{"id":110739,"date":"2021-01-16T17:10:06","date_gmt":"2021-01-17T00:10:06","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=110739"},"modified":"2021-01-16T17:11:29","modified_gmt":"2021-01-17T00:11:29","slug":"sri-lanka-moves-away-from-the-notorious-structural-adjustment-of-the-imf","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/01\/16\/sri-lanka-moves-away-from-the-notorious-structural-adjustment-of-the-imf\/","title":{"rendered":"Sri Lanka moves away from the notorious Structural Adjustment of the IMF"},"content":{"rendered":"

By Garvin Karunaratne, PhD Michigan States University\u00a0\u00a0<\/em><\/span><\/h2>\n\n\n

Introduction <\/h4>\n\n\n\n

The Central Bank Governor\u2019s statement:\u00a0\u00a0The New Economic Model deviates from notorious Structural Adjustment<\/em>\u00a0“(Sunday Times:\u00a020\/12\/2020) marks a watershed in the economic policies of Sri Lanka.\u00a0\u00a0He has added that\u00a0” Sri Lanka will move away from an import oriented market economy towards a production-oriented strategy”.<\/em>\u00a0\u00a0It is also stated that\u00a0working within a market economy\u2026. the performance\u00a0\u00a0of the economic policies introduced in 1977 will be viewed rigorously.\u201d(DailyFT:5\/1\/2021)\u00a0<\/em>\u00a0<\/p>\n\n\n\n

Our Central Bank Governor deserves to be praised and congratulated for deciding to get away from the notorious Structural Adjustment Programme of the IMF, which has in the last few decades taken many Third World countries that had self-reliant economies and were not in debt,\u00a0\u00a0to their grave.\u00a0\u00a0 Sri Lanka happens to be one of them.\u00a0\u00a0<\/p>\n\n\n\n

What\nis Structural Adjustment?  <\/p>\n\n\n\n

Structural\nAdjustment, include rapid price and trade liberalization, accompanied by a\ndetermined stabilization programme to restore or maintain price stability.. the\nimmediate opening of markets to entry by new businesses.\u201d(World Development\nReport 1996) <\/em> <\/p>\n\n\n\n

The\nWorld Bank view is that <\/p>\n\n\n\n

strong\nliberalization stabilization help transition economies correct their inherent\ninefficiencies and macro economic inbalances and move to a path of secure and\nrapid growth.\u201d(World Development Report: 1996) <\/em> <\/p>\n\n\n\n

Though\nstabilization and rapid growth was talked of, in actuality by Structural\nAdjustment Programmes an attempt was made by the IMF, to  restructure\nthe economies of countries that were economically  self reliant\nand did not have a debt, to become indebted. Sri Lanka, that  had a self reliant economy, was instructed to\nliberalize the use of foreign exchange, get loans and spend, getting into debt.\nThe administrative infrastructure of development programmes that was being\nimplemented to enable development was also abolished as instructed by the IMF.  <\/p>\n\n\n\n

Our\nCentral Bank then sang hossannahs, misleading the Government. The\nAnnual Report 1978 states: <\/p>\n\n\n\n

\u2019Substantial capital inflows, together with resources from the\nIMF went on to create a favourable balance of Sri Lanka payment\u201d.  <\/em> <\/p>\n\n\n\n

In my words: <\/p>\n\n\n\n

The word ‘favourable’ can be construed to be misleading in the\nextreme, to refer to resources (loans) from the IMF as  favourable\nbecause IMF finances  are loans on interest that\nincrease the foreign debt of the country. Actually the loans worsened the\neconomy.\u201d(From How the IMF Ruined Sri Lanka:2006: p47<\/em> ) <\/p>\n\n\n\n

The\nIMF loans were provided to Sri Lanka with  long grace\nperiods, to entice our rulers to take the loans as they could enjoy spending\nthe money, but may not bear the responsibility to repay. In my words, “It\ncan be considered morally wrong  for any\nGovernment that had been elected for a term of 5 years to take any loan with a\ngrace period beyond their legitimate incumbency because then the burden of\nrepayment  will fall on a future government that did not\ncontact and obtain the loan.\u201d(How the IMF Ruined Sri Lanka: 2006:p.47) <\/em>   The IMF\nstooped so low to entice our decrepit leaders  to take\nloans and get into debt.     <\/p>\n\n\n\n

