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However, despite the dangers inherent in this IMF Agreement, it has not been critically scrutinized nor adequately discussed in the media.
This IMF Agreement will significantly impact Sri Lanka’s economic policy trajectory over the next few years. Furthermore, the IMF conditions will also dictate the substance of the 2017 Budget Proposals. The Government and the IMF claim this Agreement and the related policies will address the economic crisis facing the country.
However, as with the many previous IMF agreements, including most recently in July 2009, the current IMF Agreement may only aggravate the crisis conditions with further liberalisation of the economy, with an even bigger crisis in the future.
The current economic crisis facing Sri Lanka is mainly a balance of payment crisis due to the flight of capital, falling exports and rising imports. This crisis is a direct consequence of capital market liberalisation, which has made Sri Lanka susceptible to capital flight, and mega development projects funded by borrowings by successive Governments. However, the people are now being called upon to take responsibility for the crisis by tightening their belts and sacrificing their labour rights, so that the Government can lure in more foreign capital.
The Government is shifting the burden and responsibility for this crisis onto the people, even as the new IMF Agreement and the related neoliberal economic policies will further burden the people in the future. The conditions in the IMF Agreement include:
- Reform Tax Policy – With a higher tax burden on ordinary people as with the VAT increase.
- Reduce Government Expenditure – To meet IMF Targets of reducing Budget Deficits.
- Restructure State Owned Enterprises – Electricity, Fuel and Water will reflect market prices.
- Liberalise Trade – Workers’ wages and security affected by cheap imports and services.
- Deepen Financialisation – Creates financial crisis and exchange rate price fluctuations.
The Alliance for Economic Democracy calls on the citizenry and peoples’ organisations including trade unions, farmers’ organisations and student organisations to be aware of the dangers inherent in the IMF Agreement. Given the continuing economic suffering of the people, the 2017 Budget Proposals should consider the people’s demands and not be reduced to the IMF conditions. The democratic participation and the empowerment of the people is necessary to demand progressive policies towards economic justice and equality.
To discuss the fall out of the IMF Agreement and related issues the Alliance for Economic Democracy is organising a public event on Tuesday, 2nd August 2016 at 4pm, at the Colombo Library Auditorium.
The media and the public are invited to participate in the event.
Alliance for Economic Democracy
