29 September, 2021

Blog

Presidential Secretary Says IMF Not The Answer; But It Is The Answer

By Hema Senanayake

Hema Senanayake

“Dr. P.B. Jayasundera is destroying the government.” So said and reiterated many times by Venerable Muruththetuwe Ananda in recent past. I was reluctant to believe it, given his experience and more over due to his qualification as a senior economist. After reading his recent interview published on July 25th in the Sunday Times, I was convinced that how true the Venerable Ananda’s assertion is.

Sri Lanka is in a dire economic crisis. Technically Sri Lanka is facing a serious Balance-of-Payment (BOP) crisis. The gravity of crisis is so severe that China cannot or not capable enough to bail us out. If China could have done it, Sri Lanka would not have gone to India to borrow money, especially Sri Lanka would have not borrowed from Bangladesh. In fact, China does not have internationally designed mechanism to bail out countries that faces temporary BOP crises.

However, economic thinkers who created international payment system after the World War Two, knew that free trade would not be possible if there is no proper international mechanism to support the countries that face with temporary BOP crises either due to the shift of terms of trade or due to some natural disaster. Therefore, they established a formal international organization with participation of many member countries just to do this job. That organization is International Monetary Fund (IMF). Sri Lanka became a member of IMF in August 1950.

IMF’s primary mission is to ensure the stability of the international monetary system- the system of exchange rates and international payments that enable countries and their citizens to trade with each other (see IMF website). This goal is achieved by supporting countries whenever they face with temporary BOP crises. It is true when IMF bails out countries IMF advises those countries to make structural reforms/ adjustments that would provide lasting solution to BOP situation of those respective countries. It is also true some of these economic adjustments proposed by IMF are in line with the neoliberal thinking which is not popular among some nations. But IMF correctly thinks and as a member country Sri Lanka too agrees that no country should be bailed out continuously as such measure would allow an irresponsible country or corrupt government to live on other countries wealth. Therefore, the conditions imposed by IMF is very similar to all countries and there is no secret about it. Yet, the IMF does not demand the exact pound of flesh. IMF open for negotiations in line with theory and well-set country plan.

This is a time we face with a severe BOP crisis with foreign remittances shrunk, tourism down and Foreign Direct Investments not forthcoming even after passing and enacting the Port City Bill. So, Ranil Wickremesinghe declared in parliament that the country must go to IMF. Dr. Harsha de Silva, an economist and a parliamentarian of Samgi Jana Balawegaya, reiterated the same idea in many press conferences. Even the leader of Communist Party, DEW Gunesekera recently expressed that the Government should go to IMF on the basis of the situation created by Covid-19 pandemic.

Rejecting all those ideas, presidential secretary Dr. Jayasundera says that “Sri Lanka has no immediate plan to seek financing from the International Monetary Fund (IMF).” He questions whether ‘going to IMF would bring tourism and will IMF bring exports back.’ If this is his opinion that should be the President’s and the government’s official view. This is complete madness. If it is just a madness of some official it is fine. But this madness makes citizens, businesses, farmers suffer enormously and makes banks vulnerable. IMF’s mandate, ratified by Sri Lanka as a member country is not to bring exports or tourists to any country but to stabilize any country’s BOP situation enabling the country to do regular businesses and attract foreign direct investments. And, yes, if IMF supports to resolve BOP problem and supports to contain Covid-19 under emergency financing instruments, the suffering of people including farmers, self-employees, businesses, and the stress on banks etc., will end soon. In the official website of IMF says that “In response to the Covid-19 pandemic, the IMF temporarily increased the access limits under emergency financing instruments and the annual overall access under non-concessionary resources.” Dr. Jayasundera rejects this opportunity. What is his alternative suggestion?

“The alternative was to consolidate projects already on the ground, for which funds are secure, and to make use of them. If you execute those projects, you can get the money,” he says. He further says that “The World Bank/Asian Development Bank project portfolio covering such sectors as water, irrigation, highways, education and health is around US$ 3bn with utilization spanning three to four years. So, if you fast-track them, remove the bottlenecks for implementation and focus on those, the disbursements are a money flow… Last year saw the highest ADB disbursement at US$ 750mn (Rs 149bn).”

