By Rusiripala Tennakoon –
Today many are talking about going to IMF. During their usual tête-à-tête people talk about fuel queues; power cuts; gas shortages etc. and most of them think that we have missed a panacea in not seeking IMF assistance to mitigate the hardships, repeating the often-heard cliché advice presented to them as a good mantra. The bombast is coming from politicos and some posing as veterans in the game making the gullible swallow the crap under the desperate circumstances faced by all without going deeper into the rationale. This situation generally existent all over, is exacerbated by the political theatrics in play. It is necessary to view it in an unprejudiced sense to properly assimilate things freed from proverbial ostrich distortions.
What is this commotion about “Going to IMF”? We are already with the IMF as a member country enjoying all privileges any member is entitled to. We are in the borrowers list of the IMF having obtained a loan in June 2016 to the value of 1.1 Bn. SDR equivalent to 1.5 Bn USD (our second largest facility), since we became a member of the IMF in August 1950. The repayment of this loan (Extended Fund Facility) extends till 2028 beginning 2020. The IMF is conducting its annual member surveillance under the Article IV consultation program last of which was concluded very recently, on 25th February 2022. It is also relevant to note that Sri Lanka obtained its highest assistance from the IMF in 2009 when the current Governor of the CBSL was serving as the bank’s then Governor. It was a facility of 2.5 billion USD under a Stand by Arrangement during the period when our country and the economy was very badly hit due to the ongoing terrorist war.
The quacks as well as some economic maestros keep chanting that we have no way out of the current embroil without going to the IMF. They portray things as if we have never gone to IMF for assistance and try to slander that the Governor CBSL is refusing to go to IMF because there will be some repercussions arising out of a borrowing request adversely affecting the Governor or our governance. This balderdash must be clarified before anything else.
Each time we seek assistance, the IMF probes about our internal affairs and point out, and sometimes lay down conditions, for granting such facilities, recommending corrective steps and measures to be taken by us. In 2009 we were subject to this procedure before the IMF gave us the facility. In 2016 under the Yahapalanaya regime (Ranil, Eran, Harsha et-al) when they applied for the EFF, the IMF went through the same process before granting the facility. It has to be noted that Sirisena-Ranil govt. sought this facility at the time in a normal background with no Pandemics or Tsunamis. The current Govt. came into power in 2019. What is there for the Government to hide from the IMF between 2019 up to now?
The only query that the IMF will raise would be about the violations of the Yahapalana regime and their failure to introduce the reforms for the Heavily loss making SOEs and about certain despicable events like the CBSL Bond Scam where the charged CBSL ex-Governor is in self-exile evading arrest. I was bewildered to see recently in one of the TV shows how some of the opposition critics were shouting demanding that the banking sector should be safeguarded. During the time of ERAN and Harsha, we saw how the Parliament exposed in the COPE committee how the Peoples Bank has plundered thousands of millions in an alleged computerization project. Their govt. appointed Directors and officials responsible for the violations attempted to defend those and totally ignored any follow up actions recommended by the COPE. They have to be reminded how they allowed these to continue even after some of their own appointed Board Members complained to their Prime Minister and tendered resignations. These were head line carrying news which no one can deny.
The COPE raised several issues about releasing of vehicles to departing executives as parting gifts to take home. COPE pin pointed instances of wrongful payments on account of unauthorized service extensions given to a CEO hired on contract who has continued as a contract employee for over 15 years. That is how banks were safeguarded during their regime. Now when the Central Bank tries to introduce safeguards to prevent the banks from falling into insolvency by continuing to grant unlimited facilities to heavily loss making SOEs, opposition MP Eran Wickramaratne sees that as a danger to the banks! What type of prudent banking is that?
In the meantime, they go public stating that the Government is Bankrupt. (Front page sub headline news in daily FT, of 3rd March). Whose interest are they serving? They want to announce to the whole world that Parliamentarians like them are confirming & vouching the alleged bankruptcy. Is this Patriotism OR National Mindedness? This is pure and simple political hypocrisy. Public who look at things analytically know this. The correct information in this regard, however, will gradually seep down to the level of the deceived public.
Their claim and shout about the depleting foreign reserves position of the country is equally unfounded. We are aware that the Sirisena-Ranil government messed up the economy of the country and did not start any sustainable project to bring in new foreign exchange income into the country. We were totally kept dependent on the Foreign Remittances coming from the overseas employed and the income from Tourist Industry as the prime source of income into the reserves. Our export income from traditional as well as non- traditional sources remained static as they were before. The economy had to support a fixed average monthly import bill of 1.5 Bn USD. When the Sirisena-Ranil regime was defeated the Reserves were around 7.2 billion USD.
