Verité Research Head lambasts govt. and IMF for ‘privatising profits and socialising losses’

Democracy in Sri Lanka will not work unless there are robust accountability mechanisms, Executive Director of Verité Research Nishan de Mel has said.Dr. De Mel said that there were undemocratic aspects to the way the IMF operated.

The Sri Lankan government was privatising profits while socialising losses because of the lack of accountability, De Mel added.

“When those in power work for the benefit of themselves and their friends, they ensure that a small group of people enjoy the benefits of growth or implement policies that benefit targeted groups. However, when things go wrong, for example, when we have to restructure domestic debt, those in power make sure that the people in general bear the losses. This is what we have seen in Sri Lanka.”

Such things happened frequently in Sri Lanka because there was little accountability, De Mel said, noting that lack of accountability had led to the 2022 economic crisis, and unless Sri Lanka established robust accountability mechanisms the current economic stability would be transient.

The Executive Director of Verité Research said they had asked both the government and the IMF to present them with data pertaining to their agreement.

“The IMF has said that it is only accountable to the government. It says it has analysed data but only the government can publish them. No one has seen this analysis––not even Parliament. Again, this is a problem of accountability. So, there is a problem of democracy in the way the IMF works.”

Dr. de Mel said that he was planning to attend several IMF summits next month and question the international lender on the lack of its transparency in Sri Lanka. The IMF, too, must be more transparent and accountable, he said.

“The person who led the IMF team here has a paper on countries that restructured debt since 1998. He looks at 14 countries. According to this, Sri Lanka is the only country that shifted the full burden of domestic debt restructuring on pension funds like the EPF. The overwhelming majority of the countries didn’t touch such funds at all.”

The Executive Director of Verité Research said the government had insisted that banks would collapse if the banking system had to bear some burden of domestic debt restructuring. However, that conclusion had been reached without any analysis.

“As I said, all the other countries that restructured debt shifted part of burden debt restructuring on to the banking sector. There are ways of protecting banks during debt restructuring. The government has placed all the burden on the pension funds and says that the impact on these funds are limited. It also claims that banks will collapse if they are affected by domestic debt restructuring. So, which claim is true? Why can’t the banks share part of the burden?”

Instead of demanding the government lower taxes, people must ask the government to be more accountable for what they do with the tax, he said.

“If we don’t pay taxes the government will have to borrow. If we don’t pay taxes now, our children will be in trouble. Instead, we must make sure that the government spends our tax rupees well,” said Dr. de Mel.