IMF at last

After months of speculation and controversy about an issue that was more political than financial, the International Monetary Fund (IMF) announced this week its decision to grant a US$ 2.6 billion loan to Sri Lanka, a virtual lifeline to the country’s ailing foreign reserves.
The loan became an object of political bartering in the backdrop of Sri Lanka’s relentless war against terror. After the final assault on the Liberation Tigers of Tamil Eelam (LTTE) and the ensuing humanitarian crisis in the North and East, no less a personage than the Secretary of State of the United States, Hillary Clinton announced that the “time was not appropriate” for the disbursement of funds.

That led to charges of the IMF being politicised, with Minister Sarath Amunugama going so far as to name the United States as a bully that was trying to arm twist the IMF into carrying out its political agenda.
After all this brouhaha, the IMF has now announced that the loan would indeed be granted. It has not stopped the ruckus though, as Britain this week said that “it was not the right time to go forward with the loan” because of “the humanitarian situation” in the country.

While the international community engages in this collective bout of breast beating, the government has come in for some scrutiny on the domestic front as well. Opposition Leader Ranil Wickremesinghe, while agreeing in principle that loans from institutions such as the IMF were more appropriate than borrowing from commercial banks, led the critics in Parliament claiming that the Letter of Intent (LOI) for the loan had not been made public.

The government, we have been assured by Deputy Finance Minister Ranjith Siyambalapitiya, will place all facts before Parliament shortly, but we wish to nevertheless comment on the issue of borrowing from international lending institutions.
For long years, such borrowing has been looked at with a jaundiced eye. The left leaning parties, now personified by the Janatha Vimukthi Peramuna, have always claimed that this was an act of mortgaging future generations to foreign capitalist forces. They have also claimed that most of the conditions imposed on the country, in return for financial favours, were unreasonable and not in the best interests of the masses.

The act of ‘mortgaging future generations’ is a philosophical argument which we would not dwell on here. However, the conditions that are imposed, as a result of these financial transactions, are worthy of re-examination.
The bottom line is that the funds disbursed are a loan and therefore, has to be repaid. No lending institution wants a borrower to become bankrupt subsequently, as it diminishes the chances of recovering its dues. Rather, it wants the borrower to prosper, so that repayment is free of any hassles. The same principle applies for billion dollar international transactions as well.
The ‘usual’ conditions placed when such loans are granted are that a country enforces stringent financial discipline and manages its money frugally. There may be some welfare measures that will feel the pinch, but that again will be in the interest of maintaining fiscal control.

This would ensure that governments are not indulging in whimsical welfare programmes, solely for their political benefit, when it has been proven time and time again that such programmes are not sustainable in the long run, even though they may win elections in the short term.

Having traversed these ‘welfare’ avenue many times in our six decades of Independence, and having just ended three decades of a separatist war, we, as a nation, need to ask ourselves whether such financial self discipline is necessarily evil.
We think not. Politicians of whatever hue are often tempted by the lure of the next election, and they are rarely mindful of the next generation when they draft their manifestos and make their promises. Therefore, there needs to be some checks and balances in the system, to ensure that they do not drag the country into a financial quagmire.
If it is the IMF dictates that does that job, we daresay, so be it.

Devolution and Education

This week, there would have been consternation in many households, as school children grappled with their term tests. The confusion was because the test papers in several provinces contained many howlers, so much so that the matter took up quite a bit of time in Parliament.

The finger has been pointing firmly in the direction of the respective Provincial Councils (PC), which have been tasked with conducting these examinations at a regional level. And, they have bungled big time.
At a juncture when the entire country is debating the pros and cons of PCs and their effectiveness, in the context of devolution, in the aftermath of the end of the war, these incidents should be an eye opener to those who advocate PCs as the be all and end all of all of Sri Lanka’s socio-political turmoil.

We are not for a moment suggesting that primary and secondary education should not be devolved to the provinces. We only wish to highlight the fact that such devolution - carried out for the sake of devolution, without the proper infrastructure or personnel to implement it - can end in disaster. Similar experiences abound in the health sector, where certain State health institutions have been entrusted to the PCs.
The powers that be would therefore, do well to ensure that, when devolution does take place, it is done in a manner in which it would be meaningful and practical, and not just a disaster waiting to happen.