Diplomatic victory follows military victory

  • IMF standby facility comes with bonus
  • Govt. turns tables on pressure groups
  • UNP adopts new line of attack
  • Road map spawns fresh problems for Ranil

Sri Lanka asked for only US $ 1.9 billion from the IMF. But the IMF has now decided to increase this standby loan facility to US $ 2.6 billion, given the decisive end to the protracted war and the urgent need to carry out rehabilitation and reconstruction in the North and East.

Sri Lanka received US $ 322.2 million as the first tranche of this credit facility last Friday. The country is to receive the pledged amount in eight equal instalments and the final instalment is due on March 15, 2011.
According to Central Bank sources, this is the biggest ever loan Sri Lanka has received from the IMF.

Govt. turns tables on detractors

Sri Lanka applied for this loan facility at a time when the war against the LTTE had reached a very decisive stage. At this time the government was under heavy pressure from some countries in the West which were keen on saving the Tigers from the ignominy of certain defeat, to go in for a ceasefire. The main reason they adduced to justify a ceasefire, was that a large number of civilians were being killed in crossfire They also alleged that that the war led to numerous violations of human rights of the people in the North.

US Secretary of State Hillary Clinton, British Prime Minister Gordon Brown, and his Foreign Affairs Secretary David Miliband were among those leaders who spearheaded this pressure group. France, Germany, Norway, the European Union and Canada too threw in their lot with those strongly lobbying for a ceasefire with the Tigers. Hillary Clinton went to the extent of saying that the time was not opportune for granting the loan facility to Sri Lanka, and the IMF should reconsider the application.

Meanwhile, the international outfits such as the Human Rights Watch and the Amnesty International, were raising their voice against the IMF granting the loan facility asked for by Sri Lanka. The pro-LTTE Tamil diaspora took advantage of the growing anti- Sri Lanka sentiment to stage demonstrations worldwide calling on the IMF not to grant the loan facility as a mark of protest against the killing of civilians by armed forces in the north.

UNP now plays different tune

The UNP-led opposition here too, were eagerly counting on the possibility of Sri Lanka’s request for the IMF loan facility being turned down resulting in the Mahinda Rajapaksa government falling into a financial crisis.
However, the government succeeded in bringing the war to a victorious end by May 19 this year. Meanwhile, the international sentiments against Sri Lanka began to wane. The IMF too had realised that now that the war is over, the immediate priority is to carry out reconstruction and rehabilitation in the war-torn North, and therefore decided to grant a bigger loan than what was asked for.

Now that the loan once considered elusive is a fait accompli, the UNP led opposition has changed their tune to suit the new situation. They now charge that the government has obtained the loan subject to stringent conditions laid down by the IMF. Pursuing this line of attack, UNP’s Kabir Hashim told a Press briefing in Colombo last week that the government would be compelled to further increase the tax burden on people in compliance with IMF stipulations, which would lead to a marked increase in living costs as a ripple effect in the near future. UNP and Opposition leader Ranil Wickremesinghe `warned’ against the possibility that the government would squander the loan by using the funds to settle short term borrowings from the HSBC bank, and to meet financial commitments under the CPC Hedging deal. He also urged that the government disclose the conditions subject to which the loan was granted.

The UNP government that took power in 2001 too obtained loans from the IMF, but never disclosed the conditions they pledged to abide by. UNP leader Wickremesinghe did not disclose the contents of the Ceasefire Agreement signed with Velupillai Prabhakaran with Norway as the facilitator either in Parliament or to his Cabinet either.
His challenge that government disclose the conditions under which the IMF loan was obtained, has only caused ripples of amusement in political circles.

Minister G.L.Peiris told a recent Cabinet Press briefing that the IMF funds would be disbursed to bridge the gap in the country’s balance of payments and assured that the government had not agreed to meet any condition that runs counter to Mahinda Chintana.

According to Central Bank sources the government has agreed to curtail government expenditures, and allow the value of the rupee to be determined by market forces.
The Ranil Wickremesinghe government after coming to power in 2001, floated massive loans from the IMF under rigid conditions imposed by the bank. And that government by way of complying those conditions had to privatise state ventures, stop recruitments to public service and scale down the role of state sector in the economy. This led to the subsequent privatisation of Sri Lanka Insurance Corporation, and Lanka Marine Services and ending of Ceylon Petroleum Corporation’s monopoly in the oil trade by co-opting IOC as a competitor. (Sri Lanka Insurance Corporation and Lanka Marine Services had to be handed back to the government recently following a judgment by the Supreme Court.)

