Sugath Kulatunga

It is pathetic to see a majority of SLPP MPs under the delusion that President RW has performed a miracle in saving this country from the economic debacle it faced and he is the only one who can continue the recovery.  What he has done is nothing but accepting the dictates of the IMF and complying with the IMF conditions as agreed to in the Letter of Intent dated March 6, 2023, submitted to Ms. Kristalina Georgieva, Managing Director, International Monetary Fund. These dissidents are advised to read the IMF reports where RW has agreed to highly objectionable conditions in the Memorandum of Economic and Financial Policies Article 3, to phase out administrative measures imposed to support the balance of payments, such as import restrictions, exchange restrictions, multiple currency practices (MCPs), and capital flow management (CFM) measures. (CFM includes the repatriation of export proceeds held back abroad). The President has accepted every condition of the IMF including its primary objectives of trade and payments liberalization. The Central Bank has been made autonomous with power to decide on their salaries and perks.

RW has gone beyond the IFM conditions of the management of State-Owned Enterprises to privatization of even profit making SOEs and increasing the VAT from the IMF recommendation of 15 to 18 percent. While complying with every IFM condition RW has initiated a move to make the country subservient to India in his policy of Connectivity” with India.

It is regrettable that the SLPP approved and voted for these measures and only now has decided not to support RW in the Presidential election. It is rumored that a high-up in SLPP who also was influenced by the US was behind the continuous support to RW regardless of those policies were intrinsically against the policies of the SLPP. SLPP should have realized that RW is using the IMF to implement the policies of Mont Pelerin Society of neoliberalism. 

When the IMF appeared on the scene, I said that RW is the best interlocutor we have to deal with the IMF. But he has used the IMF to foist his Mont Pelerin doctrine. The President of course deserves full credit for restoring law and order without which no economic reforms could have been accomplished. He had the guts to stay and fight whereas the military man Gotabaya left the country and abdicated. For personal safety he could have moved to the Dockyard of the Navy in Trincomalee or to the Panagoda Army cantonment. It is a mystery how the Galle Face Aragalaya evaporated with the advent of RW.

 Today the talk of the town is on the number of Ministers and MPs abandoning Pohottuwa and switching to the camp of RW thus bringing the votes of their supporters. The UNP claims that so far 95 SLPP members have pledged their support to RW and expect more to follow. There is a misconception here that the votes of a consittuency automatically follow the changing politics of the sitting member.

 The term of the Presidency (of both Gota and Ranil) the country has been one of the most traumatic periods since independence. The terrorism, the pandemic, economic bankruptcy and the rocketing cost of living have radically affected the physical and mental health of the people. People are despondent and frustrated and are unlikely to follow old political loyalties and it will be irrational to equate the number of defecting MPs with the peoples votes.In addition there are other political parties in the field which could attract anti SLPP votes.

In the timing of the  withdrawal of support to Ranil at the last moment the Pohottuwa has erred. They should have done it earlier against Ranil’s policies inimical to national interest. They could have done so on the objectionable agreements in the Letter of Intent submitted to the IMF or on his proposal for the full implementation of the !3th Amendment or privatization.

SLPP dissidents believe that the IMF program negotiated by Ranil is a masterpiece and could not have been done by anybody else but RW. In a report of July 12th, 2024 by Charles Abugre, Executive Director, International Development Economics Associates, (IDEAs) and a team of eminent economists has been very critical of the Agreement with the IMF and reports that Sri Lanka must Renegotiate IMF Agreement for Sustainable Recovery from the Crisis. They said:

We do not believe that the current economic policy program defined in the 17th Agreement with the International Monetary Fund (IMF) provides a sustainable path of recovery for Sri Lanka or a credible means of resolving its external debt crisis. This is based on our analysis of the factors leading to the economic collapse, our assessment of the agreement and the policy package that accompanies it, and our estimation of the economic, social, and political burdens of fiscal consolidation under the current program.”

They further said that:

The benchmarks for economic reform and the austerity conditionalities in the IMF program impose a large burden of adjustment on the poor and vulnerable sections of society, which have already been severely hit by the crisis. The increase in indirect taxation is regressive, as the poor pay a disproportionately higher share of incomes than the rich. The increase in energy tariffs on electricity, cooking gas, and kerosene has increased the burden on working households in both urban and rural areas. Austerity policies have already led to electricity disconnection of one million households; falling school attendance; unemployment and under-employment. The devastating impact of such measures is largely borne by women and children in these households.”

They stress that:The benchmarks for economic reform and the austerity conditionalities in the IMF program impose a large burden of adjustment on the poor and vulnerable sections of society, which have already been severely hit by the crisis. The increase in indirect taxation is regressive, as the poor pay a disproportionately higher share of incomes than the rich. The increase in energy tariffs on electricity, cooking gas, and kerosene has increased the burden on working households in both urban and rural areas. Austerity policies have already led to electricity disconnection of one million households; falling school attendance; unemployment and under-employment. The devastating impact of such measures is largely borne by women and children in these households.”https://www.networkideas.org/news-analysis/2024/06/sri-lanka-must-renegotiate-imf-agreement-for-sustainable-recovery-from-crisis/

Dissidents do not seem to be aware that RW is also responsible for the economis crisis of 2022. His government issued from 2016 to 2019, around $12 billion in International Sovereign Bonds (around 70 percent of the face value of total bonds issued in the country’s history) and in 2021. ISBs accounted for 70 percent of the government’s annual interest payments. The final trigger of the dollar crisis was due to the settlement of the ISB which matured on October 2020 and July 2021 ($1 billion each) and January 2022 ($500 million), which drained our dollar reserves to a paltry 37 million dollars and resulted in the insolvency and bankruptcy of the country.