A Little Learning is a Dangerous Thing – Alexander Pope
Posted on May 15th, 2009

Bandula Kothalawala

ƒÆ’-¡ƒ”š‚ Mr Miliband has put his foot in the mouth again! The incorrigible British Foreign Secretary, Mr David Miliband, has this time strayed into international economics! Egged on by his LTTE friends who are roaming the streets of London, breathing down his neck, Mr Miliband, is reported to have raised doubts about whether “Colombo could be trusted to use a US$ 1.9 billion loan from the IMF appropriately”. Mr Miliband’s rantings reflect a curious mixture of pitiful ignorance, sheer arrogance and puerile obduracy of an intellectually bankrupt politician on a wild goose chase. Mr Miliband should have the Articles of Agreement of the International Monetary Fund explained to him by somebody from the Treasury or the Bank of England. He should understand that the role of the IMF is not exactly to pander to the whims and fancies of wily politicians of his ilk and even less to support attempts to bail out terror outfits. Of course, Mr Miliband’s country and other G7 nations, despite their publicly avowed passion for the welfare of the world’s poor, have long dictated the agenda of the International Financial Institutions to the detriment of developing nations.

The US has kept the presidency of the World Bank for itself since the inception while a French national has held the post of Managing Director of the IMF for most of the institution’s sixty-four-year history. Reforms of the International Financial Institutions have been systematically prevented by the US which holds approximately 16.75% and 16.38%of voting power of the IMF and the World Bank respectively. In 1997, a new allocation of Special Drawing Rights – net addition to international liquidity – which would help ease the balance of payments constraints of developing countries was agreed. As at today, 131 countries with 77.68% of total voting power in the IMF have approved it. However, the US with its 16.75% of the votes has been able to block it since 1997! At present, five out of the 24 Executive Directors of the IMF are appointed by the United States, France, Japan, Germany and the United Kingdom while 19 others are appointed by 185 member countries. Therefore, in a sense, Mr Miliband’s remarks simply confirm the unsavory reputation of G7 governments and their allies.

Perhaps, Mr Miliband and his advisors believe that it is unusual for a developing country to seek financial assistance from the IMF. Mr Miliband may be unaware that, in 1976, when his party was in power, the UK Government, due to its incompetent management of the British economy, had to go to the IMF, cap in hand, to seek financial assistance! What is unusual in the current sordid episode is that a developed nation which professes good governance with evangelic fervour has resorted to unorthodox underhand tactics to prevent a developing nation from securing a loan.

Sri Lanka has long been a member of the IMF with an unblemished record on debt servicing and on the fulfilment of other obligations to the Institution. Mr Miliband and his band should note that Article I of the Articles of Agreement which sets out the purposes of the IMF makes no mention of any political role assigned to it.

Mr Miliband does not realise that his myopic attitude contrasts sharply with the publicly declared policy of his own Government. In the past, the British Government supported a series of propositions aimed at enhancing the voice and voting power of developing nations in International Financial Institutions. He seems to be ignorant of the fact that a document – Enhancing Voice and Participation of Developing and Transition Countries in the World Bank Group was submitted to the Spring Meetings of the World Bank/IMF in April 2009. Mr Miliband should know that, due to mounting pressure from developing nations and civil society, the International Financial Institutions have even agreed to relax conditionality. It may be of interest to Mr Miliband’s ill-informed advisors to know that the Review of 2002 Conditionality Guidelines published in 2005 makes any reference to withholding support for any political reasons, let alone, from a member who takes legitimate action in line with the UN Charter to protect its independence, territorial integrity and sovereignty. The conclusions of the Article IV Consultations completed in October 2008 which, on the whole, support the Government’s management of the economy, provide no indication as to why Sri Lanka should be denied IMF assistance. Moreover, since the completion of the Article IV Consultation Mission, inflation has dropped considerably while the economy is projected to grow by at least 4% in 2009. Mr Miliband’s comments betray a pathetic lack of basic knowledge or understanding of the role and responsibilities of the International Financial Institutions.

Mr Miliband flaunts his academic career on his website. Perhaps, he should think twice before making asinine remarks on issues, of which he does not seem to have the foggiest idea.

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