Covid pandemic broke out towards the latter part of 2019, soon after the new government was elected. The whole world was affected. Our export income fell. Remittances from overseas gradually came down. Tourism income virtually became Zero. Our imports bills increased heavily to support the new demands for prevention and caring for the Pandemic. The normal imports continued for some time before measures were taken to control the non-essentials. Measures had to be taken to prevent the breakdown of the economy and to allow the industries and the market forces to survive under drastic conditions. Central bank had to introduce several concessions including loan moratorium periods at a huge cost to the treasury. With no sufficient replenishments the reserve position naturally declined.
The debts taken by the previous governments had to be serviced to keep our reputation as well as our market acceptability for future borrowings. All the predictions these deceitful pretenders made regarding our ability to repay the debts falling due and meet other obligations were proved phony. Even their forecast about the IMF surveillance report became a delusion.
Their former leader now consigned to oblivion by the voters of this country was making a hellish hue and cry about the pending IMF report and demanding a debate on it even before it was published. There is nothing to be surprised about their approach (although now divided as UNP&SJB) because they paid in millions of dollars to foreign agencies to get their policy statements drafted. Their Oasis was the Howard School Economics and fee levying agencies such as the HDIC. They were so dependent on Neo-Liberal think tanks and their projections. Their Mantra for seeking refuge in desolation from foreign agencies emanates from such a background. This country has put an end to that highly dependent mentality of enriching the rich and further increasing the inequality between the haves and have nots. Even on a trial-and-error basis we wish to traverse a path which will make us independent to at least decide on our domestic policy planning. There is nothing so sacrosanct about running to external sources for that.
They expected the IMF to castigate the government in the lines of their criticism which never happened. In fact the IMF has categorically commended the Government for the steps taken to arrest and control the Pandemic. Quote; “Executive Directors commended the Sri Lankan authorities for the prompt policy response and successful vaccination drive, which have cushioned the impact of the Pandemic”. We trust this will be very valuable information to those fed up listening to harangues then made by the leader of the opposition in his highly immature disposition commenting about how to combat the Pandemic.
Even the few remarks IMF made about the downward trends of our economy, have been qualified by referring to the external shocks we were subjected to in the global sense and also the vulnerability of our economy due to the inadequacy of external buffers in it with a heavily loaded debt burden beyond sustainability. This confirms the contributory commissions and omissions of the Sirisena-Ranil regime, the government which spilled over to the new government period, making it extremely difficult to adjust during unpredictable circumstances such as the pandemic we faced. The IMF report has referred to this aspect as follows;
“On the eve of the Pandemic, the country was highly vulnerable to external shocks owing to inadequate external buffers and high risk of public debt sustainability, exacerbated by the Easter Sunday Terrorist attacks in 2019 and major changes including large tax cuts in late 2019….”
Eran, Harsha – duo have centered their barrage on the futuristic trends stated in the IMF report. We have to face the realities and there is no skepticism about it. But let us see how the IMF has seen and commented on our performance during this highly tense stricken period. I wish to quote from the report;
* The authorities deployed a prompt and broad- based set of relief measures to cope with the impact of the pandemic, including macro-economic policy stimulus, an increase in social safety net spending, and loan repayment moratoria for affected businesses. These measures were complemented by a strong vaccination drive.
* Directors welcomed the policy actions that helped mitigate the impact of the pandemic on the financial sector.
* Directors welcomed the ongoing legislative reforms to strengthen the regulatory, supervisory and resolution frameworks.
We know that this type of remarks is anathema to the Voice Cut specialists. The IMF knows that this is not a situation only common to us. They have pointed out the downsides in the future notwithstanding the highly unpredictable Global developments which we witness today.
It is a pity that those who have access to media and the freedom to express freely as they wish misuse such opportunities against their own country and the people facing a crisis. They have chosen to fish in trouble waters. But they carry with them identities of extremely poor performances which the people will not forget.
They once said don’t repay the dues on maturing debts. Then they claim that there cannot be fuel queues when there is no Terrorism and War. We are sorry to push them to see what they refuse to look at. There is a terrorism ongoing against us through various foreign missions masquerading as humanitarian involvements. There is a War that can any moment expand and develop into a 3rd World War in our own region. It can be the worst human disaster we ever have to face. Don’t be like Nero playing the violin, and concentrating on building sand castles to deceive gullible people. We know in their desperation for power they will provoke and promote the already agitated sectors including the defectors. But a word of caution. Those defectors are no enemies of the government. They are reform seekers unlike the people who go public announcing bankruptcy with ulterior motives to make things more difficult to the Government.
It is a welcome move that the MB of the CBSL has decided on a new policy package to deal with several factors that need to be addressed in priority. The broad outline of all those measures requires buttress and reinforcement for further expansion. It will be a prudent step welcome by the public for critics to engage in such a task instead of carrying flames at this hour of need.
We hope and prey that sanity will prevail in all quarters during this period filled with unprecedented happenings beyond our control.