The IMF leads our countries to rack and ruin.
Posted on September 30th, 2016

By Garvin Karunaratne, Ph.D Michigan State University Former Government Agent, Matara District,

The IMF has in its recommendation to the Government on Sri Lanka in their evaluation to grant the second tranche- $ 1.5 billion stated  that they could not in good conscience” release the funds unless the Government passes the VAT increase to 15%. (Daily FT, 24/09/2016). In detail they state it is important that the Government expedites the legislative process of implementing the VAT amendments that are needed to support revenue targets for 2016 and 2017.

This amounts to an interference into the administration of a sovereign country.

Let us read the recommendation of the IMF in the historical light, when the IMF started its inroads into the economic affairs of sovereign countries in the Seventies.  Till then the IMF never interfered with the manner in which the sovereign governments ran their countries.  As a senior administrator we admired then how the World Bank and the IMF were supportive.

However things have changed.

Noble laureate Professor Jeffery Sachs states in his book: The End of Poverty:

Western Governments  enforced draconian budget policies in Africa during the Eighties and Nineties. The IMF and the World Bank  virtually ran the economic policies  of the debt ridden continent recommending regimens of  budgetary belt tightening known technically as the Structural Adjustment Programme. These Programs had little scientific merit and produced even fewer results. By the Start of the Twenty First Century Africa was poorer than in the later 1960s when the IMF and the World Bank  had first arrived on the scene.”

Professor Jeffery Sachs is no outsider to the IMF and the World Bank. He was an agent of these two institutions in serving several countries to implement the Structural Adjustment Programme. In Bolivia in 1985, in Poland in 1989 and in Russia in 1991, Professor Sachs was advising his shock therapy”. How to be a success in following the market economy. Then he arranged loans for them and paved the path for them to get caught in the trap of indebtedness.

Both Professor Jeffery Sachs as well as Professor Joseph Stiglitz (once Chief Economist of the World Bank) now happen to be sharp critics of the IMF and World Bank policies. In fact Jeffery Sachs in his latest book The Price of Civilization states that free market policies implemented by the IMF do not work and has said:

The free market system  must be complemented  with government institutions  that accomplish three things: provide public goods such as infrastructure, scientific research and market regulation, ensure the basic fairness  of income distribution and long term help for the poor to escape poverty”.

The recommendation of the IMF today to the Government of Sri Lanka has to be viewed from the points of view expressed by Professor Jeffery Sachs.

It is a fact that African countries were made poorer by the World Bank and the IMF and so is Sri Lanka a country that had a foreign debt of only $750 million in 1977(taken for project development and not for liberalized spending) when it commenced following the IMF and gradually piled up its foreign debt because the IMF advised Sri Lanka to liberalize the use of foreign exchange and when its resources were insufficient, advised  Sri Lanka  to borrow and spend. The IMF is itself to blame because the IMF gave loans on generous terms like  grace periods of even 5 to  10 years where the country need not pay back.  The leaders were enticed to take the loans and spend as they would not be there to repay. The very fact that grace periods were offered indicates  complicity on the part of the IMF to make the countries indebted. The aim of the IMF was to make the Third World countries indebted so that they can be controlled. They all became ‘colonies’ once again.

In my words;

The Structural Adjustment Policies of the IMF are so flawed that any country that follows them  is doomed to a situation of increased poverty, increased deprivation and increased indebtedness. What is necessary today is for the IMF to understand that its Structural Adjustment Programme  will not function in the interests of the Third World countries.”(From Garvin Karunaratne: How the IMF Ruined Sri Lanka…(Godages)

Instead of making superficial provisions like insisting that Sri Lanka should  implement the VAT provisions, it would behove of the IMF to come up with a growth strategy, a strategy that will alleviate poverty, increase production, create employment  and help build a sustainable economy. Every country that had followed IMF’s advise has failed and in fact the IMF’s teachings to the Third World was the laughing stock of the Wall Street Journal

The IMF Drill is as follows. A Third World poor country with a pegged currency is working towards taming its inflation. Instead of a growth formulae it gets the IMF’s  old austerity dosage which slows down the economy. The banks begin to falter in  paying their old debts,  The IMF recommends  yet more medicine- devaluation making the bank predicament and capital flight worse.  The currency slumps and the banks are now in real trouble.  Is this any way to run an international monetary system.” 22/02/2001)

That very wise statement of the IMF was a full one and a half decades ago. Is it not sad that all this while the IMF has failed to come up with a growth strategy.

