Prof. N.A.de S. Amaratunga

If we go along the path we have been following upto now adhereing to the IMF conditions we may have to boost up our dollar earning capacity at least to USD 25 billion by 2028 in order to be able to pay 15% interest on foreign loans and capital recovery with a looming reduction of the hair cut” as well. To increase our exports we may have to import more for which we we may have to take more loans. On the other hand if we increase our income which we have to do in any case the interest on foreign loans will go up to 15% and the hair cut” will be pruned. Heads we lose and tails they win! These are the conditions of the agreement entered into with our creditors mediated by the IMF. This is a tall order requiring us to increase our exports at a a rate never achieved in the past and paradoxically there is a huge penalty” when we do that. Even if we achieve this unrealistic goal we are already entangled in a system of debt from which it may not be possible to come out in the forseable future. What is worse is the impact all this will have on the poor, already the poverty rate is 26% and a further rise may result in food riots and social unrest.

I have dealt with self-sufficiency which could be a solution to this problem in my earlier letter titled Answer is self-sufficiency in food and energy” which appeared in these columns a few days ago. There is no need to repeat what I had said in that article here. My intention in this article is mainly to draw the readers attention to the growing possibilty of an alternative to the present neo-liberal global economic order controlled by its currency the dollar and related currencies. The BRICS is increasingly becoming the true friend” of the global South. And more and more countries are joining the association mainly as an insurance against the dictates, hegemony and dollar monopoly of the western powers. Saudi Arabia, a country which is a staunch US ally has applied for membership and so has several African, South East Asian and South American countries. Iran, Egypt and South East Asian giants would make BRICS a formidable group. Their main concern would be the inequitable world order under the hegemony of the western powers. They have the honourable intention of helping the under developed countries to extricate themselves from the trap woven by the neo-liberal forces in whose hands the IMF appeares to be a tool. They have the intention of extending a hand without asking in return what the poor countries are incapable of giving.

The IMF deal that Sri Lanka has entered into is unfairly favourable to the creditors. Our poor people will get poorer and will have to exist on a pittance if we follow this path without substancial changes that would give the government some freedom to increase public spending and give some relief to the poor. Whether the IMF would allow that is very doubtful. They will not agree to change the terms and conditions related to the financial aspect of the agreement particularly regarding interest rates and haircut”. The government will have two huge problems in its hands; increasing poverty and increasing debt. Well these were the two main problems that the country had since 1970s when neo-liberalism took over and there had never been a respite. And this is the experience of most of the developing countries. Neo-liberalism which is the zenith of capitalism and depends heavily on the trickle-down effect for the sustenance of the poor seems to believe that richer the rich gets greater will be the trickle, but this has not happened, on the contrary the inequality has worsened everywhere.

Obviously the world needs a people oriented new order and the global south seems to have realized this and are working towards it. BRICS is just one outcome of that effort. Five new countries have joined the organization and its economic performance in terms of purchasing power parity is shown in the graph below. Apparently BRICS+ as it is now known has overtaken the G7 countries by 2021 and has the potential to be the dominant political and economic block in the future. In the least it may have the capacity to challenge the political, financial and other sanctions of the western powers and pressure them to mend their ways.

Several countries have already been benefitted by being members of BRICS and Sri Lanka  could negotiate with them for bilateral trade on better terms, assistance in achieving self-suufficiency in food and energy and getting soft loans to alleviate poverty.

Prof. N.A.de S. Amaratunga