 The\nStructural Adjustment provisions provided loans and ensured that they\nbenefitted a class of rich people, who enjoyed luxury imports, who were allowed\nforeign exchange to spend abroad, go on expensive  holidays,\nsend off their children to foreign universities all done with the funds\nobtained on loans. It was inevitable that the countries would fall into debt as\nthe funds were not used productively. The foreign exchange that came in as a\nloan was also somehow sent bank to the Developed Countries in some form or\nother leaving our country saddled with the debt.  The other\nprovisions were to impose a high interest policy- this made local entrepreneurs\nfind it impossible to make a profit and they gave up enterprises  making way for imports. Import controls were\nabolished and import taxes were reduced. Public Sector commercial activities-\nthe development oriented infrastructure to enable development like the\nVegetable & Fruit Marketing Scheme of the Marketing Department, the Canning\nFactory which enabled Sri Lanka to be self sufficient in food preparations(jam\netc.) and viable small industries like powerlooms and handlooms were all\nabolished and there were to be no subsidies.  Foreign\nExchange was to be used freely to import anything. The incoming Foreign\nexchange was to be handled by banks and commercial dealers and the Central Bank\nonly controlled the Rupee. This in a nushell were the main provisions of\nStructural Adjustment. <\/p>\n\n\n\n

SriLanka,\none of the first countries to follow the Structural Adjustment Programme  is perhaps the first country to declare that\nthe IMF was leading our Third World Countries to become indebted.  <\/p>\n\n\n\n

How Sri Lanka was trapped <\/h4>\n\n\n\n

Sri\nLanka was not having a foreign debt in 1977 when President Jayawardena\ncommenced following the advice of the IMF. <\/p>\n\n\n\n

In  1975 Sri Lanka\u2019s foreign debt was negligible in the\nearly Seventies. Then the foreign debt-. only $ 743 million, and  at\n$ 750 million in 1977- were all incurred on projects and not on consumption. In\nmy words, “Following the Structural Adjustment Programme of the IMF from\n1978,  our foreign debt increased  to $ 1,845 million by\n1980 in hardly three years of liberation, to   4,063 million by\n1986, to $ 6,723 million by 1993, to $ 9,405million by 1995.\u201d( From How\nthe IMF Ruined Sri Lanka(2006) <\/em> <\/em><\/p>\n\n\n\n

 In 2020 the foreign debt\nis around $ 56 billion.  <\/p>\n\n\n\n

 In\nfact, Chandra Maliyadde one of our former Permanent Secretaries, queried how,\nwhile  “at the end of 1976 the foreign debt of Sri Lanka was\nonly $ 75 million, how the external debt liability  had increased by\nmore than 500 times in 35years”.(The Island:23\/06\/2013).   <\/p>\n\n\n\n

What\nhappened was that President Jayawardena of the United National Party when he\ncame into power in 1977,  requested financial help\nfrom the IMF. There was no need for him to seek any  help from\nthe IMF because Prime Minister Sirimavo, who ruled from 1970 to mid 1977 had\nmanaged to avoid getting into debt even though the Oil Producing countries had\nincreased the price of oil fourfold in the early Seventies and she had also to\npay in foreign currency for the take over of Estates over 50 acres when the UK\ninsisted that the companies should be paid immediately.  The\nSuperpowers, resenting the socialist policies that were  followed,  even resorted to subject Sri Lanka to sanctions\nlike not providing us flour at reduced rates, as was normally done, which\nresulted in bread queues. This reduced our reserves yet the country was managed\nwithout falling into foreign debt. The balance of payments i.e. the amount\nof money created in foreign exchange by way of net inflows received from\nexports and other services, less the cost of imports and services  and payments made in foreign exchange, recorded\na net . $ 58 million in 1976 and $ 117 million in 1977, while after 1977 there\nwas a negative figure of $ 75 million in 1978, increasing every year to as much\nas $ 507 million in 1980. (From How the IMF Ruined Sri Lanka(2006,\np.48)  <\/em> <\/p>\n\n\n\n

It is\nimportant to note that 1976 and 1977 were the last two years when we had a\nfavourable balance of payments.  Since 1977\nthe balance of payments have grown negatively. Today, the balance of payments\nis negative in the region of over four billion dollars, all due to following\nthe Structural Adjustment of the IMF.   <\/p>\n\n\n\n

