Thursday, 28th August 2014

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Did the Rajapaksas ruin Lankan economy?

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It is to the credit of President Rajapaksa that he has routed the ruthless terror outfit of the LTTE for which he is yet been hounded at the Human Rights Council at Geneva. It will be a miracle if he can avoid being charged for War Crimes in the International Courts. In 1995 to 2000 when I was living in Sri Lanka in my circles the parents of a family never traveled together for fear of an attack by the LTTE. It is President Rajapaksa that delivered us from this predicament.
It is true that our President has spent funds to develop the Hambantota District. Let me speak on that because Hambantota was my home for two years. It was the most neglected District that one can find. There were no houses with facilities even to rent out. We had to bathe in the sea or hold our heads to the roadside taps (government servants went at night). The two roomed house where I lived with the Veterinary Surgeon Balachandran was close to the new harbor. The roads were in disrepair and there were hardly any shops. Visitors were hosted at the Rest House.

Hambantota required an upliftment and it has come now. Perhaps Hambantota can do with some more bakeries, a cannery for fish and one for fruit juice, perhaps in Tissamaharama. Fishing can be stepped up while mangoes are in plentiful supply already. I can also state that Hambantota District can produce cotton for half our country’s requirements. In the fifties the air at Weerawila was laden with cotton wafting in the winds. Suddenly we stopped production.
Can we ever get out of the clutches of the IMF ?.

Even today Sri Lanka is compelled to follow all the dictates of the IMF:
A high interest regime- The interest on loans as high as 24% kills local entrepreneurs. I was in Sri Lanka recently and found that the banks do not give out loans with the result that the economy has actually grounded to a halt. Devaluation- shrewdly avoided by the Central Bank by buying dollars in the open market and using our reserves, which are also built on borrowed money!

Allowing a Floating Currency where our Central Bank has no control over the use of foreign exchange. The Central Bank has admitted again and again that it controls only the local currency- the Rupee.
Reduce or abolish Import Controls Recently no less a person than the Defence Secretary has said that we even import tamarind. We import many items that we ourselves can make.
Charge low taxes- Sri Lanka charges only 24% tax, far lower than the UK or the US and then we lament that our revenue is low.

Allow the Private Sector to be the Engine of Growth
Limit the Public Sector to the barracks. – do not use the Public Sector for development activities. Allow the Private Sector despite the fact that the Private Sector is not interested in national development. The Private Sector motto is Profit. The Small Industries Department that ran public sector industries was closed down by the UNP under the dictate of the IMF. Similarly the Marketing Department that ran a vegetable and fruit marketing scheme to enable producers to get a fair price and simultaneously the consumers to get produce at cheap rates was closed down courtesy IMF ‘conditionalities’. The result is unbridled inflation that is somehow not caught within the Government’s barometer.
Do away with National Planning   henceforth allow the Private Sector to develop the country. Theirs is a history of obtaining land, selling the timber and having a chena crop thereafter dumping the land or opening up Supermarkets where they can make profits in a few months.

All of the above helped destroy the economy and it is time that our leaders come to grips with this problem before it is late. Today our country is the dumping ground for old books, discarded car body parts, cheap movies and imports which we can easily make ourselves. We spend our hard earned foreign exchange on these unnecessary imports and cry whine loud that we have to obtain further loans. Will it not be more dignified to step up production and to limit imports to get down only what is worthwhile.
President Rajapaksa defeated the ruthless LTTE, a terrorist outfit that was supposed to be invincible for almost three decades. He could now address the non-developmental policies of the IMF and negotiate with the IMF to make the Structural Adjustment Program really developmental.. This battle has to be fought if Sri lanka has to survive.. Once long ago, well before 2009, I wrote that President Rajapaksa can defeat the LTTE but may not win the war with the IMF.
 One must not forget that once the Wall Street Journal itself ridiculed the Structural Adjustment Programme of the IMF:

 “The IMF Drill is as follows: A Third World poor country with a pegged currency is working towards taming its inflation. Instead of a growth formulae it gets the IMF’s old austerity dosage which slows down the economy. The banks begin to falter in paying their old debts. The IMF recommends yet more medicine, devaluation making  the bank predicament  and capital flight worse. The currency slumps and the banks are now in real trouble… Is this any way to run an international monetary system.”(Feb22,2001)
 Despite the writing on the wall, the IMF has failed to correct itself to become developmental.  The IMF though it follows the dictate of Developed Countries today, belongs to all the sovereign nations and it is up to a personage of the caliber of President Rajapaksa to discuss and argue with the IMF and arrive at a developmental strategy.  We must have the ability to contest every sentence that the IMF officials give because as pointed out by Professor Jeffery Sachs, the IMF policies have so far failed.
There is no point in avoiding facts, and continuing to accept the utterances of   petty officials of the IMF. We have to develop expertise to identify the new paradigm for development. The IMF has to be forced to come up with a growth strategy.  Without this growth strategy even the Divineguma Programme will be a total flop.

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