This is an amazing but awful solution. For the first time I am hearing from a senior economist that BOP crises can be resolved from project loans provided by World Bank/ Asian Development Bank. Interestingly, the IMF which is the international organization that is mandated to help in resolving BOP crises, has different set of financial instruments but it has never listed project financing of World Bank or Asian Development Bank as mechanisms that support resolving BOP problems. Instead, what the IMF says is this. “The IMF’s various lending instruments are tailored to different types of balance of payments need as well as the specific circumstances of its diverse membership.” Also, it says that “In the absence of IMF financing, the adjustment process for the country could be more abrupt and difficult. For example, if investors are unwilling to provide new financing, the country would have no choice but to adjust—often through a painful compression of government spending, imports and economic activity.” That’s what the country is experiencing right now. It further states that “IMF financing facilitates a more gradual and carefully considered adjustment. As IMF lending is usually accompanied by a set of corrective policy actions, it also provides a seal of approval that appropriate policies are taking place.”

If Sri Lanka gets the above said seal of approval from IMF, we will be in a position to rollover our debt in foreign currencies much easily and perhaps much better rates of interest given the reduced global interest rates prevailing as of now. What I could not understand is that why Dr. Jayasundera thinks that his alternative and seeking IMF help must be mutually exclusive. Instead, seeking IMF support will be much favorable for the government to “fast-track” the disbursement for projects identified by World Bank & Asian Development Bank. Both can happen together. Lying to people is a crime.

Print Friendly, PDF & Email

Latest comments

  • 9
    41

    There is a misconception among people that the IMF, World Bank, UN are there to help 3rd World countries. They do the opposite. They are Neo-colonial outfits designed by the Americans exert their control over the rest of the world after WW2. The purpose of the IMF and WB is to make sure everyone traded in the dollar. The Soviet block refused until 1991. The influence of the Dollar is over. Americans under 45 have moved onto cryptocurrency. 1 Bitcoin is worth $ 58,000. Which is hyperinflation. The Chinese outsmarted them by developing the Digital Yuan which means that Sri Lanka can use it to trade with China’s partners ( over 160 Nations ). SL doesn’t need dollars to trade anymore, except with USA, India, Saudi’s ( to buy oil ) and a few other nations . EU, Russia, Africa, are all China’s trading partners. GOSL is using the yuan to trade with Pakistan, Bangladesh, Vietnam etc.

    • 45
      4

      Why should Sri Lanka go begging to IMF, when with the money Mahinda Rajapakse had swindled from Sri Lanka, he can buy IMF outright.

    • 21
      5

      yeah, yeah….trade, trade with Bitcoin till Motherland looks like Bangladesh or Sub-Saharan Africa. Well, nothing wrong with them…..all will be in Socialist poverty.

      • 18
        0

        Please leave Bsngladesh out. It is no longer a basket case. It lends money to Sri Lanka.

        • 10
          0

          Cicero,
          Some Sri Lankans still call a slum a “Korea”, and believe Tamil Nadu has no toilets. Ignorance is a disease with no cure.

        • 2
          4

          Cicero,
          Bangladesh is still a slum, but is improving fast.

    • 24
      0

      westham

      “There is a misconception among people that the IMF, World Bank, UN are there to help 3rd World countries. They do the opposite.”

      Do you believe CCP (Chinese Communist Party) is there to help 3rd World countries?

      “They are Neo-colonial outfits designed by the Americans exert their control over the rest of the world”

      You seem to have a wealth of knowledge about these things ……… can you name the countries that were forcibly grabbed by the IMF, WB? Can you name the countries that fell victim to the IMF and WB and the reasons for their plight? A good one will be to start right at home with SL ……. is Lanka in this plight because of IMF,WB, US, UK, India, Tamils, Muslims, ………. just name your bogeyman.

      “The influence of the Dollar is over.”

      Then why is SL having a dollar crisis/shortage? :))

      • 13
        0

        continued

        “SL doesn’t need dollars to trade anymore, except with USA, India, Saudi’s ( to buy oil ) and a few other nations . EU, Russia, Africa, are all China’s trading partners. GOSL is using the yuan to trade with Pakistan, Bangladesh, Vietnam etc.”

        Do you know the percentage/ratio of Lankan imports from the US and the Western-block (where $ is required for trade) vs the imports from the rest of the countries (where $ is not required for trade?)

        You are very good at sounding as if you know what you are talking about by throwing around a lot of high-sounding gobbledygook.

        I know bugger all about economics …… do you want to have a rational point by point argument about any of these issues?


        The imaginary rose-tinted dream world the Lankan “economists” roam around ……… and the real world out here are 2 different thangs!

