Shenali D Waduge

Was Sri Lanka’s economic crisis precipitated by an externally planned course to incrementally result in outcome? This is a question Sri Lankans need to ask themselves. How far have Sri Lanka’s elected leaders, paid policy advisors failed to read the external threats & mitigate internal measures to address them, instead of blindly following external advice? Another question for Sri Lankans to answer.

Sri Lanka is in a default status. Why does IMF/World Bank not place these conditions instead of demanding governments cut welfare of the ordinary people & increase taxes of tax payers while defaulters and corrupt get away!

• Ministers & MPs cut down on their entourage / overseas travel & other unnecessary waste including clearly defining what the state pays for and what Ministers & MPs have to personally pay for.
• Well aware that the externally-imposed Provincial Council system is a white-elephant why is there no recommendations to scrap it & save millions from its maintenance? Why is the waste & corruptions by politicians and top corporates not targeted instead of targeting the military for ulterior motives.
• Why doesn’t IMF/WB insist Govt go after defaulters & big time tax evaders & recover from them?
• Why doesn’t IMF/WB insist Govt crack down on black money circulating & catch the culprits
• Why doesn’t the IMF/WB insist Govt review tax holidays/import levies etc given to investors & monitor how far investors have actually invested what they promised?
• Why doesn’t IMF/WB encourage local entrepreneurs & SMEs and encourage govt to give then better facilities to serve the nation?

There are countless more measures that IMF/WB can insist GoSL to implement instead of increasing taxes on utilities, raising prices of essential goods & making life miserable for the common people in particular the tax payers while tax evaders/the corrupt/wasters enjoy a field day.

At the same time the People of Sri Lanka must wake up to reality. We see a segment of society 24×7 enjoying luxuries, another segment barely surviving & another segment finding life impossible. This cannot continue. There has to be some austerity measures across the board & must include that of those living in luxury as well. Some common dos & don’ts have to get applied & be followed by all if Sri Lanka is to come out of this rut instead of eternally taking loans & taking more loans to pay off previous loans/interest. We have to put a stop to this ugly practice. 

IMF was originally set up to work with member states to ensure stability of the international financial system & correct balance-of-payment maladjustments but instead of helping governments avoid currency crisis IMF ended up pressurizing them to stop regulations on cross-border trade creating trade imbalances.

IMF policies attracted huge inflow of foreign money to emerging market economies” across Latin America & Asia via loans & speculative investments & this set the stage for eventual financial meltdown that took place in Mexico in 1994 and in Russia, Brazil & Asia from 1997-1998. When the financial inflows could not be sustained billions of dollars were pulled out of these countries resulting in currencies & stock markets going into freefall. This paved way for IMF to enter with new loans & bail outs aligned with foreign banks & financiers & poverty-stricken people insisted their governments complied, little aware of the dangers they were walking into. Ultimately the taxpayers ended up footing the bill. IMF even insisted that uncollectible private debts were converted to public debt Now do Sri Lankans understand what has happened in Sri Lanka?

Over 90 countries have been subject to IMF/WB structural adjustments – where are these countries now? Sri Lanka has taken 16 IMF loans – but where is Sri Lanka today?

IMF claims it has replaced structural adjustment loans with a new term – comprehensive development framework.

IMF provides financial support to countries suffering external payment difficulties. IMF loans are not for development but meant to balance payment financing with repayment with interest. A country falls into debt, IMF enters gives loan based on internal structural changes & country has to repay amount given as loan with interest.

IMF staff visit countries to discuss economic policy with government officials. These are incorporated into an analysis presented to the 7 largest industrial countries (G7)

Majority of developing countries are guilty of high levels of external borrowing in the 1980s & they have not been able to eliminate this legacy.

Sri Lanka is guilty of living beyond its means & the sooner it realizes this, the better for Sri Lanka. The question is why doesn’t IMF try to eliminate the root cause of the imbalance instead of always targeting the poorer segments of society?

Isn’t IMF also guilty of disorderly adjustment because the very areas that IMF highlights by such adjustment is happening in Sri Lanka – shortage of goods, black markets, high rates of inflation, build up of external payment arrears.

