Dr. Darini Rajasingham-Senanayake

The list of recent IMF program successes is long. Barbados and Benin, Cabo Verde and Costa Rica, Moldova and Morocco, Suriname and Sri Lanka, to name but a few’, triumphantly declared the International Monetary Fund head, Kristalina Georgieva at Annual Meetings in Washington last month.[i]  Heedless of repeated calls for reform to give voice to the Global South perspectives, the IMF Managing Director claimed Sri Lanka as a debt restructuring ‘success’ story:

Left unsaid was that the geostrategic Indian Ocean island’s debt had apparently ballooned from $ 26 billion to a purported whopping $100 billion in just two years of IMF Extended Fund Facility (EFF) negotiations and reforms. The latter included mandate and mission creep into domestic debt restructure (DDR)![ii] Simultaneously, the retirement funds of working people were earmarked to pay International Sovereign Bond (ISB) private creditors who charge predatory interest rates despite widespread protests by trade unions and activists. Sri Lanka’s largest private creditor is BlackRock.

Nor did Georgieva dwell on the BRICS summit held earlier that week in Kazan, Russia, where de-dollarization was a hot topic amid renewed calls for reform of the Bretton Wood Twins (IMF and World Bank). The US dollar has been weaponized in multiple forms, not just sanctions, against many emerging economies trapped in International Sovereign Bond (ISB), odious debt and the IMF’s bailout business. There are 55 countries in post-Covid-19 Eurobond debt traps. Meanwhile, Sri Lanka is currently on its 17^th IMF program and Argentina on its 23^rd! 

Around the world and in Sri Lanka, skepticism has been growing about IMF claims to be a ‘Savior’ of countries in economic crisis, and the narrative that ‘there is no alternative to the lender of last resorts’. Under its Debt Restructuring Agreements (DSA), dollar denominated Eurobond debt traps seems to deepen and extend, rather than reduce. At this time there are 55 countries caught in post-Covid-19 ISB debt traps, in IMF treatment. The IMF Extended Fund Facility (EFF), seems to be aptly named!

It’s the Economy Stupid! Forget Woke Ethno-religious Identity Politics

In General Elections last week, the National Peoples Power (NPP) party led by President Anura Kumara Dissanayaka swept to power on a landslide mandate to restore Sri Lanka’s economic sovereignty, exit US-dollar Eurobond debt neocolonialism, and ensure debt justice for working people whose retirement funds are at risk.

The fundamentally economic reasons for the NPPs sweeping victory have been little remarked in post-election analysis in the corporate media echo chamber and NGO think tank discussions. These seem to be still distracted with Woke ethno-religious identity politics, which the electorate had rejected wholesale. After all, identity politics has long been a well-funded research industry that distracted from economic inequality and the geopolitical dimensions of the geostrategic island’s permanent ‘poly crisis’. However, it would appear that geopolitical economic history of colonialism is embedded somewhere in the ‘political unconscious’ of the nation and manifest in the rejection of ethno-religious identity politics by voters across Sri Lanka.

Recall that President Anura Kumara Dissanayake had reversed IMF-promoted ‘reforms’ and privatization of the Ceylon Electricity Board and Sri Lankan Airlines within a month of taking office in September. It was hence too that he received a huge vote of approval from the general public who gave his National Peoples Power (NPP) party landslide win two months later.

The new NPP government that came to power supported by trade unions would now be expected to take the time to carefully review the IMF Debt Sustainability (DSA) and other booby trap agreements and sweetheart deal with ad hoc groups of ISB holders entered into by the previous Ranil Rajapaske regime. 

To rescue working people’s EPF pension funds it would be necessary for the new NPP government to roll back ISB-IMF mission creep into DDR. So too review of Lazard, Clifford and Chance’s Macro-economy-linked (MLB) proposales would also as part of the fight against corruption and for Debt Justice.

Eurobond debt traps, Sanctions, and hybrid economic proxy war

During her plenary address at the annual meetings, IMF Managing Director, Georgieva sought more information on the BRICS new payment system, which was discussed as an alternative to the current US controlled SWIFT international trade settlements and payment system in Kazan. SWIFT leaves countries vulnerable to brow beating and US exchange rate manipulation in the context of not just trade and tariff wars, but hybrid economic proxy wars on partner countries of on China’s Belt and Road (BRI), as well as, sanctions hit Russia, Iran, Venezuela etc.