What really did happen is best\nexpressed by the South Asian Commission (SAARC) on Poverty Alleviation:   <\/p>\n\n\n\n

the\nindustrial countries are for the first time since World War II in need of\nmarkets for their products.. So they have put into effect the Structural\nAdjustment Programme\u2026 the industrial countries are  pressurizing the\nreceipients of  Structural Adjustment loans to unilaterally\nopen  their economies to goods from them.\u201d(Meeting the Challenge:1992) <\/em> <\/p>\n\n\n\n

I have\nhappened to be in the forefront against the IMF\u2019s Structural Adjustment\nProgramme(SAP). <\/p>\n\n\n\n

In\n1990 I commenced  a series of courses on Third World Studies at\nWestminster Institute of Adult Education in London, These lectures subjected\nthe IMF’s Structural Adjustment to critical evaluation. These lectures were\nattended by students of the  University\nof London. The University professors yet taught  traditional\neconomics- to them the Third World economies were not falling apart under the\nIMF’s Structural Adjustment Programme. On the other hand, my Lectures exposed\nthe detrimental effects of the SAP.  Our former\nAmbassador Mr Sarath Wijesinghe, the President of the South Asian Forum of the\nUniversity of London,  in 1992 invited me to speak  about the economy of Sri Lanka at a meeting of\nthe South Asian Forum in the University of London.  Minister  Nimal Siripala de Silva was also invited from\nSri Lanka and spoke on the  political\nsituation. <\/p>\n\n\n\n

My\naddress highlighted how the foreign debt increased from a low of $ 743 in 1975\nto as much as $ 5101 in 1989, how the Rupee was devalued  from\nRs. 15.50 to the pound sterling in 1977  to Rs 34.53\nin  1978( a devaluation of over 100%), to Rs. 39.06\nby 1981, how the income enjoyed by the richest increased from 28% in 1975 to\n35% in 1987 and the incomes of the poorest declined from 19% in 1975 to 16% in\n1987, how the people were deprived of the rice ration scheme which provided\nrice at low prices by abolition of the Rice Ration Scheme and instead\nintroducing a Food Stamp Scheme, which in its first three years of\nimplementation, the per capita calories consumption  of the\nbottom 20% declined by 8% from an already low of 1490 calories in 1978 to 1368,  documents  a tremendous\nincrease in the foreign debt (due to)  being\nextremely liberal  in allowing foreign exchange for foreign\ntravel, offering students foreign exchange for overseas expenses for stay and\nfees at foreign universities, allowing the unrestricted  import\nof non essential consumer goods, importing built up buses lorries instead of\nimporting chassis and building them locally, causing loss of employment to\nthousands , leading  the country  to disaster in terms of foreign debt,  currency devaluation, high inflation, increased\nimports , poverty and unemployment.” <\/em> <\/p>\n\n\n\n

This  Address to the\nSouth Asian Forum at the University of London on  18 th October 1992\nhas been published in my book: How the IMF Ruined Sri Lanka(2006).Pages\n43 to 82)  <\/p>\n\n\n\n

Following\nthis Structural Adjustment Programme  has today\nled to Sri Lanka having a foreign debt of around $ 56 billion. Paying back\nthese loans is impossible. Even to service the loan- not to default, requires\naround $ 6. 5 billion annually.  The total\nforeign exchange earnings is hardly sufficient to meet this commitment.   In short, we have to find loans and get\ninto further debt to service our loans. <\/p>\n\n\n\n

The\nforeign debt was $ 13 billion in 2005 and $ 18 billion in  2009, which indicates that Sri Lanka did not\nget into massive debt to defeat the LTTE.  Thus the\nforeign debt was entirely created by living beyond our means- by financing the\nrich to spend lavishly. The IMF dictated and we followed, like the children\nfollowing the Pied Piper of Hamelin. <\/p>\n\n\n\n