IMF’s neoliberal objectives can be seen in requiring debt-ridden states to forsake their resources by privatizing public enterprises. Why does IMF not concentrate on reviving public enterprises by showing how governments can turn public entities around – why does IMF always demand to pass public ownership to private hands?

IMF entices countries to

• Cut govt spending on education, health care, environment, price-subsidies for basic necessities such as food, grains & cooking oils
• Devalues national currency & encourages increase of exports by privatization of natural resources, reducing labor wages & subsidizing export oriented foreign investments.
• Liberalizes (opens) financial markets to attract short term investments that create financial instability & foreign liabilities
• Eliminate tariff & other import controls resulting in increase of imported goods (consumer) purchased with borrowed foreign exchange intentionally undermining local industry/SMEs/Entrepreneurs & adversely affecting agricultural producers who cannot compete with cheap imports – this results in straining foreign exchange accounts & deepening external debt in the long term

The World Bank was created to assist reconstruction & development of territories of member nations by facilitating investment of capital for productive purposes as well as to promote long-range balanced growth of international trade.

WB’s original mandate was to focus on financing post-World War 2 reconstruction of Europe but when Europe did not show interest in mortgaging its economy to foreign bankers, the WB began to market its loans to newly independent former colonies by investing in training & education to indoctrinate bureaucrats & economics of the developing nations to follow its economic ideology – equating development with export-led economic growth fueled by foreign borrowing & investment. This is where economists of developing nations have erred!

Thus loans were used to finance infrastructure projects & then imports that were beyond the export earnings of a country – eventually forcing nations to take larger loans to service payment of interest due on previous loans. The more nations borrowed – the bigger the loan needed to pay the interest. Ultimately nations became loan addicts.

This was how developing nations were trapped by the international monetary agencies. IMF & WB rewarded nations with more loans after they accepted conditional structural adjustments putting them in more debt.

Countries were pressured into increasing export of their natural resources & goods from cheap labor – this in turn made nations import dependent while their economies came under foreign ownership/influence. Notice how the slow takeover of national economies were taking shape.

In 1980 total external debt of developing countries was $609billion

In 2001 total external debt of developing countries was $2.4trillion (after 20 years of structural adjustments)

Countries end up paying more on debt-service payments than it does on its people. This is how the West drains the wealth of the Third World. It is not a question of giving loans at less interest – the issue is the manner countries are enticed to take loans and more loans to pay off loans. How can they ever think of ever getting out of debt!

The IMF/WB that provide loans (even at low interest) their objective is to enable global corporations to take control over the natural resources & their markets. Note the manner that the companies that enter as investors” are energy & agriculture sectors. The WB financed roads, electric grids were built primarily to serve global corporations – this was no different to why during colonial rule roads and train services were built to plunder resources out of the country.

WB stands guilty of contributing to global greenhouse gas emissions via fossil fuel projects by global corporations that it promotes. Unfortunately ADB, IDB are copying this same model.

Are IMF/WB & WTO really representative of the Global South Third World Nations?

WTO bias is seen in the banana example. 1999 – Caribbean. WTO informs Europe that they could not give import preference to bananas produced by small banana farmers because it posed a threat to 2 US agribusiness companies – Chiquita & Dole which control the world’s banana trade. Europe refused to comply with WTO. US imposed 100% tariffs on numerous European exports which WTO sanctioned – this shows the bias of WTO to US govt & US corporates.

How can the Third World come out of its loan addictions” when IMF/WB keep them addicted to it. How can there be fair trade when WTO ensures there isn’t. WTO rules & systems are used by giant corporates & their allied governments on national governments.

What good is a WTO that regulates governments to protect corporations? Why should everything be imported? Why cannot countries be encouraged to grow their own first. Priority to ensure a nation feeds its people first. How did imported items become cheaper than what is grown and sold locally? Why should locally entrepreneurs and producers be drowning in debt attempting to feed their own when governments are encouraged to import & the system rewards imports. Does trade & investment liberalization really bring economic growth – if so, where is the growth? Do we not see increased imbalances in the global & local economy as well as inequalities.

Shenali D Waduge