Features
Education and healthcare in crisis:
Why IMF is not the solution
By Ramya Kumar
The rally of July 9th and the events that followed are symbolic of the radical changes in governance demanded by the people of this country. We want to be informed and consulted, an end to the abuse of power, fair distribution of the country’s resources and a democratic and inclusive society. The ruling elite, for whom the current system works, are not invested in the seismic shifts that are needed to make this happen. Puzzlingly, in this moment of crisis, the International Monetary Fund (IMF) is being presented as the solution to the country’s woes. This article reflects on what the IMF’s interventions could mean for social welfare, in particular, free education and health in Sri Lanka.
IMF and its agenda
The IMF and the International Bank for Reconstruction and Development (now World Bank) were created in 1944 at a meeting in Bretton Woods, New Hampshire, USA. The IMF was tasked with managing the post-Second World War international monetary system, including balance of payment problems, while the World Bank was mandated to support development projects as part of post-war reconstruction efforts. Called the Bretton Woods institutions, the IMF and World Bank shifted their attention from Europe and East Asia to the “Third World” in the 1950s in the context of Cold War tensions and the perceived threat of communism.
At the behest of the United States and its allies, the IMF’s agenda has been to bolster global capitalism by propagating neoliberal ideology and expanding markets to renew the profitability of capital. The long economic downturn that began in the 1970s, the 1973 oil shocks and ensuing debt crisis saw the IMF and World Bank negotiate structural adjustment loans for indebted governments, imposing various conditionalities, including: trade liberalization, financial deregulation, privatization, and slashed welfare budgets. This recipe did not fix third world economies but intensified balance of payment problems, forcing governments to borrow more, including eventually from volatile capital markets, necessitating more IMF agreements and similar stabilization packages, resulting in more cuts to public spending. The ensuing reforms weakened universal welfare systems across the world, including in Sri Lanka, and also entrenched the dependent relationship between indebted countries and the West.
Universal welfare anathema
The Bretton Woods institutions have consistently intervened to dismantle universal welfare programmes in line with neoliberal ideology; the IMF pressures governments to adopt free market policies and cut public expenditures, creating the conditions for the World Bank to step in to push for public sector reforms involving varying degrees of privatization. The latter is justified based on a distorted interpretation of equity that goes something like this: universal programmes are inequitable because the rich benefit more from them; the rich should pay for (private) services to cross-subsidize the poor; universal welfare programmes should be replaced by targeted welfare schemes; the latter should preferably take the form of “demand-side financing” schemes (i.e. those that channel funds through service-users as opposed service-providers), such as vouchers or conditional cash transfers.
Vouchers for healthcare services, conditional cash transfers for education and other forms of demand-side financing usually do not discriminate between public and private service provision, enabling the private sector to be involved in service delivery. Also, governments (and their high-paid consultants) usually fail to develop effective mechanisms to identify households in need, resulting in piecemeal coverage and issues of access for the poor. In the health sector, insurance schemes have served to separate purchasing and provision, enabling governments to cover (limited) service packages for the poor involving various “cost-sharing” arrangements, and also engage the private sector in health service delivery. In higher education, student loans have supported the expansion of (private) education.
All this requires considerable investment on the part of governments. The UN, World Health Organization, and of course the World Bank, advocate for raising public financing for education and health. While in theory this may look like increasing government support for public education and healthcare, such funds may be channelled to the private sector through “public-private partnerships” (PPP), channeling scarce resources away from universal programmes.
Welfare state and its demise
Sri Lanka has a long history of welfare provisioning. Universal food subsidies came into effect in the early 1940s in the context of food scarcity during the Second World War. Free education became government policy in 1945 when universal primary and secondary education became a citizen right. And the free health policy (1951) eliminated user charges from previously fee-levying units at public hospitals, ensuring access to non-fee levying public healthcare for decades on.
The first World Bank mission to Ceylon took place in 1951 on the invitation of the government during the economic boom associated with the Korean War. Broadly speaking, the World Bank recommended policies that encouraged private capital investment and also proposed a gradual removal of the rice subsidy. The then UNP government adopted the World Bank’s development programme and, in 1953, removed the rice subsidy, for which it paid dearly. The labour movement organized the Great Hartal of 1953 to restore the rice subsidy, leading to events that would end in regime change in 1956.
The first IMF agreement came in 1965 in the face of economic crisis. The stabilization package included more cuts to subsidies, policies to encourage private investment, currency devaluation and trade liberalization. IMF prescriptions did not encourage investment in agriculture and production for local consumption, leaving the country relying on imports for essential items, including food—decisions that we are paying for today. The IMF’s forays mostly took place under UNP regimes, most strikingly its influence on the country adopting an “open economy” after the UNP’s landslide victory in 1977.
Perhaps owing to Sri Lanka’s exemplary status in human development, attributed internationally to its welfare system, and also the political ramifications of dismantling free education and health, successive governments maintained the free education and health policies, with minimal capital investment on infrastructure and facilities. As per the IMF-World Bank recipe, education and healthcare were opened to the market, with various fiscal incentives for private sector expansion. Today, private educational institutions and hospitals are under the Board of Investment, receiving tax concessions, including on imports, lease terms on state lands, in effect, public subsidization of the private sector.
This trajectory of development manifests in government policy. For instance, in 2021, state universities had to increase their intake by 30% with minimal additional investment, while private higher education institutions received huge allocations, including loans for students to access private degree programmes. Not surprisingly, we are left with weakened public education and healthcare systems, along with disgruntled students and workers, and ever-expanding private education and healthcare sectors.
What is at stake
Two years post-pandemic, the education and health sectors are in shambles. Schools are closed and universities are unable to function. Hospitals are struggling to provide services with widespread shortages of medicines and medical supplies, and a rapid exodus of healthcare workers. Some welfare programmes have already come to a standstill, including the Thriposha and school mid-day meal programmes—even when child malnutrition is widespread. Many such programmes may be terminated in the name of economic crisis.
Negotiations are underway with creditors for a debt restructuring programme and an IMF agreement that will come with conditionalities, including austerity. What is to be expected? On July 13, 2022, the IMF Chief blogged a series of fairly typical measures to address the “darkening economic outlook” in the post-pandemic era, including tightening monetary and fiscal policy, targeted measures to support vulnerable households (cash transfers), and reversing restrictions on food imports—more of the same. Earlier this year, analysts in Sri Lanka were pleased with the IMF’s proposals, with some claiming that its recommendation to increase public financing for education and health signaled a shift in the IMF’s approach. As discussed earlier, these funds will likely not be allocated to strengthen universal education or health, but rather to private education institutions, student loans, or health insurance schemes.
Economic crises are times of social upheaval, heralding radical and long-lasting change. Although an IMF agreement may bring short-term respite financed through more loans (and more indebtedness), pro-business policy prescriptions will intensify inequality in the country. The system that the IMF and our ruling elite sustain relies on countries like ours remaining dependent, for consumption by the West, whether tourism, tea, or as a source of workers, sending remittances. The IMF’s austerity measures will further weaken free public education and healthcare. Is this our vision for change? Sri Lanka has said no to dismantling welfare systems before this. There are other avenues to raise funds particularly by redistributing wealth, whether for food assistance in the immediate term or to sustain a universal education and health programme in the medium- and long-term, even within or precisely because of the crisis.
(The author is attached to the Department of Community and Family Medicine, University of Jaffna)
Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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