Abolishing\nthe administrative infrastructure that Sri Lanka had built up to enable\ndevelopment  Sri\nLanka had since achieving independence in 1947, put together a development\ninfrastructure to enable the move from a colonial vassal status to a self\nreliant situation where a bold peasantry will be well established in\nagricultural pursuits and  agro industries, making\nwhat is required for the country. By the time the IMF took over the running of\nthe country by imposing the Structural Adjustment Programme in 1978, the\ncountry had achieved self sufficiency in its staple crop- paddy and industries\nwere developed making many consumer items. We were making all our textiles. To\nachieve this we had developed a Scheme for Vegetable and Fruit Purchase paying\nhigh prices and also having a Canning Factory that made Sri Lanka self\nsufficient in all  Jam, Fruit Juice  and Sauce.\nSri Lanka, had developed a Paddy Purchasing Scheme paying a premium price to\nproducers and also established rice mills. The Vegetable Purchasing Scheme, the\nPaddy Purchasing Scheme were stopped and the Rice Mills abandoned and left to\nrot, following the IMF advice. Handlooms and Powerlooms that turned out\ntextiles were all closed  down and the infrastructure\nof Velona the research institute that helped textile manufacture was closed\ndown. The Small Industries Department that handled the development of small\nindustry in both the public and private sector was crippled.  According to the IMF the Public Sector should\nnot attend to any commercial activity. The IMF concept was  the Private Sector as the Engine of Growth. It\nwas forgotten that the private sector had as its aim making profit and service\nto the nation was not in their books. In industries we had developed small\nindustry- made mechanized boats, crayons on a cooperative framework, made tools\netc and all this had to be abandoned on the IMF advice. Thus the IMF’s advice  to abolish the development infrastructure was\nvery detrimental for the development of the country. <\/p>\n\n\n\n

Sri Lanka did not subject the IMF teachings to\ncritical evaluation <\/h4>\n\n\n\n

Our Central Bank sang\nhossannahs in praise of neoliberal economics that underlay Structural\nAdjustment.  <\/p>\n\n\n\n

Our University professors the\nerudite economists of the country ignored what was happening to our economy.\nOur Universities teach only traditional and historical economics and never even\ntouch the neoliberal economics of Milton Friedman of the Chicago School of\nEconomics which propounded the Structural Adjustment Programme of the IMF. <\/p>\n\n\n\n

 In  1996  as\na Visiting Lecturer in the Faculty of Economics at the University of\nPeradeniya, my first assignment was to lecture on any subject I liked to the\nfaculty. I selected the IMF’s Structural Adjustment, which was  forced on Sri Lanka by the IMF. in 1978. I\ndetailed how the implementation of the Structural Adjustment Programme caused\npoverty and deprivation in our country and ruined the economy. I detailed  how through the development of\nmicroenterprises, we  can yet  bring about development. .None of the erudite\nfaculty  who listened to a two hour’s  lecture , raised a single question, but my\nlecture  also sealed the fate of my being a visiting\nlecturer. My critique of the IMF was   anathema\nto the thinking of the erudite dons who perhaps thought I would indoctrinate\ntheir students. <\/p>\n\n\n\n

This\npresentation was published by  Sarasavi Publishers in 1997 and this\nbook: Microenterprise Development: A Strategy for Poverty Alleviation and\nEmployment Creation in the Third World: The Way Out of the World Bank and IMF\nStrangehold,(69 pages) happens to be the first book critically\nevaluating  the IMF’s Structural Adjustment Programme and also\nproviding a detailed new paradigm for the Third World countries to save\nthemselves from the IMF\u2019s Structural Adjustment trap. In my words:   <\/p>\n\n\n\n

As far as economic development and productive growth is\nconcerned  Structural Adjustment provisions spelled death for the\neconomies of the Third World\u2026. The provisions of the Structural Adjustment\nProgram are so binding on the Third World countries  that they have\nno power to plan their economies. The countries have to accommodate to the\ndictates of foreign investors  and foreign financiers coming to them\ndirectly and covertly in the name of the WB and IMF.(From: The Way Out\nof the IMF and World Bank Stranglehold:1997) <\/em> <\/p>\n\n\n\n

Professor\nSirimal Vithane in evaluating this book states:  <\/p>\n\n\n\n

The author is successful in providing a critical picture of the\ninherent features of the World Bank and the IMF\u2019s policies and their\nimplications for rural development in the Third World and suggesting a\nreasonably powerful alternative or sustainable  economic development\nat the community level. It is a valuable addition to the literature on\nDevelopment Economics.<\/em>\u201d  <\/p>\n\n\n\n

The United\nNations woke up only in 1996, making a petty statement in its Human\nDevelopment Report 1996:  <\/p>\n\n\n\n

The stabilization measures of the IMF  aimed at\nreducing  both budget deficits usually involved cutting public\nspending and increasing interest rates… Although these policies reduced\ndeficits in some countries they often did so at the cost of inducing recession\nIn short, they often balanced budgets by unbalancing peoples lives\u201d.  <\/em> <\/p>\n\n\n\n

That\nwas all the United Nations  did.  The United\nNations  ignored the detrimental effects of countries following the\nStructural Adjustment Programme, while the Third World countries  bled to death.   <\/p>\n\n\n\n

