Addressing the Samagi Jana Balawegaya’s (SJB) May Day rally, Opposition Leader Sajith Premadasa said there is a debate among many people regarding the Government’s agreement with the International Monetary Fund (IMF).
Whether such international agreements that have actually been signed can be changed according to the needs of each political party is a matter of discussion. A number of economic experts were consulted on whether it is possible to change the agreements made with the IMF and make new amendments, and many experts said that changing such international agreements will damage the confidence of foreign countries and investors. Here are excerpts from the comments of political leaders and economists.
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We invite SJB and JVP to make IMF agreement a success
– President Ranil Wickremesinghe
Addressing the United National Party May Day rally, President Ranil Wickremesinghe said that political parties including the SJB, the Janatha Vimukthi Peramuna (JVP) and other political parties should come into an accord with the Government to protect the country’s economic stability by making the agreement with the IMF a success.
We have arrived at the position we are now with great difficulty. It has been protected by the IMF agreement. We have to decide whether we will secure it and move forward, or return the country to the state it was in 2022. I am requesting the SJB, JVP and other parties not disrupt and work against this program. I ask them to think about the people and come to an agreement with the Government to help this situation.
All of us should think about the country. In 2003, I went to the Tokyo Conference and got US$ 3 billion for Sri Lanka. President George Bush gave us US$ 1 billion. In that way, four billion dollars was secured. But this all changed in 2004. But they went back. If we had the four billion dollars, it would have been worth US$ 10 billion today. By 2018-2019 we had a primary budget surplus. If that program had been carried forward, this issue would not have arisen.
If this arrangement is changed now, there will be another risk. Therefore, I am submitting a law to the Parliament that includes the conditions established with the IMF and conditions necessary for the rapid development of the country. I request everyone to support that. I request the SJB and JVP to agree to it.
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IMF conditions will be changed
– Opposition leader Sajith Premadasa
Addressing the Samagi Jana Balawegaya May Rally, the Opposition Leader said that a new, revised, people-friendly agreement with the IMF would be reached under a SJB Government.
While President Wickremesinghe invited the Opposition including the SJB and the JVP in the May rally to unite to make the IMF agreement a success, the Opposition Leader said that the IMF’s terms should be changed. He said that a new IMF agreement should include a people-friendly and populist update that will keep the people’s aspirations alive.
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If IMF conditions are changed, country will last for only two weeks
– Minister of Transport, Highways and Mass Media, Dr. Bandula Gunawardena
There was an economic crisis in the country in 2022. Sri Lanka entered a comprehensive loan agreement with the IMF to recover from the great national disaster in which the country was left without fuel, gas and medicine. There is a rough plan to maintain Sri Lanka’s economy until the year 2027 in that comprehensive loan agreement. Even by 2027, it is predicted that the deficit of foreign financial resources related to that year will be US$ 3,911 million.
To fill the gap in foreign financial resources, the international community agreed to complete foreign finance in the following manner. Under the IMF Extended Fund Facility (EFF), another tranche of US$ 329 million will be received and the IMF will provide US$ 600 million to finance the budget between 2027 and 2027. Also, the World Bank has agreed to provide US$ 600 million and the Asian Development Bank (ADB) US$ 300 million. An estimated US$ 1,482 million will go for debt relief. A deficit of US$ 1,500 million has been further estimated for 2027.
For that, Sri Lanka is allowed to issue International Sovereign Bonds (ISBs) in the international market and get US$ 1.5 billion. But by that time, Sri Lanka’s international reserves should have increased to around US$ 14 billion.
This is a serious agreement, and Opposition Leader Premadasa says that it can be changed. We have received two instalments so far, since the agreement was signed by the Government, submitted to Parliament, approved and the terms are being fulfilled.
Before the third tranche is granted, the economic situation of Sri Lanka is monitored and a report on progress and weaknesses of the economy has been submitted to the Board of Directors of the IMF.
The Government hopes to study it and receive the third instalment in the near future. The restructuring of foreign debt is ongoing. If the Opposition Leader’s global wealth of knowledge can change this hard-won IMF comprehensive loan agreement, it is a wickedly stupid idea.
Unfortunately if he gets power and changes the IMF agreements, Sri Lanka will last for a maximum of two weeks. Because if such perverse decisions are made by a leader of a country, then international confidence in that country will be completely destroyed and no country will accept the Letters of Credit (LCs) issued by that country.
If other countries do not accept our LCs, Sri Lanka will have no oil, gas, medicine nor food and drink. The biggest and most important message the Opposition Leader gave to the nation on May Day was that he can provide smart classrooms and buses for schools, but he cannot run a country.
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If we change the IMF program, international trust will be broken
– Former Professor of the Department of Economics, University of Colombo, President of the Association of Economists, Prof. Ven. Wijitapure Wimalarathana Thera
After a country enters into international agreements, it is not possible to change them when a new Government comes to power. If we change like that, the international trust will be broken. This applies not only to the IMF but also to agreements signed by Sri Lanka with any other organisation in any country. When the Good Governance Government came in 2015, it was said that the Port City of Colombo will be changed. It was closed for about a year which caused a huge loss to the country. But work continued as usual, because the contracts have been signed.
In addition, before the Government came again in 2019, the party that came to power said that they will take back Hambantota Port. But they did not. News like that is all over politics. Sometimes small amendments can be secured through negotiations. It is not possible to withdraw from the entire contract. There is a point that is not understood. According to the agreement between us and the IMF, we will not get much money. We will get about US$ 3 billion. It is sent in tranches. They are bound under a series of regulations and we have to implement those policies.
