21 January, 2022

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Are Ministers & The Governor Misleading The Citizens & Even Their Superiors?

By Chandra Jayaratne

Chandra Jayaratne

At this challenging time for Sri Lanka, economically and socially, with high magnitude risks of precipitating a crisis that can easily destabilize the whole country, impoverish it and drive to starvation the poor and vulnerable segments and even lead to a national calamity following social unrest, are some Ministers and the Governor, misleading the citizens and even their superiors in governance? If so, do they not realize the impending risks, most recent examples from Lebanon and yet continue to mislead and take the country down a dangerous path, where one slip can mean disaster for the majority of the citizens and those yet unborn?

IMF has been made in to a “Goni Billa / Grease Yaka” by these Ministers and the Governor, and portrayed as an international institution waiting for an opportunity to strike, assist with regime change, go for the kill and swallow the sovereignty, independence and resources of the people in favour of the rich and powerful western nations! This plan they make out will be achieved by “IMF CONDTIONALITY”, described more or less as a suicide note cum last will in favour of the IMF.

To the contrary, this is how IMF describes “Conditionality[1]–“ When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid. These policy adjustments are conditions for IMF loans and serve to ensure that the country will be able to repay the IMF. This system of conditionality is designed to promote national ownership of strong and effective policies”.

Conditionality covers the design of IMF-supported programs—that is, macroeconomic and structural policies—and the specific tools used to monitor progress toward goals outlined by the country in cooperation with the IMF. Conditionality helps countries solve balance-of-payments problems without resorting to measures that are harmful to national or international prosperity. At the same time, the measures are meant to safeguard IMF resources by ensuring that the country’s balance of payments will be strong enough to permit it to repay the loan. 

The member country has primary responsibility for selecting, designing, and implementing policies to make the IMF-supported program successful. The program is described in a letter of intent, which often has a memorandum of economic and financial policies attached. The program’s objectives and policies depend on a country’s circumstances. But the overarching goal is always to restore or maintain balance-of-payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth and, in low-income countries, reducing poverty.

In addition, ‘GUIDANCE NOTE ON IMF ENGAGEMENT ON SOCIAL SAFEGUARDS IN LOW-INCOME COUNTRIES[2]’ of 14th June 2018 refers to;

The role of social safeguards in protecting vulnerable groups is an important element of the Fund’s engagement with low-income countries (LICs).

Reducing poverty, and more broadly promoting inclusive growth, helps support economic and political stability. For these reasons, achieving strong and durable poverty reduction was established as a key objective for Fund programs supported by the Poverty Reduction and Growth Trust (PRGT) and Policy Support Instrument (PSI)

Social safeguards represent a key policy tool to achieve this objective, and thus have an important role in both the design of LIC programs and policy discussions with LICs in Fund surveillance.

For the purposes of this note, social safeguards comprise the following:

* Commitments to social and other priority spending. Minimum floors on social and other priority spending should be included, wherever possible, in programs supported by PRGT facilities. Social spending is defined as spending on education, health, and social protection— with social protection comprising social safety nets (or social assistance) and social insurance. Other priority spending generally includes high-priority projects that support national poverty reduction and growth strategies.

* Specific reforms designed to protect poor and vulnerable groups, for instance by strengthening social safety nets and improving the tracking and monitoring of spending on such groups.

The Key Concepts described above are amplified as

* Inclusive growth versus pro-poor growth. While there is no universally agreed definition of the concept of inclusive growth, it generally refers to circumstances where growth is robust and broad based across sectors, and the benefits are widely shared. Growth is said to be pro-poor in relative terms if and only if the incomes of poor people grow faster than those of the population as a whole. Pro-poor growth can be the result of direct income redistribution schemes, whereas fostering inclusive growth requires effort to boost productivity and measures to mitigate growth-inequality tradeoffs

* Social protection consists of social safety nets and social insurance policies:

Social safety nets (or social assistance) are defined as “noncontributory measures designed to provide regular and predictable support to poor and vulnerable people.” They can include measures such as cash transfers, school meals, in-kind transfers (such as targeted food assistance), public work programs, and fee waivers (The State of Social Safety Nets, World Bank 2018).

