Sri Lanka is finally re-entering a rehab clinic. Not for addiction to some common vice but for addiction to economic policy myopia and ignorance of the related dynamics of governance, financial mismanagement and mishandling, fiscal profligacy, and wanton corruption. This state of affairs is not the result of financial misadventures but of systematic corrosion of monetary governance.
After more than a year of toing and froing, months and months of bandying about the dirty “C” word and instead opting to eke out a hand-to-mouth “Eda Wela Tours”, handouts-based, mostly rudderless existence, a set of officials from the International Monetary Fund (IMF) will meet Finance Minister Basil Rajapaksa and President Gotabaya Rajapaksa this week to begin discussions on obtaining IMF assistance, with the Finance Minister set to visit the IMF in the US next month. This inevitable decision has been made after having heaped daily servings of unprecedented and untold sufferings on the people thanks to the laissez-faire attitude to the provision of essentials, amidst the worsening economic crisis precipitated by dwindling foreign exchange reserves and pending massive debt repayments. The economic crisis has currently snowballed into a hydra of crises related to fuel, electricity, and liquefied petroleum gas (LPG) and the cumulative effect of these have been dragging the hapless masses, kicking and screaming, to squint into the vistas of the dark night of the soul, and has led the rather ineffectual Opposition to repeatedly utter the dreaded “B” word (“bankruptcy”).
Moreover, it is learnt that Minister Rajapaksa’s plus ones to Washington, DC will not include Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal, likely owing to the latter’s vocal opposition to opting to enter an IMF programme. However, Rajapaksa is set to take with him a homegrown plan, outlining economic recovery and fiscal consolidation. Regardless of the fate that can befall even the best laid plans, having any kind of plan based on which the bilateral dialogue can be initiated is better than showing up with tabula rasa, a fact which is presently affecting the loan facility being sought from India, which is seeking a plan from the Government regarding certain economic developments.
The “conditions” of financial discipline and accountability that the IMF would impose on the Government could include cutting down the number of public servants by slashing public sector jobs (such a harsh condition, some economists argue, would be imposed only if the Government approaches the IMF sans a solid economic regeneration plan), allowing the Sri Lankan rupee to depreciate further, increasing the interest rates, slashing pension schemes, and selling state properties. Such requirements per the IMF reform agenda are not ones which, according to Cabraal, the Government is willing to comply with at present. These concerns and other factors including exhibiting complacency and cocksureness in equal measure, underpinned by illiteracy and pigheadedness, serve to explain why Sri Lanka took so long and got this late to the IMF party.
The reality is twofold. The IMF process is time consuming, and therefore it will be well into the second half of the year before any relief in the form of funding is likely to materialise. The harsher reality, however, is that the IMF package will not solve the economic crisis in its entirety, not by a long shot. What is good news, however, is that this is a first but vitally important and positive step, though much belated and perhaps way too late as some would argue. But, the fact remains that beggars can’t be choosers (not when the choice is between the jaws of destitution and abject humiliation) and the country is in a dire position where it has to take whatever it can, whenever it can, and however it can; hence to ignore this reality is national peril, and therefore, it is better late than never. Moreover, the IMF coming aboard will inspire confidence in foreign governments and investors, particularly in Sri Lankan Government bonds and the Colombo Stock Exchange (CSE), which will show results in the short run, and in foreign direct investment (FDI) in the long run. However, the Government has a history of discontinuing such IMF arrangements, halfway down the line, thus breaking the pacta sunt servanda principle. Hence, it should adhere to fulfil and not deviate from the conditions mutually agreed on.
There is yet another reality. If this ruling administration cares about the country and its future, as it claims to be, it should be prepared to commit political seppuku by taking politically unfavourable yet economically rational decisions to set the country on the straight and narrow path to economic recovery. This should be the order of the day. Towards this end, it is time for the Government’s misplaced and insincere patriotism to be shown the door; it has ill served the nation.
