If wishes were horses …

Monday 13th December, 2021

Speculation is rife in political circles that the government will decide today whether to seek assistance from the International Monetary Fund (IMF) to straighten up the ailing economy. A special Cabinet meeting is expected to be held with the participation of the Secretary to the Finance Ministry and the Governor of the Central Bank to brief the ministers on the economic situation. There is hardly any need for such a briefing; everybody knows all too well the parlous state of the national economy.

The government has been telling us all these months that it is capable of steering the country out of the current economic mire under its own steam, and there is absolutely no need for an IMF intervention. Finance Minister Basil Rajapaksa reiterated the government’s position, winding up the budget debate, in Parliament, on Friday. Whether the government will stick to its guns and do without IMF help, or bite the bullet and make another U-turn remains to be seen.

The government is equal to the task of shoring up the country’s foreign reserves, the Finance Minister has said, noting that nobody wants to draw a bank loan on unfavourable conditions. If it can do so on its own, so much the better, but what if its wishes do not come true? Those who refuse to obtain loans from banks owing to unfavourable conditions often have to seek help from loan sharks, who exercise a lien on their properties, which they run the risk of losing in case of default. That is what happened to the Hambantota Port, according to the yahapalana leaders who claimed they could not pay back the huge loan their predecessors had obtained from China for the project.

Finance Minister Rajapaksa also told Parliament very confidently that the country would not default on its loans, and the government would meet all its debt obligations and make Sri Lanka a debt-free nation. This is the dream of every Sri Lankan, and it is hoped that the government will succeed in its endeavour, but how does it propose to achieve this lofty goal?

The government does not have all the time in the world. The country’s foreign reserves are barely sufficient for a couple of months, we are told. There are foreign loan installments to be settled next year, and essential imports to be paid for. We are afraid that we cannot see any signs of the foreign exchange inflow improving significantly any time soon for the country to come out of the present crisis. The Opposition has accused the government of selling prime land in the Colombo city to foreigners to raise dollars. The solution to the crisis is not to sell state assets. In handling the national debt crisis, the modus operandi of a government worth its salt should be different from that of the poor farmers in the grip of microfinance companies.

Meanwhile, the country’s desperation for dollars has increased the likelihood of some unscrupulous politicians enriching themselves further by divesting state assets on the pretext of raising foreign exchange. Most politicians we are burdened with seem to have been cast in the same mould as the savages who strip disaster victims of their valuables.

What the IMF will instruct the government to do in case of being asked for its assistance is not difficult to imagine. It is likely to ask for restrictions on government expenditure, if not an austerity drive, and the restructuring of the loss-incurring state institutions. The government may also be required to curtail welfare expenditure, and no room will be left for politically-motivated costly programmes.

The government has already done some of what the IMF would have asked it to do if it had sought the latter’s assistance. It has stopped state sector recruitments. This is a very sensible move in that the country can hardly afford the ever-burgeoning public service consisting of 1.6 million workers at present. Ironically, if the government refuses IMF assistance and continues to fund the loss-making public ventures, it will have to divest vital state assets, instead, such as the Yugadanavi power plant, to raise foreign exchange.

With the government remaining determined not to seek IMF assistance, and the country’s foreign reserves dwindling fast, we can only hope and pray that there will be a deus ex machina, as in fiction, to save the day for both the government and the country.