It is upto our countries to understand the fact that the IMF is leading our countries to become debt ridden, to economic  ruin and commence action to create employment by getting people into production- the only way to alleviate  poverty and deprivation.

Garvin Karunaratne, Ph.D Michigan State University

Former Government Agent, Matara District,

 

30 th September 2016

8 Responses to “The IMF leads our countries to rack and ruin.”

  1. AnuD Says:

    IMF policy is to promote the international currency of American dollar. IMF practices increases the transaction fees getting to the US because of international trade. They do it to many small countries.

    They made many rice producing countroes to become rice importers. Sri lankan politicians always acted the way they wanted.

    Ranil is also doing that.

  2. plumblossom Says:

    It is beast a new political party is formed to counter the wide ranging privatization of state assets programme of the UNP which envisages privatising even healthcare, water, electricity etc., to ensure that the rice farmer is empowered and not destroyed as this yahapalanaya government is doing and to ensure that 2600 years of rice farming is not destroyed, to ensure that other crop growers get a fair deal for their produce, to encourage local industries and companies by taxing imports, to create and empower and rehabilitate local industries like the Valachchanai paper plant, Puttlam, and KKS cement factories, Kanthale and Pelawatta sugar factories, to build new tyre producing factories, to build new fish tin canning factories, to build new fruit juice, jam producing factories, to create a more efficient food storage and transport to market system including proper storage and refrigeration of vegetables, fruits etc., to encourage local companies by taxing imports, to encourage school leavers to take up vocational training programmes and to create a vocational training to youth employment creation programme where youth are helped to start up their own SMEs, to change our diet from a wheat based diet to a rice based diet, to encourage farmers to produce our own milk by encouraging the dairy industry and to build factories to produce our own powdered milk etc.

  3. plumblossom Says:

    Dr.Garvin Karunaratne Sir,

    Your articles are very inspiring and totally accurate. I agree that we need to produce our own food and create a more efficient system to convey perishable food items from farm to market. I also agree that with so much vegetables and fruit, we need some plants to produce our own fruit juice and jams. We need the Palewatte and Kanthale sugar factories to produce our own sugar. We need to reinstate the KKS, Puttlam cement factories and the Valachchanei paper factory.

    We need to reinstate a tyre producing factory. We also need a number of fish tin canning factories. We need to convert from a wheat based diet to a rice and kurakkan based diet. We need to encourage our own industries and entrepreneurs by taxing imports. We need to reinstate the handloom industry.

    We need more vocational training colleges and most importantly a comprehensive vocationally trained youth to employment programme where the youth are helped start their own SMEs and helped until they succeed.

    We need to vastly improve our dairy industry by importing milk cows and ensuring that we produce all the required milk we need. We need to build our own milk power producing factories. We also need to expand massively Sathosa and the cooperative system islandwide.

    We also need a number of organic/ inorganic fertilizer producing factories.

    If we do all this by taxing imports and encouraging local farmers, vocationally trained youth to employment programme by encouraging youth to start SMEs, local industries we will be able to reduce spending our foreign exchange, create massive employment opportunities, reduce massively cost of food and develop our country further.

  4. plumblossom Says:

    This UNP is trying to privatise state enterprises suggesting that they are loss making. I would like to point out to this treacherous UNP Government that they have no right to privatise any state enterprises since they belong to the people of Sri Lanka in general and is not their private property to privatise as they wish. If state enterprises are loss making, appoint a good management team to manage the state enterprise properly. This treacherous UNP Government is privatising state enterprises citing loss making as an excuse since they are also privatising even profit making state enterprises. Actually this UNP Government is selling all state enterprises to their friends in high places and to companies of those foreign powers who helped them come to power monetarily and via totally false propaganda during their election campaign and this is their pay back.