The UNP may be now enquiring about the conditions that the government agreed to observe, guessing that this government too had to meet the kind of harsh conditions they themselves were called to abide by when they were in power!

However, according to Central Bank sources, the IMF is not stipulating stringent conditions when granting loan facilities to developing countries to help cushion the impact of the global meltdown.

IMF Managing Director Dominic S Khan had said that the bank is assisting Sri Lanka given her keen interest in strengthening her depleted foreign reserves, and narrowing down the country’s widening budget deficit
Replying to opposition criticisms, Deputy Finance Minister Ranjith Siyambalapitiya assured Parliament that the IMF conditions would be disclosed after July 24.

Meanwhile, Central Bank governor Ajith Nivard Cabraal will disclose details about the US $ 2.5 billion credit facility granted to Sri Lanka at a media briefing tomorrow, informed sources said.

UNP-led alliance partners sound a discordant note

The Road Map for a Common Opposition Consensus unanimously adopted by the UNP Working Committee has now spawned a host of new problems for UNP leader Ranil Wickremesinghe.
SLFP (M) leader Mangala Samaraweera, SLMC leader Rauf Hakeem and Democratic People’s Front leader Mano Ganesan who are now holding talks aimed at forming a broad opposition alliance with Wickremesinghe, have raised strong objections to the clauses in the Road Map that refer to the need for ` an open and broad devolution of powers within the framework of a unitary state’ and ` ushering in of an economy built by Bhumiputras’.

On receiving copies of the UNP’s Road Map for National Consensus from Ranil, Hakeem and Ganesan had called on Mangala for a discussion. SLMC’s Nizam Kariappar too had participated in this discussion. At this discussion, Mangala and Hakeem had taken up the position that they could never agree to the concepts of a unitary state and a `Bhumiputra economy’. Hakeem had emphasised that his party stood for devolution of powers untrammeled by conditions, SLMC sources said.

Another round of discussions on the proposed UNP-led National Opposition Consensus now widely referred to as opposition alliance, was held last week at Ranil’s Cambridge Terrace office. Karu Jayasuriya, Tissa Attanayake, Gamini Jayawickrama Perera, Ravi Karunanayake, S.B. Dissanayake, Rauf Hakeem, Mano Ganesan and Mangala Samaraweera participated in these talks chaired by Ranil Wickremesinghe.

Mangala took advantage of this meeting to express his displeasure at certain clauses in the UNP’s new Road Map. Questioning the UNP’s wisdom of adopting a policy document of this nature without consulting other parties, Mangala asserted that he could not agree to the concepts of a unitary state and a bhumiputra economy. Hakeem and Ganesan too expressed their reservations about the UNP’s new policy document.

“Nothing is conclusive in the policy document. The party has not taken a final decision on anything. Therefore, there is no reason for you to get agitated,” said Ranil. His re -assurance brought smiles to the party leaders.
“The Unitary State and Bhumiputra concepts can cause damage to our election campaign in Uva, complained Mano Ganesan.

Hakeem joined the fray again, but a visibly irritated Ranil Wickremesinghe had waved aside his remonstrations saying, “Don’t make an issue of UNP policies. I will do the needful when the time comes.” When Hakeem and Ganesan brought up the issue of unitary state concept again, Ranil had decided enough was enough and threatened to leave the meeting if they continued to harp on the same issue.

S.B.Dissanayake who emerged as the trouble shooter at this stage assuaged the ruffled feelings of the dissident partners, explaining that a broad devolution of powers could be done within the framework of a unitary government and the bhumiputra concept is an all inclusive one embracing all communities Sinhalese, Tamil, Muslim and others.
Mangala Samaraweera said that he had no objection to UNP holding all offices in the proposed alliance and his main objective is to unify all opposition forces to form an anti-government alliance.
The participants after a lengthy discussion decided to three committees to pursue the plans to form the proposed opposition alliance . Three committees, three members of each party representing each committee, were appointed to carry out the plans.

Pro-UNP professionals and business leaders protest
Meanwhile, there are reports that a section of the business community who had been long standing UNP supporters had expressed their reservations about some contents in the party’s new policy document.
Some pro-UNP professional and business leaders had articulated their opposition to certain new policies of the party enunciated in the policy document at a meeting with UNP leaders, Sirikotha sources said.
One of the clauses they had taken exception to, says: “We consider it a responsibility of the government to intervene to ensure the rights, job security, and welfare of employees of both state and private sectors.”
They have strongly objected to the new policy of “building a new development model laying a special emphasis on public good and public welfare guaranteed through state intervention…”
The business leaders had reportedly pointed that the new policies are not conducive to economic growth and they had to be suitably revised, the same sources said.