Relapse is but a prescient stumbling block of addiction, especially so in the case of addicts who have hit rock bottom but continue to plumb and mine the depths of such as they do not possess the clarity of thought to recognise the bottom even when they experience it firsthand. Sri Lanka’s economic recovery too, by any modest assessment of the state of things, will come at such a price. The unsavoury but inevitable rehab clinic
13 Mar 2022
The unsavoury but inevitable rehab clinic
13 Mar 2022
Sri Lanka is finally re-entering a rehab clinic. Not for addiction to some common vice but for addiction to economic policy myopia and ignorance of the related dynamics of governance, financial mismanagement and mishandling, fiscal profligacy, and wanton corruption. This state of affairs is not the result of financial misadventures but of systematic corrosion of monetary governance.
After more than a year of toing and froing, months and months of bandying about the dirty “C” word and instead opting to eke out a hand-to-mouth “Eda Wela Tours”, handouts-based, mostly rudderless existence, a set of officials from the International Monetary Fund (IMF) will meet Finance Minister Basil Rajapaksa and President Gotabaya Rajapaksa this week to begin discussions on obtaining IMF assistance, with the Finance Minister set to visit the IMF in the US next month. This inevitable decision has been made after having heaped daily servings of unprecedented and untold sufferings on the people thanks to the laissez-faire attitude to the provision of essentials, amidst the worsening economic crisis precipitated by dwindling foreign exchange reserves and pending massive debt repayments. The economic crisis has currently snowballed into a hydra of crises related to fuel, electricity, and liquefied petroleum gas (LPG) and the cumulative effect of these have been dragging the hapless masses, kicking and screaming, to squint into the vistas of the dark night of the soul, and has led the rather ineffectual Opposition to repeatedly utter the dreaded “B” word (“bankruptcy”).
Moreover, it is learnt that Minister Rajapaksa’s plus ones to Washington, DC will not include Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal, likely owing to the latter’s vocal opposition to opting to enter an IMF programme. However, Rajapaksa is set to take with him a homegrown plan, outlining economic recovery and fiscal consolidation. Regardless of the fate that can befall even the best laid plans, having any kind of plan based on which the bilateral dialogue can be initiated is better than showing up with tabula rasa, a fact which is presently affecting the loan facility being sought from India, which is seeking a plan from the Government regarding certain economic developments.
The “conditions” of financial discipline and accountability that the IMF would impose on the Government could include cutting down the number of public servants by slashing public sector jobs (such a harsh condition, some economists argue, would be imposed only if the Government approaches the IMF sans a solid economic regeneration plan), allowing the Sri Lankan rupee to depreciate further, increasing the interest rates, slashing pension schemes, and selling state properties. Such requirements per the IMF reform agenda are not ones which, according to Cabraal, the Government is willing to comply with at present. These concerns and other factors including exhibiting complacency and cocksureness in equal measure, underpinned by illiteracy and pigheadedness, serve to explain why Sri Lanka took so long and got this late to the IMF party.
The reality is twofold. The IMF process is time consuming, and therefore it will be well into the second half of the year before any relief in the form of funding is likely to materialise. The harsher reality, however, is that the IMF package will not solve the economic crisis in its entirety, not by a long shot. What is good news, however, is that this is a first but vitally important and positive step, though much belated and perhaps way too late as some would argue. But, the fact remains that beggars can’t be choosers (not when the choice is between the jaws of destitution and abject humiliation) and the country is in a dire position where it has to take whatever it can, whenever it can, and however it can; hence to ignore this reality is national peril, and therefore, it is better late than never. Moreover, the IMF coming aboard will inspire confidence in foreign governments and investors, particularly in Sri Lankan Government bonds and the Colombo Stock Exchange (CSE), which will show results in the short run, and in foreign direct investment (FDI) in the long run. However, the Government has a history of discontinuing such IMF arrangements, halfway down the line, thus breaking the pacta sunt servanda principle. Hence, it should adhere to fulfil and not deviate from the conditions mutually agreed on.
There is yet another reality. If this ruling administration cares about the country and its future, as it claims to be, it should be prepared to commit political seppuku by taking politically unfavourable yet economically rational decisions to set the country on the straight and narrow path to economic recovery. This should be the order of the day. Towards this end, it is time for the Government’s misplaced and insincere patriotism to be shown the door; it has ill served the nation.
Relapse is but a prescient stumbling block of addiction, especially so in the case of addicts who have hit rock bottom but continue to plumb and mine the depths of such as they do not possess the clarity of thought to recognise the bottom even when they experience it firsthand. Sri Lanka’s economic recovery too, by any modest assessment of the state of things, will come at such a price. Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!