Colombo chaos: IMF and countries like India cannot help Sri Lanka unless there’s a credible regime in place
Posted on July 11th, 2022

Courtesy The Time of India

Anger and frustration may have prompted Sri Lankan protesters to storm Gotabaya Rajapaksa’s official residence. But the bottom line and the lesson from recent history like the Arab Spring countries where civil strife hasn’t abated is that Sri Lanka needs a functional government to get its act together, conduct negotiations with IMF and major nations, and restructure the economy to make it viable again. Continuing anarchy could lead to agencies and friendly countries interested in Sri Lanka’s revival developing cold feet.

Abhorrent actions like setting PM Ranil Wickremesinghe’s private home on fire don’t help the Lankan cause. Wickremesinghe had accepted an unenviable job, betting that his credentials could help smoothen negotiations and expedite lines of credit. Obviously, Lankan people have lost patience and want results immediately. The July 9 protests, coming exactly two months after the May 9 violence that unseated Mahinda Rajapaksa, are a warning to political parties to stop bickering and brainstorm the next course of action, including a unity government and fresh elections.

Negotiations with IMF must cross the hurdle of all creditors including China, which accounts for 15% of Sri Lanka’s external debt, agreeing to debt restructuring. As its nearest neighbour, India must keep generously helping in cash and kind. With inflation topping 50% and the Sri Lankan rupee crashing to 350 for a dollar, food and fuel shortages will worsen without a government in place. Sri Lanka’s strategic location in the Indian Ocean, through which a busy international shipping route also passes, must stir other nations also to offer more aid to the embattled country.

Not too long back Sri Lanka was South Asia’s brightest spot with high human development indices. But economic mismanagement threatens a regression, with schools shutting last week, and hospitals running out of medicines and supplies. Already, a chunk of shipping business is shifting to Indian ports as containers are wary of stopping in Sri Lanka. Austerity measures accompanying an IMF bailout will not be popular in a country spoon-fed on a steady diet of populism. However, there’s no other course left but belt-tightening and a peaceful transfer of power to a credible government that is allowed to work without being subjected to populist pressures. Otherwise, the pain can only deepen and Sri Lanka will struggle to attract tourism, trade and foreign investment as it once did.

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