Social insurance policies are typically financed by contributions and can include old age and disability pensions, maternity, unemployment, and health insurance.

* Other priority spending usually includes certain infrastructure spending that can be a development priority but may provide limited or no benefits to the vulnerable in the short term. Due to the country-specific nature of such spending, this note focuses more on social spending. Country teams, in close consultation with the authorities, need to exercise judgment when deciding on whether to incorporate other priority spending into program design.

Brookings Institute article titled ‘Managing developing countries’ sovereign debt’[3] states “The IMF determined early in 2020 that 29 of its most vulnerable members will be exempted from amortization and interest on their debts with the organization, during an initial period of six months that was later extended to 24 months (until April 13, 2022).

In turn, the G-20 offered a suspension of the debt service of the countries of the International Development Association (IDA) for the year 2020. This Debt Service Suspension Initiative (DSSI) potentially benefited 73 countries, but did not cancel the debt, which also continued to earn interest. The corresponding decision was adopted by the Paris Club and other major creditors, especially China. However, private creditors did not adopt it, as requested by the G-20, and some debtor countries did not use it for fear that their sovereign credit ratings would be negatively affected.

The IMF proposals underscored the need to improve the existing institutional mechanism—the so-called “contractual arrangement” based on the collective action clauses included in bond contracts—which was redesigned in 2014, and highlighting at the same time the growing problems associated with non-bond and collateralized debts, and the lack of transparency in this field.

It should be noted that the other possibility that has been on the table over the past two decades is the creation of a new institution that would support sovereign debt renegotiations. An additional possibility is doing so in the context of the IMF, as was attempted at the beginning of the century, if the debt panel in charge is independent from the board of the institution. The need for such a reform, called “statutory” in the debates, has been championed again by the UNCTAD during the current crisis.”

The above evidence supports the assertion that some Ministers and the Governor created “Goni Billa / Grease Yaka ” picture of the IMF, is only a figment of their imagination or a picture painted with personal or political interests.


[1] https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/28/IMF-Conditionality

[2] file:///C:/Users/User/Downloads/pp061418social-safeguards-guidance-note.pdf

[3] March 2021-Jose Antonio Ocampo- Chair – U.N. Committee for Development Policy 

Professor and Director, Economic and Political Development Concentration, School for International and Public Affairs – Columbia University

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Latest comments

  • 6
    0

    .Since the days of Sirima B, SL has been anti Western in the guise of a socialist state. I remember as a school boy, the much hyped Non Aligned movement, taught to us as the third force, led by our very own leader, challenging the West (or developed countries) but it turned out to be a club of despots, which fizzled out soon after with nothing achieved, apart from our relationship with China & other autocratic, even, terrorist regimes, such as, the PLO & that of Gaddafi’s. The subsequent JR’s UNP was pro US & capitalist by definition, but, apart from the rhetoric, capitalism & socialism became blurred under CBK & MR, although, the anti Western mindset remained with the average voter, promoted even now by Ministers, such as, ‘Modawansa’. So, we have been misled for quite some time & for the average man on the street, a change to IMF/Western ‘capitalist’ mindset would be a hard sell. We are comfortable with a Chinese takeover but not the ‘West’ or even the Indians.

    • 1
      0

      Not just Ministers & The Governors but all that got elected by the voters are Misleading The Citizens & Even Their Superiors….. yes … yes…. yes.
      .
      Just look at the Premier `s trip to THRUPATHI and recent trip to Italy ?
      .
      Just a big lie was droped down, but local máin stream media did not reveal it to its citizens.
      .
      Loads of printing materials are airlifted to Kenya – …. what happened to the investigative journalists in this country , which powerful journalist had guts the bravery to question what were the these hidden materials, publicly kept away from the very citizens (slaves) ?
      https://www.sundaytimes.lk/210418/news/sla-uplifts-102-tons-of-printed-material-to-uganda-but-refuses-to-give-details-440509.html

      And today, there were speculations that MAHINDA was supposed to leave the country for DUBAI, for what purpose etc is not in the media ….. there are also speculations that the bugger wanted to check his bank statements of secret deposits in dubai banks….
      .
      What is today transparent in this country ?
      :
      They attacked SORYSENA s govt, but they taught how to be transparent…..at least to some extent…

  • 11
    0

    Thanks to Rajapaksas. What 30 years of war couldn’t achieve, the family did it in no time.The reason to avoid IMF is not just austerity but IMF will demand going through our accounts books which may reveal more than what we are told. Rajapaksas printed trillions of LKR to cover the stolen stash.