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IMF terms have been agreed upon
– Dr. Shashitangani Weerawansa, Department of Economics, University of Colombo
We as a country went to the IMF 17 times. We have been there 16 times since 1965. But this time, when we went to the IMF for the 17th time, we agreed to these conditions. This agreement with the IMF is not a private one. The Government is considering the IMF conditions to make this agreement.
Whoever comes to power needs to continue to implement those conditions. But let’s think if we get shares as loans; Governments may change or the current Government may remain. But then, if there is a reasonable doubt during the process of signing the agreement and the implementation of our economic machinery, we can present reasonable reasons and discuss that through changing some conditions, the economic progress of our country can be improved or the standard of living of the people can be raised.
There is a possibility to submit some amendments based on IMF agreement. But if we do that, we cannot think that we as a country will have a good image in front of the IMF. Since Governments change every five years more or less, the policies can also change. No matter what Government comes to power, national policies of countries like India will not change. The fault is not in setting the conditions; but how they are implemented.
Certain conditions are imposed when a loan is given by a certain institution. When we borrow as a country, we need to repay that debt. If suddenly we are unable to pay the loan, in such cases the IMF has to make certain conditions. These people have given us those conditions to be able to pay the debt. Looking at history, 11 or 12 countries have been dealing with the IMF for more than 30 years, including our country. Thirty countries have received assistance from the IMF for more than 20 years.
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No room for other agreements with the IMF
– Prof. Wasantha Athukorala, Department of Economics and Statistics, University of Peradeniya
There is no need to change anything put forward by the IMF. Some political parties do not understand what the IMF has said. We should find out what has been implemented in the country. The IMF says that tax revenue needs to be increased. Then the Government should not increase taxes on the people. We say that efforts are being made to get people who do not pay taxes into this tax net. The IMF is not recommending to place the tax burden on the poor.
The problem here is only if there are policies which harm the Government which harm the country. In IMF policies, there is a program needed for economic stabilisation and a program for economic development. What any Government should do is to understand the policies of the IMF and implement them practically in a way that suits the country.
This has been misunderstood by various political parties.
They say they are working on changing the conditions by discussing with the IMF. There is no need to do so. The problem here is that the political parties and their advisors have not understood the issue correctly. If someone claims that the agreement can be cancelled and replaced after renegotiating with the IMF, that simply cannot be done.
In that case, there is a possibility that the IMF will completely stop lending. As a result, we will be blacklisted globally.
Further economic collapse will result from that. What some political parties do not understand is the problem here. We are moving forward with the IMF.
The fact is that it is carried out in a way that suits the people of this country. There has not been an intelligent discourse in other parties regarding the IMF problem.
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Who will change the conditions and pay for the damage?
– Prof. Sirimal Wijeratne, Department of Economics, University of Colombo
Politicians can say whatever they want. All I have to say is that there is no need to change. To save the country from the economic crisis this time, the IMF plans must be implemented and carried forward. The mediating parties know whether these conditions can be changed or not.
That means that the Ministry of Finance and the Central Bank are connected with the IMF. Apart from that, there are things that we need to implement. We should move forward with that program as well. We need to ask the relevant parties who will pay for any the damage caused by changing these.
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Can a country be entrusted to someone who does not know the seriousness of a problem?
– Prof. Milton Rajaratne, Faculty of Management, University of Peradeniya
Parties can say irresponsible and impractical things. They can say whatever comes to mind. Those in the ruling party and Opposition should avoid speaking irresponsibly when it comes to Government institutions. They should think about the way to protect this State rather than getting power. This country has gone into a very severe economic crisis. We got help from the IMF not the other way around. They don’t just help us whenever we want.
They are looking at why our economy collapsed. We are asking for remedies that can be applied for those reasons. They say that they agree with the IMF on those remedies.
These people have not yet begun to act against us. As the IMF says, while we are shaping the economy, there is hope that we will start negotiations with our creditors and prepare a program that will allow us to restructure this debt and pay it off over many years or decades. The IMF has a responsibility to those creditors.
The IMF does not pay them money. But the IMF deals with the Sri Lankan Government as an intermediary on behalf of that group. There is no point in reading meaningless and impractical things. We should speak knowing this environment.
It is not possible for any new government, even the existing Government, to withdraw from the IMF program. We can get rid of it unilaterally. Withdrawal means that there is no party to talk to between the creditors and us. At the same time, if our country goes into a financial crisis, the IMF will not come to our aid again. They will lose faith in us. The consequences of this statement by SJB leader Premadasa are very dangerous.
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We need to show we are developing economically
– Prof. Navaratne Banda, Department of Economics, University of Kelaniya
In fact, the IMF is a place where we also have a financial contribution. They provide loans to member countries to which we have also contributed.
The US has contributed the most. That is why they can borrow more. We have contributed; we get loans based on that contribution. According to a 1944 agreement by which the IMF was established, the role is to provide necessary relief to any country after a short-term problem. We reserve the right to request assistance in such cases.
We want to tell them at that time that by doing these things we will increase our State income. We want to show that we are developing our country economically.
They should be convinced that the country will be developed.
They say to increase State revenue. But things like taxation are done by Governments. The IMF has not asked to increase taxes.
However, what can be done quickly is taxation.
The Government did it. The IMF needs to be informed on how Government revenue is going to be increased.
