Sri Lanka’s Economic Incompetence: Don’t Blame the IMF

The IMF agreement is a four year agreement and neither the current President nor the government has four more years in office unless they are re-elected.

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IMF members pose for a photograph April 22, 2017 at the IMF Headquarters in Washington, DC. [Photo Credit: Getty Images]

The IMF agreement is much more than the USD 3 billion that accompanies it. In the overall scheme of the country’s foreign debt (now estimated at around USD 48 Billion) and overall debt at 115% of GDP, with no funds for foreign debt repayments and no foreign exchange to purchase essentials, the USD 3 Billion is relatively miniscule in the face of the mammoth task before the country. In this context, it is the four-year plan that accompanies this agreement that matters. This plan may drive the country more towards the Western world led by the USA, and even more hardship as contended by some. This contention is however based on a hypothesis and without an appreciation of the political, social, and economic circumstances in other country’s that obtained similar bail out packages, and who reportedly were driven further into an economic and social abyss as a consequence of IMF bail outs.

The question to be asked is whether Sri Lanka has any other choice other than this assistance package from the IMF, and if there is, what that choice is. Criticising the overall thrust of this plan is like refusing to hold on to a tube thrown at an individual struggling in mid sea saying one needs to know more about the tube before grabbing it.

Sri Lankans are divided in their opinion whether to regard the IMF agreement as a lifeline or a cunning plan. They hover between the two phrases “Don’t look a gift horse in the mouth” and “Beware of Greeks bearing gifts”.

Don’t look a gift horse in the mouth is an admonishment to be grateful when receiving a present and not to find fault with that present. A horse’s teeth change as it ages, and looking in its mouth is a good way to judge the health and value of a horse. To question the value of a gift is an insult. The oldest example of this proverb in English dates back to the mid-1500s, where the equine in question is called a given horse. However, St. Jerome sent a Letter to the Ephesians in the year 400, with the admonishment “Noli equidentesinspiceredonati” which translates as “Never inspect the teeth of a given horse”. It is astonishing to consider how old this proverb truly is.https://grammarist.com/usage/dont-look-a-gift-horse-in-the-mouth/

The adage “Beware of Greeks bearing gifts is heard often and is normally used to refer to an act of charity that masks a hidden destructive or hostile agenda. But it’s not widely known that the phrase originates with a story from Greek mythology–specifically the story of the Trojan War, in which the Greeks, led by Agamemnon, sought to rescue Helen, who had been taken to Troy after falling in love with Paris. This tale forms the core of Homer’s famous epic poem, The Illiad (https://www.thoughtco.com/beware-of-greeks-bearing-gifts-origin-121368 

Sri Lankans are good at looking for scapegoats. They are a nation of experts who think they know everything and are good at talking about these but not doing as much to put their opinions into action. All Opposition parties have been guilty of this, as the current Opposition is. People have consistently voted for political parties and elected them to power by not looking beyond their noses. Although no doubt said figuratively, a leader once said on a political platform to loud cheers from a mammoth audience that “if need be, I will bring rice even from the Moon”. Short term agendas rather than longer term policies have been the determinants since independence. Family and personality politics have dominated the political landscape. Allegations of corruption are rife although no politician or a high-ranking official has been indicted on corruption charges. Billions of dollars of ill-gotten money said to be stashed away in other countries are still stashed away, if indeed such funds are there. No serious effort has been made to uncover these although there are international agencies including a UN body (The Stolen Asset Recovery Initiative (StAR), a partnership between the World Bank Group and the United Nations Office on Drugs and Crime that supports international efforts to end safe havens for corrupt funds. StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets- see https://www.unodc.org/unodc/en/corruption/StAR.html)

Many excel in hindsight analysis and criticism, but few learn lessons from mistakes. This writer and many others are no exceptions. We have all collectively led the country to where it is now. It is time to learn from mistakes and move on and look towards the future and stop scapegoat hunting.

The IMF bailout plan is not a gift. So, there is no horse nor a Greek to consider here. It is an economic strategy and an economic plan for a bankrupt country drowning in a debt vortex created by itself. It has been the only lifeline thrown at the country.

What can and should be done by political parties, organisations and individuals is to support this plan, but, if it is to be opposed, to come up with an alternate plan that would assure the country’s creditors that their loans will be repaid, how the country would generate enough foreign income to do so, how the country would generate enough foreign currency to purchase essentials like oil, coal, medicines etc, how the country would meet its domestic expenditure with domestic income and borrow only for development projects that will yield a return on investment. These critics must also spell out what they will do to stop the massive haemorrhaging that is going on subsidising entities like Sri Lankan Airlines, the Petroleum Corporation, the electricity board among others. They must either put up or shut up. What is desperately needed now is not political point scoring to continue duping the voters with no alternate plans but short-termpolitical hyperbole.

If indeed some countrieswho received similar IMF packages met with the an unfortunate fate as alleged, it is more than likely that they themselves were the cause of it. Sri Lanka too could face a similar fate if the stakeholders in the country do not own this plan and work together to make it a success. As suspected by some, if the IMF is playing a game as in Homer’s famous epic poem, The Illiad, the country needs an Odysseus to overcome such a challenge. While not suggesting or imputing that the IMF has any kind of a cunning plan, the challenge for Sri Lanka would be to demonstrate their ability to manage its economy well and do so with the assistance of all other development agencies and via bi lateral agreements but within the terms and conditions of the IMF agreement it has signed.

The IMF agreement is a four year agreement and neither the current President nor the government has four more years in office unless they are re-elected. It is imperative that a party or parties in Opposition who could well form a government at the next general election, and a future President, if the current President either does not stand for election or is defeated, works with the IMF over the next four years. An abrogation of this agreement will be the ultimate death sentence for the country. If the Opposition has contentious issues in the agreement, they should highlight these now, and work with the government to address them collectively with the IMF now, and not later. If they are opposing the agreement, they should submit an alternate plan to save the country from its current disastrous situation. Failure to demonstrate their concern for the country by not teaming with the government on this specific issue or not presenting an alternate plan to save the country from its economic abyss may even test Democracy itself and possibly the sovereignty of the country as well.

Raj Gonsalkorale

Raj Gonsalkorale is an independent health supply chain management specialist with wide international experience. Writing is his passion.

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