Dr. Ameer Ali,
Murdoch Business School,
In his attempt to find peace with trade unions, President Ranil Wickeremesinghe explained to their representatives that working with “one policy framework” (OPF) is the only option to pull the country out of its morass. It should now be clear that this OPF carries IMF seal. RW should at least be given credit for being tenacious in advocating IMF intervention since the time he was in the opposition during Gotabaya Rajapaksa’s (GR) presidency. Now that he is the President and there is no way he is going to step back from that alternative.
Even without RW’s commitment, IMF is the only choice available to seek help for any troubled or failed member of the neo-liberal family of open economies. IMF was created specifically for that purpose and its task is to discipline prodigal members and put them back on the right track. It is this exercise that is currently underway and RW’s OPF with his 2023 budget are therefore blueprints of IMF agenda. It is on that basis IMF agreed to extend emergency funding to the tune of $2.9 billion and that too in instalments, provided Sri Lanka comes to a settlement with its creditors regarding debt restructuring.
Once should not forget that IMF is also an unofficial debt collector for private creditors, several of whom are party to Sri Lanka’s debt. Once IMF funds are released there is the possibility of receiving another lot of $5 billion from other agencies such as the World Bank and the Asian Development Bank. RW and his CBSL Chief are hopeful that the funds would be made available without undue delay. In his latest address to the parliament, the President had told members that debt restructuring talks with India and China had been successful without revealing any details. India had already notified IMF that it would support Sri Lanka’s efforts at restructuring. However, accusations and counter accusations between the respective ambassadors of US and China in Colombo over this issue do not augur well for a speedy resolution.
Debt Cancellation or Reduction
In the meantime, 182 experts of whom many are non-economists, had called for cancellation of Sri Lanka’s debt and talks on debt negotiation. They have pointed out and quite rightly that private creditors own almost 40 percent of Sri Lanka’s debt stock and mostly in the form of International Sovereign Bonds (ISB), and that they receive 50 percent of the country’s external payments. “Such lenders” the experts stated in their memorandum, “charged a premium to lend to Sri Lanka to cover their risks, which accrued them massive profits and contributed to Sri Lankas’s first ever default in April 2022. Lenders who benefited from higher returns because of the “risk premium” must be willing to take risk. Indeed, ISBs are now trading at significantly lower prices in the secondary market. In this context, giving private bond holders an upper hand relative to sovereign debtors in the Paris Club and the IMF’s requested debt negotiations violates the basic principles of natural justice”.
Unfortunately, it is not natural justice but self-interest that is the lifeblood of the global economic order. Where is natural justice when one percent of the world population holds as much wealth as the rest ninety nine percent? True, several countries have cancelled their debt unilaterally, but have they prospered as a result? Unless the neoliberal global economic order is thrown out and a new order based on justice and fairness is introduced, there is no way countries like Sri Lanka could get out of their indebtedness. So long as countries wish to remain in the system, problems created by the system could only be resolved by applying the corrective mechanism that the system recommends. Debt restructuring and not cancelling is its recommendation. Period.
It is one thing to argue for debt reduction as CBSL’s Chief Dr. Weerasinghe had appealed to India and China. But it is totally another for experts to agitate for debt cancellation, because unlike in other countries, Sri Lanka’s debt problem is only one aspect a more complex crisis emanating from a system driven by ethnonationalism and a majoritarian political ideology that had given a blank cheque without accountability to managers of the system.
As long as borrowing and spending without accountability becomes the norm for governments, that practice would one day exhibit its real cost to the public. Sri Lanka is such a basket case. “Neither a borrower nor a lender be;/ For loan oft loses both itself and friend, and borrowing dulls the edge of husbandry”, counselled Polonius his son Laertes in Shakespeare’s Macbeth. The last few words of that counsel could may well be applied to the situation facing this country. Not only its husbandry but the entire economy is in tatters because governments without any accountability went on a spending spree with money they did not have. They even waged a war with borrowed money.
OPF without System Change
Coming back to RW’s OPF, the question is even if the expected funds are made available what and how much is it going to achieve? Although RW tried to inject a degree of confidence when addressing the parliament, the ground situation looks dire. For instance, for the first time in history shortage of funds has compelled the government to delay payment of salaries to higher grade staff. Central Bank Executive Officers Union, which is normally a conservative body, has now raised concerns over the inequities and other harms contained in RW’s high tax budget. RW’s reluctance to face Local Government Elections is further sign of the underlying economic pessimism.
The primary objective of IMF however, is to stabilize Sri Lanka’s macroeconomic foundation and put the economy back on growth path. But whether that growth path would be sustained to realize RW’s high-tech driven export-oriented turbo economy by the year 2048, without changing the existing socio-political and ideological paradigm is the challenging issue. It is the need to get rid of that paradigm and bring about SYSTEM CHANGE that the aragalaya youth rose in revolt, but suppressed by RW. Yet, he appears to have understood their message, but is unwilling or unable to translate that message into practice because he nis trapped by a political situation that will not allow him to tamper with the system. Already, one of his bold moves to tamper with it is provoking trouble.
The ideological base of the existing system is Sinhala-Buddhist nationalism and its political manifestation is Sinhala-Buddhist majoritarianism. It is this ideology and politics, backed by all the constitutions except the Soulbury one, that are at the root of decades of ethnic disharmony, riots, civil war, economic mismanagement, corruption, and today’s bankruptcy. To deny this link is to misread history.
It is at least to soften the rigidity of this ideological base that RW took the initiative to resolve the so-called national question. In his last visit to Jaffna, he promised Tamils that the controversial 13th Amendment, controversially authored by India, would be fully implemented. He has also conceded to allow national anthem to be sung in Tamil followed by a speech in Tamil at the forthcoming Independence Day celebrations.
Given the prospect of local council elections looming large these concessions appear to have fallen as manna from heaven to the demagogues of Sinhala Buddhist nationalism. Already, a member from one of the anti-RW-MR coalitions had written to the Mahanayakas reminding them that such concessions would lead to division of the country. Needless to point out that these prelates do not need any reminder from any political charlatan, because prominent members of the Sangha had been the architects and arbitrators of the system in operation. In the absence of any alternative and pragmatic program to counter IMF-RW OPF, ethnonationalism would remain the last resort to win electoral contests by competing coalitions. Even if RW were able to postpone elections the national question over the 13th Amendment would remain a hot potato and the system managers would use it at their convenience when the time comes. Without changing the system, the economy would continue to remain fragile and RW’s OPF is only an ointment to a deeper wound.