Two\ncelebrated professors who have now come out against the IMF\u2019s Structural\nAdjustment  are Noble laureate Joseph Stiglitz and Jeffery\nSachs. Both were working for the IMF, the World Bank  or\naffiliated institutions and for years were furthering the interests of the\nIMF.  In the case of Indonesia, Stiglitz had the audacity to advise\nthe IMF: I suggested that the  excessively contractionary\nmonetary and fiscal programme could lead to political and social turmoil in\nIndonesia. If the people we entrust to manage the global economy in the\nIMF  don’t begin a dialogue and take their criticisms to heart,\nthings will continue to go very wrong.\u201d(The Insider, The New\nRepublic:17\/4 2000) <\/em>Stiglitz was given a standing sack.  <\/p>\n\n\n\n

That\nwas after he had served as the Chief Economist and Vice President of the World\nBank from 1997 to 2000, furthering  the Structural Adjustment\nProgrammes.   <\/p>\n\n\n\n

Professor Jeffery Sachs came up\nwith a major criticism of IMF policies in his The End of Poverty(2005)  <\/p>\n\n\n\n

<\/em>Western Governments enforced  draconian budget policies\nin Africa during the 1980s and 1990s. The IMF and the World Bank virtually ran\nthe economic policies of the debt ridden continent, recommending\nregimes  of budgetary belt tightening, known technically as\nStructural Adjustment Programs. These Programs had little scientific merit and\nproduced even fewer results. By the start of the twentyfirst century Africa\nwas <\/em>poorer than in the late 1960s when he IMF and the World Bank\nhad first arrived on the scene with disease, population growth and\nenvironmental degradation spiraling out of control. IMF led austerity\nfrequently led to riots, coups,  and the collapse of public\nservices.” <\/em> <\/p>\n\n\n\n

It is interesting to note that till 2005 Jeffery Sachs was a\nproponent of free market economics and served as the Advisor to the Governments\nof Bolivia in 1985, to Poland in 1989 and Russia in 1991. In all of these\npositions he was advising his ‘Shock Therapy’\u2019 how to be a success in following  the\nmarket economy  through open trade, privatization of State Assets,\nelimination of price controls and subsidies- the core tenets of Structural\nAdjustment.  This was done through obtaining more loans actually\nmaking the countries more indebted\u2026 His shock treatment  was\nfurthering the structural adjustment policies. He has been\ncriticized  for his shock treatment  in that it had produced\nmisery and death for an untold number of working people”  <\/em><\/p>\n\n\n\n

.(internalist.org.JefferySachsachsows1110html)  <\/p>\n\n\n\n

In fact I have had to comment on Jeffery Sachs:  <\/p>\n\n\n\n

Jeffery Sachs in the Eighties and Nineties when working to\nfurther the Structural Adjustment Programme did not have the foresight to\nunderstand  that the very policies he implemented would not only push\nthe countries  more towards bankruptcy and debt., but also leave the\npeople impoverished and poorer.”(From: How the IMF Sabotaged Third\nWorld Development,  (2017) <\/em> <\/p>\n\n\n\n

The Left Busines Observer  states:  <\/p>\n\n\n\n

Poland looks like a success to some but with the transition came\nhigh unemployment, falling real wages. Russia though was a thorough disaster,\none of the worst collapses in human history. Living standards fell and the\npopulation shrank, an almost unprecendent event in a country not at\nwar.”(The Long Strange Career of Jeffery Sachs: Left Business\nObserver, 11\/8\/2005) <\/em> <\/p>\n\n\n\n

What happened to Tanzania illustrates how the countries were\ntrapped:  <\/p>\n\n\n\n

The IMF in routine consultations advised Tanzanian\nleaders  that their reserves were embarrassingly large  and\nmight lead the country’s aid donors  to reduce their contribution. A\npoor country, the IMF argued  should not hoard its reserves but spend\nthem in order to develop more rapidly. They persuaded the Government , to\nabolish the foreign exchange budgetary system… lift controls on imports and\nconsequently by the end of 1978 Tanzania had only reserves for ten days worth\nof imports. Then the IMF imposed its Structural Adjustment reforms. Tanzania\nwhich had a stable, self reliant economy  was broken down and brought\nto its knees.(From Lent and Lost by Cheryl Payer ) <\/em> <\/em><\/p>\n\n\n\n

The foreign debt of Tanzania which was nil in the Seventies\nincreased to $ 2.4 billion by 2011 and $ t4 billion by October 2020.   <\/em><\/p>\n\n\n\n