        Is it any wonder Lanka is in such a mess? :)))

        • 9
          0

          Nimal,
          “The imaginary rose-tinted dream world the Lankan “economists” roam around ……… and the real world out here are 2 different thangs”
          There was once a set of Lankan economists in the 70’s who believed we could exchange tea for oil. Now they claim we can settle the entire national debt with one humonguous gemstone.

          • 4
            0

            old codger

            “Now they claim we can settle the entire national debt with one humonguous gemstone.”

            Alright, who has the humongous stone?
            Hasn’t Basil sent his intermediary yet to negotiate with the keeper of the stone?

    • 3
      17

      Why didn’t the IMF help Tamil Elam? Why did IMF help SL buy weapons in 2000 when SL had another currency crisis?

      But I agree IMF is not the solution this time. Indonesia got IMF help in 1999 and it ended in ethnic riots.

      • 8
        0

        Please Gatam, what is the link between the IMF and the ethnic riots in Indonesia?

    • 7
      0

      Its the same old story
      Brag about ancient kings and ‘superior aryan genetics’
      Then go running around the world the next day with the begging bowl.

  • 28
    1

    This PINA reiterates that IMF would not be the solution. However, that man with bed-pan like mouth piece none other than minister of trade – Bandula Gunawardhana added that we will have to go to IMF after going through all the other channels.
    https://www.youtube.com/watch?v=DXjrRoC40iI
    THese buggers with thier crime and high corruption intetions would not want to kneel down before IMF, as if state affairs would be similar to that of their Medamulana CAVE affairs.

    This is wonderland srilanka caught by criminals as leaders as of today – May all gods help the poor people of this country.

    • 3
      0

      Dear LLM: Watch: https://www.youtube.com/watch?v=VX4tpXXwPdw

      This is liable to be removed soon. Watch before that. Thanks.

      • 3
        0

        Dear Simon,
        Thank you brother. I have no doubt, this KALLUSALLI pact is to bring those 3 billions of US dollars loot from Dubai to srilanka.
        .
        I like the video, but his focus on a middle class which is not existing is out of my information Please check this and get back to us. Are you also in the view, that 40% of lankens belong to that ” middle class” ?’
        I dont think even 10% would belong to srilanken middle class. Not even 33% of srilankens can afford a smart phone. yet today.
        .
        I have passed this to all known to me. Unfortunatley, I dont have enough lankens on my whatsup list.

        • 4
          0

          LLM: Thanks. Yes, there is a “Middle Class” of very high proportion. The presenter gives those categories, whose “Earnings” are not “Accounted” and “Taxed”. He says it is around “40%”. This is a “Ball Figure”. This “40%” is the category, that does not want a “CHANGE”. They always “Suspect” and “Fear” anyone who talks of “Systemic Change”, “Accountability” and “Responsibility”. This “Middle Class” is the “Parasite” that lives, “Sucking” the blood of the next “Higher Class”. So long as this “40%” finds “Catered” to it will not “Agree” (Vote) for a “Change”. That “Catering” is done by the “Elite” political class in “SLPP”, “SJB”, “UNP”, “SLFP” etc. and their “Cohorts”. Do you see where the “Root” of our problem – “This MIDDLE CLASS”?

      • 3
        0

        Dear Simon,
        I think our artists should come forward and work on transporting the message to grassroot levels.

        Before long, ours will be ended up being a Lebanon.Dollar value will go up to 300 or more sooner than later…
        .
        See how neigbouring india how they keep 1300 mio under control… it is the music …. that keeps them that powerful. Indians are music-addict.
        https://www.colombotelegraph.com/index.php/austin-fernando-29-july-2021/comment-page-1/?unapproved=2402138&moderation-hash=b10f572e6e05fced5df6886adec06473#comment-2402138

  • 25
    0

    Why go to IMF? The Minister of Finance has found a “Better” way to bring in the much-needed Dollars. He has introduced a bill in Parliament and that is uniquely titled “FINANCE”. When it is passed in Parliament, all “UN-DECLARED” earnings from abroad would be permitted into the country and no questions would be asked as to how that wealth was earned. The only penalty would be “1%”.

    Sometime back, the present Minister Bandula Gybawardene was the Finance Minister in a UNP Government said, Mahinda Rajapakse holds “$ 35 million” in Foreign Banks. He also said that was in deposit for his sons and their children too.

    So why go to IMF? All “Rajapakses” wealth abroad could be brought to Sri Lanka and they could buy the properties that are now vested with the “SELENDIVA” and the “PORT CITY”. P.B.Jayasundara knows this well and he knows that money is more than he could get from IMF.