    We would warn any buyer of any state enterprises being privatised by this treacherous UNP Government that as soon as a a new Government comes to power, all these selling of state enterprises will be considered null and void and anyone who buys up any of these state enterprises will have to bear the loss of buying any state enterprise. Therefore we urge all potential buyers not to buy any state enterprise since as soon as a new Government comes to power, all such selling of state enterprises will be considered null and void and they will only end up making a loss.

  5. Cerberus Says:

    The strategy RW is following is one that will suit the powerful countries. It is to bring the country to its knees by crashing it completely economically while pumping out all the money to their friends. As soon as My3 appointed Ranil illegally as PM, he appointed Paskaralingam, a well known Govt servant who had amassed an immense amount of wealth under a previous President and had gone abroad, as head of the Treasury, and also a Singaporean citizen, Arjun Mahendran, as the Governor of the Central Bank. The new Governor, in turn, issued CB bond to the value of X at an interest rate of Y and at the time of auction made the value of bonds 2X and the interest rate 2Y for his nephew Arjun Aloysius’s company Perpetual Treasuries owned by Free Lanka Capital Holdings.
    Since then as has been pointed out by Prof. G. L. Pieris that the CB Governor has been doing more Bond sales and have borrowed a record amount of money in the 1 1/2 years they have been power. No one can account for monies which have been borrowed since no work has been done unlike during the MR regime where a lot of developmental work was carried out. I feel this money is being channelled to Tamil diaspora who will use it to buy 5000-acre plots in the tea estates on 99-year leases and also in the Trincomalee area. Part of the money may have been channeled to the UNP coffers since they were broke. Everything is running smoothly as per the script is given by the Think Tanks of the powerful countries who are using RW, My3 and CBK as stooges. See: ” Arjuna Mahendran Is Innocent – Another Betrayal By Yahapālanaya” dated June 21, 2016, https://www.colombotelegraph.com/index.php/arjuna-mahendran-is-innocent-another-betrayal-by-yahapalanaya/

    Unless RW can explain what he is doing with all the money that has been borrowed in the last 1.5 years, I think we are going to face the same scenario as Greece very soon. Once the country has crashed it will easy for the Govt to give the Federal States, sign the ETCA, build a bridge to India etc., which are all part of the grand plan that RW has been planning all these years. Even though the ordinary people do not want all these things, that is what the powerful countries may want Sri Lanka to do.

  6. sena Says:

    Mr. Garvin please do not blame IMF. It is the privileged class in developing countries (in Sri Lanka they are called Colombians) who invite and negotiate with IMF to get loans for their luxury imports. And they know the productive blue collar workers will work overtime to pay the loans. This privileged class also look at their fellow countrymen with sense of revulsion – the worst racist attitude you can find anywhere in the world. In Sinhala how many words you have for the word “you” to indicate the extent of that revulsion they feel.

  7. sena Says:

    plumblossom, how about these state enterprises? Set of political goons change hand looting them after every election. It is far better to have them in private hands who add value and develop these enterprises

  8. plumblossom Says:

    Sena: State enterprises belong to the people in common. They are not the private property of the UNP Government. With good management, they can be made profit making which will benefit both the people and the Government will also acquire revenue from these. For example, Sri Lanka Telecom, Lanka Hospitals, the state banks, they are all making a profit and benefiting the people and the Government too.

    You simply do not understand what this UNP Government is trying to do. They are trying to privatise everything and sell them cheaply to their friends who helped them monetarily come to power and they are trying to make way for state enterprises to be bought off cheaply by the companies of those foreign powers who always supported the separatist terrorists i.e. the LTTE and now the TNA in Sri Lanka i.e. the US, UK, EU, Canada, Norway, Sweden, India etc. who brought them to power. Once all these are sold, what will be left for the citizens of Sri Lanka?

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