What did happen to Sub Saharan African countries is an eye opener:  <\/em><\/p>\n\n\n\n

After more than a decade of acrimonious debates and\ntonnes  of evaluation reports there is an increasing\nconvergence  of views that Structural Adjustment Programmes have not\nworked and that as designed  they are grossly defective  as\na policy package for addressing the endemic poverty  and pervasive\nunder development  of the region.\u201d<\/em> :(Our Continent: Our\nFuture: African Perspectives on Structural Adjustment by Thandika\nMkandawire & Charles Soludo(Africa World Press Inc.1998) <\/em><\/p>\n\n\n\n

Under the tutelage of the IMF the Third World countries that had a\nnegligible foreign debt before the IMF came on the scene have piled up debt,\nwith poverty and deprivation out of control.   <\/em><\/p>\n\n\n\n

Making the countries to pile up a foreign debt has been the method\nthe IMF used to make the countries become \u2018colonies\u2019 of the Developed Countries\nonce again.  <\/em><\/p>\n\n\n\n

My book:  How the IMF Ruined Sri Lanka  and\nAlternative Programmes of Success   was published in 2006.  <\/p>\n\n\n\n

 Assistant Dean George Axinn of Michigan State University in\nhis Introduction to he book commented:  <\/p>\n\n\n\n

A valuable and timely book that will enable international\norganizations to arrest the trend of failures. It provides a comprehensive\napproach which includes policies for employment creation, poverty alleviation,\nimport substitution and self reliance as well as community development and non\nformal education the educational strategies that can usher in development<\/em>.\u201d  <\/p>\n\n\n\n

This book details  how  the IMF ruined Sri\nLanka in its 480 pages..  <\/p>\n\n\n\n

In 2017, my book: How the IMF Sabotaged Third World\nDevelopment was published by Godages\/ Kindle.(136 pages) <\/p>\n\n\n\n

Universities keep away from\nteaching the economics of Structural Adjustment  <\/p>\n\n\n\n

While\nmany countries were falling a prey by following the IMF\u2019s Structural Adjustment\npolicies forced on the Third World since the late Seventies,  is it\nnot sad that there is no university in the world that teaches and critically\nevaluates the neoliberal economics that underlie the Structural Adjustment\nProgramme. All Universities confine \ntheir teaching to traditional and historical economics and ignore how\nStructural Adjustment economics is currently ruining the Third World\ncountries.    <\/p>\n\n\n\n

It is my humble request that one of our Universities should\nimmediately commence research and studies on the neoliberal economics of the\nStructural Adjustment Programme. This will be a great success,\nwill attract students worldwide and will be a great service to Third World\neconomies.  <\/p>\n\n\n\n

I\nhave detailed how Sri Lanka fell into debt and now that the Central Bank has\ndecided that this was caused by following the IMF\u2019s\nnotorious  Structural Adjustment, it is necessary to carve out what\nhas to be done to bring Sri Lanka to Prosperity  and\nSplendour<\/em>, the avowed aim of President Gotabhaya.   <\/p>\n\n\n\n

It\nis absolutely necessary that we control every dollar that comes in. Sadly\nnow we do not control our incoming foreign exchange. The foreign exchange  that\ncomes in is in  charge of the banks and  private money\nchangers to make a profit. This has been happening for long but what\nhappened in January 2001 reveals the stark fact that our country is not in\ncharge of the foreign exchange that comes in.  <\/p>\n\n\n\n

 On\n25-1-2001,  when the two State banks, the Bank of\nCeylon  and the Peoples Bank did not have sufficient dollars to pay a\nlarge oil bill, and approached a private bank in Sri\nLanka,  that  foreign commercial bank that had collected\nour incoming foreign exchange, increased the price of it to Rs 106 per $ when\nthe current rate was Rs 85.00. Our two banks were forced to buy the dollars at\nthe higher rate  and this effectively devalued our rupee by over 15%\nimmediately. Our  Central Bank then admitted that it controlled\nonly the Rupee and not the incoming foreign currency\u201d<\/em>. (The Island:\n17\/2\/2001)  <\/p>\n\n\n\n

Further, our banks are allowed\nto purchase foreign currency and sell the foreign currency making a profit.-\nThis came to light on 25\/1\/2001 as quoted earlier.   <\/p>\n\n\n\n