  • 19
    1

    It looks like that Rajapakses are pushing the country towards a bottomless pit with the idea of bringing China into the picture as the one and only Saviour

  • 9
    0

    This is a well reasoned article. The fear is that the prescriptions of the IMF will ensure the triumph of greed and capitalism. Malaysia chose not to go to IMF, closed its economy for a few years and got out of the Asian Financial Crisis. In neighbouring Indonesia, the chose to go the IMF way. Both did get out of the crisis. We do not have the resources nor a vigorous economy at the moment. We are ruled by the Viyathmaga kleptocrats. The latest economist points out that China gave little to the Philippines despite all the lowtowing of Duterte. As time goes, the economic crisis will begin to bite. In that context, despite my natural dislike of the hegemony that the IMF brings, it is best to go with the IMF. It is a choice between two hegemonies- China and the IMF. When our markets are tied to the West, this is not much of a choice. China has too many client states now after its belt and road policy. It will have its own internal problems to think of. A prudent choice must be made. I am inclined to support Mr. Senanayake.

    • 1
      3

      C
      For people desperate for a loan, there is not the slightest concern about who the lender is. The country’s biggest lenders are private bankers.
      *
      The IMF is an organ of the imperialist system. Countries are strangled by it. But some rescue themselves, like Argentina.
      In 2003 the Kirchner government, forced by economic and political crises, confronted the IMF and other lenders by defaulting payment on external debt to redirect export revenues for productive social investment. As a result of the recovery, Argentina settled its debt to the IMF in 2006.
      The government changed in 2015, and the neo-liberal successor Macri got the country back into IMP debt.
      He is out now but a centre-left government has to carry the baby.
      *
      It is not easy to have good financial management in an extravagantly consumerist society.
      No denying that there is much theft, but the fundamental issue is an endemic malaise that transcends party politics.

  • 19
    0

    You cannot work under Rajapaksa regime as an independent secretary. Even Rajapaksas do not have control over this country’s economy. Everything is decided by China’s political masters in China. Dr. PB Jayasundera needs a job and money and he doesn’t bother whether the people eat a slice of bread with plain tea per day or Luxury cake with alcohol.
    This country destroyed by SWRD family and JR Jayawardena family and now Rajapaksa family. The country had no internal or external policy. It only had family policy.

  • 6
    0

    Good idea, if Rajapaksas can launder their black to white and keep buying assets under proxies, the 7 million may find it acceptable. There will be no need for IMF/WB bailouts and illegal deals will be considered “all within family”. This way the most talked about so called “sovereignty” ???? can be preserved.

    • 6
      0

      20A to constitution was a highly controversal amendment, but srilankens could not stand against it.

      PINGUNTHTAYA community is today thrown to HIBERNATION mode- people have started CURSING pinguththarayas today… I am a born buddhist, but I dont respect srilanken monks… if we have to respect the SANGA costume, it is better to dress a puppet with SIVURA and start worshiping it…. Madagoda ABHAYATHISSA is hidden under the bed of Mafia boss.Mafia boss is today scratching his ears and back ends, whenever he is being questioned… ironically journos have become UNPAID servant boy style… ye ttoday. This is the CANCER of this society.

      Let 10% or highly alleged looter of that family became minister of Finance – highly controversal to any civlized nations.But people were defeated… and misled for his back door entering into parliament.
      .
      NCM was controversal to anyone who should have some sanity, but it was passed with 2/3 mandate.

      Now the new pact allowing those CRIMINALS in that very same family, alleged to have looted over 3 billions of US dollars- believed to have been kept in DUBAI and other countries, to be brought back to the country and invest in SL – will become the ” real harakiri of srilanken people”:
      .

  • 5
    0

    The Rajapaksha – Chinthanaya is to put all the eggs in one basket – CHINA
    This is suicidal for Sri Lanka.
    Hope the govt will steers away from China only policy and diversify its foreign alliances.
    It is not too late to steer away from the China trap.

  • 6
    0

    P.B is correct. He cannot serve Rajapaksha family with IMF funds. He cannot do both: serve them and accountable to IMF. So IMF is not the Answer.

  • 1
    0

    Author HS, Ven. Ananda has experience of saving others while PBJ has to save self. What is the difficulty to continue to print more rupees like in the past, pay the teachers bubble so that they will teach the children, and avoid an unnecessary mass movement with loss of votes. Governing must benefit citizens too.

Leave A Comment

Comments should not exceed 200 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically disabled after 7 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.