The United States recently sanctioned an Indian firm which is in a consortium with a Russian firm to manage Sri Lanka’s Mattala Airport. [iii]  According to EconomyNext: The U.S. Department of the Treasury had sanctioned India-based Shaurya Aeronautics Private Limited (Shaurya), among 275 individuals and entities involved in supplying Russia with advanced technology and equipment.

The Mattala International Airport in Hambantota initially built by the Chinese was perceived to be a White Elephant’ development project, but is actually located near one of the world’s busiest maritime trade, energy and submarine Date Cable routes in the world. The Shaurya Aeronautics plan to develop the airport would bring needed foreign investment to the country and showcase collaboration among the big three Asian powers- China, India and Russia but is now on ice due to US sanctions.

Sri Lanka clearly caught in the cross-hairs of big power rivalry, had formally submitted an application to join BRICS and the New Development Bank at the meeting in Kazan, where President Putin hosted China’s President Xi and Indian Premier Modi along with other Global South leaders. The new government in Colombo would be hoping to leverage regional growth and support from the Global South in the Asian 21^st Century”. However, no senior Minister from Sri Lanka attended the meeting in Kazan– an opportunity missed in deference to Washington?

BRICS, Geopolitics and IMF’s Bailout Business

With BRICS increasingly challenging the narrative that ‘there is no alternative to the IMF’, hybrid economic proxy war and de-stabilization in the geostrategic island nation at the center of the Indian Ocean is clearly set to continue.  The new Government in Colombo led by the President Anura Kumara Dissanayake that won a landslide victory to restore economic sovereignty would hence have to tread a fine line. Escaping US dollar-Eurobond debt neocolonialism given America’s expanding sanctions regime and the on-going hybrid economic proxy war with Digital Colonialism will be challenging.

An IMF team led by Peter Breuer arrived in Colombo for the third review of the EFF this week even before the Cabinet Members of the new government were sworn in. The first challenge of the new government would face is avoiding being bamboozled into signing the draft booby trap agreements granting sweetheart deals to ad hoc groups of bondholders and the Official Creditor Committee (OCC), negotiated sans transparency by the previous Ranil Rajapase regime, which was implicated in a series of bondscams at the Central Bank CBSL.

It was primarily those CBSL bondscams that led to the accumulation of Odious Debt and the staging of Sri Lanka’s first ever Sovereign Default in 2022. That pattern continues with the subsequent debt restructuring corruption racket with a gravy train of local and international Economic Hit men.

Since the new government won a landslide victory on November 21 to fight corruption in order to restore Sri Lanka’s Economic Sovereignty it would need to carefully review the Debt Sustainability Agreements. This, especially as several national economists (Danushka Pathirana, Ahilan Kadirigamar), have noted that the current agreements with ad hoc groups of bondholders of the colonial Club de Paris, set up the country for Default no sooner it starts servicing the Odious debt.

Moreover, the IMF principles of ‘compatibility of treatment’ creditors regardless of whether they charge predatory interest rates, the secrecy surrounding the identity of bondholders, and the practice of ‘lending into arrears’ by marketing Macro-economy linked bonds in order to borrow from the same predatory creditors in order to pay them is highly questionable.

Clearly, fighting corruption would be a big part of the new government’s Primary Mandate, which is to restore the Sri Lanka’s economic sovereignty in the context of the IMF’s mission and mandate creep into domestic debt restructure/ optimization (DDO) and reverse the IMF agenda to privatize State Owned Enterprises, State Owned Enterprises and other strategic assets – coastal and hilltop lands, transport, energy, telecom infrastructure.

Finally, would be of paramount important that the new government replace Lazard, Clifford and Chance, with a team of Sri Lankan national experts, better able to represent citizen’s interests in negotiations with bondholders and the IMF. It is well established that Lazard has conflict-of-interest given connections with bondholders. Indeed, it is of paramount importance that the county be rescued from local-global networks of corruption that include the gravy train of debt restructuring advisors, consultants and Economic Hitmen, who have turned debt restructuring into rocket science, replete with numbers games and Disinformation. The devil they say is in the detail!

TO BE CONTINUED

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[i] https://www.imf.org/en/News/Articles/2024/10/25/sp102524-annual-meetings-plenary

[ii] https://www.lankaweb.com/news/items/2024/10/25/sri-lanka-met-with-bondholders-aims-to-exit-default-as-soon-as-possible-central-bank-governor-says/

[iii] https://economynext.com/us-sanctions-indian-firm-involved-in-deal-with-sri-lankas-mattala-airport-186347/