    • 0
      2

      “IMF will demand going through our accounts books”
      Will it?
      Someone should tell Mr John Perkins.

      • 0
        0

        I guess in Lanka banks must be offering loans, looking at your pretty face.

        • 0
          0

          Even for a simple personal loan, banks request 3 to 5 years of bank statements, tax records, pay statements, house ownership verification —-etc—-etc. May be Chinese and Lankan banks offer at face value. Then you wonder why Lanka is bankrupt. Try telling Gita Gopinath.

  • 2
    0

    Most of the Ministers and Officers are bought or bribed or threatened by this Regime. Even many of the Monks are come under this group. However, there are a number of Businessmen, Drug dealers used the opportunity to bribe this family regime as well. Now it is a well known fact who sponsored Prime Minister Rajapaksa family visit to Thirupathy Hindu Temple? Today one Minister said even if Mahinda wants to leave they will not allow him to leave politics? Why? Because they need him as long as the rob the country. It is only Rajapaksas and Cabral have money on dollars.

  • 1
    0

    IMF means they will not allow country to live beyond their means. China loans for non productive Mattala, Stadia and ports puts country into debt trap filling pockets of corrupt robbers. Which method is better for the citizens or the robbers.

    • 0
      2

      dtg
      Nobody snared this country into borrowing.
      If at all it was JRJ who started a process of borrowing that has since snowballed.
      *
      “IMF means they will not allow country to live beyond their means.”
      IMF will not stop the super rich living off the labour of the population. It is all about the poor tightening the belt.

      • 2
        0

        SJ and DTG,
        Morning,
        1. “Nobody snared this country into borrowing.”
        It was ego or vanity of politicians, post May 2009, to build their image, that they are PRIME MOVERS OF DEVELOPMENT IN THIS COUNTRY, than any other rulers before (One upmanship!) for projects with no return on investment (RoI) and EIA too and at Commercial Interest, minimal grace period for commencement of repayment.
        Grace period allows the project to earn enough to self finance – Short-sightedness!
        2. There was no reason to borrow, as the most expensive “war” was over!!!
        If at all it was JRJ who started a process of borrowing that has since snowballed
        Disagree, as there was evidence during the 1960’s (FEEC’s) and early 70’s to borrowings and IMF intervention/assistance!
        Easy to blame everything on JRJ and get away!
        The current crisi is evidently due to (1) above, to satisfy a family ego. Vanity. It is repeated, now not only in borrowings but bungling the Agriculture of this country, rice self sufficient until last year.

  • 0
    2

    Which country has prospered by IMF meddling?

    • 2
      0

      Dear SJ,
      Here is one that prospered. Vietnam’s Success.
      International assistance : The country’s transformation was very much the product of the determination of its leadership and the hard work of its people, who now number 95 million. Along the way, the country sought and received financial and technical assistance from foreign governments and organizations, including the Asian Development Bank, the World Bank, and the International Monetary Fund. Advisers from the IMF have helped Vietnam improve public administration, tax policy, central banking, and statistics gathering. IMF assessments of the economy help Vietnam improve its credit rating, which draws foreign investment.
      https://www.imf.org/en/Countries/VNM/vietnam-raising-millions-out-of-poverty
      The essence is in : the product of the determination of its leadership and the hard work of its people.
      Not building shipless seaports, aircraftless airports, cricketless stadia, delegateless conference halls.
      So the fault lies in ourselves and the leadership, not the IMF or lending agencies.

      • 3
        0

        Further to above:
        Vietman recorded excess 25 billion$ reserves between 2019-2021
        while ours fell from 8 to 3 in this same period mainly a result of past loans being repaid.

        • 2
          0

          contd:
          In fact I would go so far as as to say that a bulk of our woes was the lack of conditions in the Chinese loans which pandered to the R’s egos to put us in this position. R’s were given summa money to spend some, and keep some. All power stations are working well while Norochchalai the only Chinese built one, has frequent breakdowns.

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