Dilrook Kannangara

IMF help is getting delayed and delayed. So many rounds of negotiations have been held but Sri Lanka is yet to see the money. Even if IMF help comes, it will be a loan which will have to be repaid with interest just like other loans. Since all economic powers have to approve (or rather not reject) IMF’s help to Sri Lanka, they use it as a stick against Sri Lanka. IMF officials, and economic powers that can veto IMF help to Sri Lanka have taken the island nation round and round in circles. Tangible help is nowhere in sight. Sri Lankan government must have a Plan B. Relying totally on the IMF is dangerous and will be a disappointment.

Some developed nations face the likelihood of a recession, economic contraction, liquidity crisis and may seek IMF help themselves. Yes; they will need assistance themselves! Helping others comes at a cost to them which they are unwilling to bear. Recession fears have hit USA, Germany and a few other industrialized nations. They can’t get by themselves, let alone help others. In this context, a reasonable double has arisen whether they genuinely want IMF to help Sri Lanka or they want IMF to carefully retain its resources for their own use.

USA, UK, EU and China have already used the IMF stick against Sri Lanka to advance their own interests. If Sri Lanka refuses to oblige, they’d block IMF help. Some of these ensure Sri Lanka will never be able to secure a meaningful amount of IMF loans to overcome the crisis. For instance, IMF demands Sri Lanka reigns in disruptions, achieve political stability and political consensus before they could approve a loan package. On the other hand, USA, UK and the EU want Sri Lanka to allow protests, strikes, disruptions and upheaval to continue by not arresting and punishing violent protestors. It seems that they want to somehow prevent IMF use its limited funds on Sri Lanka and retain it for the benefit of recession-struck western nations.

Sri Lanka has to consider other options too as IMF help may not come after all or it will be too late or too little. IMF help may come at a worse economic cost than the meager loan they may extend. As with many western remedies, the remedy may kill the patient along with the ailment.

Even if Sri Lanka gets IMF help in sizable amounts, there will be a bun fight amongst lenders to get paid first, and, more importantly, a battle to prevent Sri Lanka paying other lenders first. For instance, Japan and China (second and third largest creditors) will not want IMF money to use used to repay bond loans (largest creditor). China would not want it used in order to repay Japan, and vice versa. Both Japan and China have already suspended their projects in Sri Lanka. India, USA and the EU make matters even more complicated. Sri Lanka is stuck in the midst of their rivalries. On top of that there is a large number of foreign investors in Sri Lanka waiting to get out of the island the moment they can profitably translate their rupees into dollars. They too will rush to grab whatever dollars Sri Lanka gets via the IMF as a loan.

The net impact of all these will be Sri Lanka sinking further down in debt without having enough investments to overcome the economic crisis.

Therefore, it is crucially important to look beyond the IMF. But sadly, Lankan leaders are neither creative nor visionary. Just as the people, they too want quick results and IMF is their only hope which may not even materialize.