Thus\ntoday the incoming foreign exchange does not get into the\nGovernment\u2019s  Treasury.  In fact the other\nprivate banks have for long grabbed foreign funds coming into the NRFC accounts\nof  banks. For details  see my\nbook: How the IMF Ruined Sri Lanka, pages 98 \u2013100, which tells\nhow a foreign bank in Sri Lanka grabbed the pounds sterling that came to my own\nNRFC account at the Bank of Ceylon. .  <\/p>\n\n\n\n

It is absolutely necessary that\nour Central Bank takes charge of all foreign exchange that comes in and also\ndecide the exchange rate. Today the banks and private exchange dealers fix\ntheir own rates. Controlling the incoming foreign exchange is the key to the\ndevelopment of a country and as former Prime Minister of Malaysia, Mahatir\nMuhammed states   <\/p>\n\n\n\n

Any\ncountry  at all which says it cannot control  its banks and\nits banking system\u2026 they are not fit to be Governments and they should either\nresign or be overthrown.”(Daily News: 1\/2\/1999) <\/em> <\/p>\n\n\n\n

Can Development Programmes be\nimplemented without a budget <\/p>\n\n\n\n

Finally,\nwhile I have made a strong case to enable a bankrupt country to get back to\nbecome self reliant, a question that emerges is as to how any development can\nbe brought about without funds.  This is very critical for our country\ntoday. <\/p>\n\n\n\n

The\nanswer to this key question comes from the Youth Self Employment\nProgramme of Bangladesh,.  I was the Commonwealth Fund Advisor on\nYouth Development to the Ministry of Labour and Manpower in Bangladesh in\n1982,  At a Conference held by the Hon Minister Air Vice Marshall\nAminul Islam, I locked horns with the Secretary to the Treasury, the highest\nofficer in the land, when he contested my request that I should be allowed to\nestablish a self employment programme. He quoted the failure of the ILO to\nestablish such a self employment programme in the earlier three years in\nBangladesh, causing a major loss. Intensive  arguments between me and\nthe Secretary to the Treasury  continued for over two hours, when the\nHon Minister stopped us and immediately approved my establishing a self\nemployment programme. The Secretary  to the Treasury, stumped stating\nthat the Treasury will not provide any funds. I said that I did not require a\nbudget. I sought  approval to find savings in approved budgets and\nuse them to do extension work in creating self employment and requested\nauthority to redeploy officers, changing their remits. For the first four years\nthis Programme was worked entirely from savings. Finally the Treasury had to\neat its words and document the progress of this Self Employment Programme by\ndevoting eight full pages in the Fifth Five Year Plan1997-2002. This\nProgramme that was commenced in 1982 has by now guided over three million\nyouths to become commercially viable entrepreneurs. It is today the premier\nemployment creation the world has known.  <\/p>\n\n\n\n

 I may also mention that\nin the case of the Divisional Development Councils Programme of\n1970-1977, the largest programme of poverty alleviation and employment creation\nSri Lanka has known, easily eighty percent of the personnel were obtained from\nthe Sri Lanka Administrative Service without any payment as they did perform in\naddition to their normal duties.   <\/p>\n\n\n\n

Sri\nLanka has already clamped import controls on non essential imports. In a\ncountry where even tomatoe sauce and all fruit juices and jam has been imported\nsince 1978, there is bound to be shortages of many consumer items. The\nGovernment has to immediately initiate small industries to make small\nindustrial goods. Prior to 1977 Sri Lanka was full of small\nindustries- we had handlooms and powerlooms which enabled Sri Lanka to become\nself sufficient in all textiles. The Small Industries Department was very\nactive prior to 1977 when it offered help to small\nindustrialists  This was by a Research and Advice Centre  at\nVelona,  Moratuwa, which was closed down on IMF advice.   <\/p>\n\n\n\n

Despite\nthis predicament of the economy being bankrupt today, we can hark back to many\ndevelopmental tasks done successfully before the 1977 IMF intervention. In the\nthree years 1955 to1957, Sri Lanka became self sufficient in all jam, juice and\nfood preparations. This was done  by the Marketing Department\nCannery.  <\/p>\n\n\n\n

We\ncan also talk of the Divisional Development Councils Programme(DDCP) which in\nthe period 1970 to 1977 created employment for as much as 33,000 youths and\nestablished many successful industries, creating employment for the youth and\nalso providing consumer goods that otherwise had to be imported. The viable\nSmall Industries established under this DDCP included a Mechanized\nBoatyard,  established by the author which was in full action\nwithin three months, where youths were trained and made around 30 \u201335 , 40 ft\nlong seaworthy boats a year. This Boatyard was closed down on the orders of the\nIMF. Instead if such boatyards are established Sri Lanka could have been self\nsufficient in all fish supplies today, creating employment for hundreds in\nmaking the boats and in fishing on the high seas. .  <\/p>\n\n\n\n

