to be implemented whether the unions like it or not. Getting rid of these liabilities will free up the finances needed for at least children’s education and for improvement of the health services.

Our health care system-once an example to the world- is now on the brink of collapse. Surgical wards in government hospitals have had to be closed due to lack of basic medicaments, while vital surgeries are cancelled or postponed due to a lack anaesthetics.

 India recently privatized its national carrier -Air India- due to continuous losses. Yet, India was one of the countries which helped keep our economy afloat during the worst days of our financial crisis. It, therefore, begs the question, why Sri Lanka should keep an airline that is causing billions of dollars in losses, while India doesn’t?

Our country is now at a critical juncture, we seem to have turned the corner regarding the financial and economic crisis, with basics now available albeit in limited quantities and high prices. But if we do not work together, commence squabbling and indulge in back-biting, we face the prospect of facing a situation similar to that of yesteryear or worse. 

It is time to put aside petty party differences and work together and lift Sri Lanka out of the pit we ourselves dragged her into.