The International Monetary Fund (IMF), after deliberations for a few months, has finally agreed to extend a 48-month loan of US$ 2.9 billion to assist in restoring the economic stability of Sri Lanka. The loan will be extended to the Sri Lankan Government under the Extended Fund Facility (EFF) to manage the ongoing serious balance of payment and cash flow crisis, giving the Government some breathing space.
However, in a statement soon after the discussions held in Colombo were over, the IMF officials stated that the loan is subject to the approval of IMF management and the executive board, clearly extending a message to the Government that the loan is also subject to several other conditions such as debt relief arrangements with external creditors, political stability, anti-corruption drive, and so forth.
Stronger autonomy
Other reforms suggested for the program include financial transparency; restoring price stability through monetary policy action; stronger autonomy for the Central Bank; and implementation of major tax reforms, including more progressive taxation and broader corporate and VAT taxes.
It is an open secret that corruption, malpractice, money siphoning, and many other misconducts have prevailed in the country for a long period of time and have plagued it, leading to the present gruesome crisis. The general opinion is that a segment of crafty politicians and dishonest public officials are predominantly responsible for unbearable corruption in the country. Naturally, the entire citizenry, except those who are corrupt, is united in eliminating such practices.
Therefore, according to this writer’s opinion, the conditions discussed in IMF proposals are what the country needs at this hour. No sane person can oppose criteria such as elimination of corruption, monetary transparency, restructuring of loss-making State-owned enterprises, and wastage control. In fact, this is what the entire nation has needed for the past few decades.
The entire citizenry understands that most corrupt practises have escalated over time, largely due to political manipulations.
IMF conditions
Therefore, with or without IMF conditions, the people of the country must get together to fight to eliminate such criteria.
Institutions such as Sri Lankan Airlines, Ceylon Petroleum Corporation, and Ceylon Electricity Board, predominantly controlled by trade unions, have contributed massively to the economic crisis the country is confronting today. According to reports, the cumulative loss of SriLankan Airlines is Rs. 306 billion, while CEB has an accumulated loss of Rs. 307 within the period of 2010 to 2020. According to reports, the CPC has recorded a cumulative loss of Rs. 335 billion as of 2020.
The more shocking news is that the total loss of State-owned enterprises for the first four months of 2022 stands at a staggering Rs. 860 billion. The general public should realise that the treasury covers these losses, predominantly through tax revenue. The Government is forced to keep funding these institutions regardless of the ongoing drastic financial crisis.
However, the most disturbing factor is that the trade unions of any of these institutions do not allow any type of reform while enjoying all the perks provided by public funds. It is alleged that cadres of SriLankan, CPC, and CEB, the big three loss-making institutions, are receiving even better salaries and other perks than the others in Government service.
Although these so-called trade unions spearhead campaigns on “saving Sri Lanka”, they have not sacrificed any of the luxuries they enjoy through Government coffers. Irrespective of all the public grievances, State-owned institutions continue to be a drain on the entire citizenry.
Sri Lanka has earned an extremely poor reputation for corruption in governance in the eyes of the international community at large.
Almost all the friendly countries who want to help demand anti-corruption mechanisms. For example, the World Bank has recently pledged financial assistance for the import of urea fertiliser. However, they seem to be suspicious of the local procedures. They demand to work closely with implementing agencies to establish strict controls and fiduciary oversight.
As per expert opinion, the IMF has requested, among other conditions, two key aspects before proceeding further, although the staff-level agreement was agreed upon. Firstly, Sri Lanka should work on debt restructuring with the relevant countries and come up with a mutually agreed process. This can be a daunting task, but the Government has seemingly initiated the discussions with the help of friendly countries.
Parliamentary representation
Secondly, they require an acceptable level of political stability. This will definitely be a trickier exercise. Although at one time recently, a vast majority of the general public openly declared that they despise the entire parliamentary representation, the politicians sitting in the house do not seem to have understood the message.
It is amply clear that, except for very few, others are vying for power. The irony is that all of them declare that their efforts are aimed at the benefit of the people when it is clear that all of them have hidden agendas. Most of the political parties in Parliament are clearly divided.
Most of the parties have split into two or more factions, making a mockery of the democratic parliamentary system. They do not even agree on common issues within their own parties.
The much talked about all-party and multi-party Government or agreement has become a farce, although that would have been a reasonably good alternative. Hence, political stability, which is a requirement for the IMF and other helping countries, is still in the balance. The irony is that none of the politicians or political parties seem to grasp the gravity of the situation.
Whether the IMF assistance is received or not, the Government must take immediate action to restructure all loss-making institutions and also reform the public service.
The general public seeks solutions to their day-to-day grievances. They are gradually becoming aware of the colossal losses made by some of these institutions, and they are paying for the existence of these white elephants with their own money. Therefore, the public will not only extend support to any unreasonable trade union actions but also directly oppose such actions by trade unions.
The Government has already initiated some action towards the loss recovery of a few loss-making important entities by increasing rates and tariffs. The IMF will undoubtedly look at these actions positively to proceed further. To the relief of the Government, the public resistance is also not as intense as expected. Even the Opposition’s reaction is seemingly mediocre. Certainly, they must have understood that these moves were necessary to survive.
The country cannot afford any more luxuries, even social benefits, until it recovers from the current dire economic crisis. This is to say that whilst maintaining the effort of providing protection to the masses, the Government must implement a mechanism to control the waste of funds through social welfare programs, mostly controlled by political authority.
The Government’s annual spending on social welfare is said to be approximately 15.2 percent of the total expenditure. According to Welfare Benefits Board officials, approximately 39 social benefit programs exist in the country. At a recent media briefing, the Chairperson stated that there are approximately 2.3 million families (around 50 percent of the total households in Sri Lanka) who benefit from one or more of these ongoing programs.
Nevertheless, the new budget proposals have allocated more funds for social welfare than last year despite the crisis. This may have been done, perhaps, to further defuse public animosity towards the ruling Government. Allocating funds to the suffering public is a good move.
However, more attention should have been given to the troubled small and medium-scale business sectors that can immensely help uplift the general economy.
It is now common knowledge that Sri Lanka has sought IMF assistance sixteen times before. Yet, there was never a concrete plan to stop the repetition. The impending IMF loan is in no way even close to a permanent solution to the numerous issues the country is experiencing currently. As a result, everyone must band together to combat corruption, political infighting, waste, and wasteful public spending.