The\nDivisional Secretary at Kotmale established a unit making paper and cardbord\nfrom waste paper. Is it not sad that Sri Lanka does not have a plant to turn\nwaste paper into cardboard, which is there in most countries. Among the youth\nentrepreneurs in the Youth Self Employment Programme I established in\nBangladesh, there were a few youths who collected waste paper and made paper\nand cardboard out of it.   <\/p>\n\n\n\n

The\nauthor was also instrumental in finding the art of making\ncrayons  done at the Rahula College Science lab and establishing a\nCooperative Crayon Factory at Morawaka where our youths not only made crayons\nbut sold them islandwide saving foreign exchange on imports. Under IMF advise\nthis Crayon Factory was stopped. In fact today walking through the Supermarkets\nin Sri Lanka my blood boils when I see Crayola Crayons on sale in Sri Lanka. My\nmind travels in nostalgia to the days when our youths did make crayons, equal\nin quality to Crayola of today and marketed them islandwide. Sumanapala Dahanayake,\nthe Member of Parliament for Deniyaya undertook to establish Coop Crayon and\ndid perform a yeoman service in his capacity as the President of the Morawak\nKorale Cooperative Union. This Coop Crayon was the most successful small\nindustry and finally was the flagship industry of the Divisional Development\nCouncils Programme of 1970-1977.   <\/p>\n\n\n\n

 Finally,\nWe old hands, are  here to tell the tale of development, of what we\ndid achieve prior to the IMF taking charge of our economy in 1978, to our\nPresident who is now humbly requested to take the lead.  This sir, is\nthe only path to achieve your avowed aim of  Vistas of Splendour\nand Prosperity   <\/p>\n\n\n\n

My humble request to our\nPresident,   <\/p>\n\n\n\n

  1. To take action to direct the Central Bank to control the foreign exchange that comes into the country. This involves collecting\u00a0\u00a0every dollar that comes into Sri Lanka and fixing the exchange rate as was done before 1977. \u00a0\u00a0<\/li>
  2. To immediately establish a programme to establish small industries, especially agro-industries to make items that were imported which can be made in Sri Lanka(import substitution). We hold the expertise to make many items that we imported and these industries can be established within three months and the total outlay can be covered within a year or two at most. This includes making paper and cardboard out of waste paper, illuk grass and straw, making all food preparations- jam, juice etc, by establishing a few canneries, making all textiles visa handlooms, power looms. . These were done earlier and there is no doubt whatsoever about success. \u00a0\u00a0<\/li>
  3. To consider directing any of our Universities to commence teaching
    and research in the neoliberal economics of Structural Adjustment. \u00a0
    This will enable the development of a new paradigm for development.\u00a0
    Garvin Karunaratne, Ph.D. Michigan State University
    Former SLAS,\u00a0 G.A. Matara 1971-1973\u00a0

    Author of:\u00a0Microenterprise Development: A Strategy for Poverty Alleviation and Employment Creation in the Third World: The Way Out of the World Bank & IMF Straglehold,\u00a0\u00a0Sarasavi Publishers, 1997 How the IMF Ruined Sri Lanka & Alternative Programmes of Success, Godages, 2006 How the IMF Sabotaged Third World Development, Kindle\/Godages,2017<\/li><\/ol>\n\n\n\n

    16\/10\/2021 <\/p>\n","protected":false},"excerpt":{"rendered":"

    By Garvin Karunaratne, PhD Michigan States University\u00a0\u00a0 Introduction  The Central Bank Governor\u2019s statement:\u00a0\u00a0The New Economic Model deviates from notorious Structural Adjustment\u00a0“(Sunday Times:\u00a020\/12\/2020) marks a watershed in the economic policies of Sri Lanka.\u00a0\u00a0He has added that\u00a0” Sri Lanka will move away from an import oriented market economy towards a production-oriented strategy”.\u00a0\u00a0It is also stated that\u00a0working within […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[],"class_list":["post-110739","post","type-post","status-publish","format-standard","hentry","category-by-garvin-karunaratne"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/110739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=110739"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/110739\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=110739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=110739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=110739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}