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Placing confidence in ongoing measures, State Minister Nivard Cabraal yesterday reiterated the Government’s stand of not going for a bailout from the International Monetary Fund (IMF) to overcome the foreign exchange and debt crisis, saying it would add to the woes of the public and the country.
At a media briefing on the status of the economy, debt servicing and foreign reserves at the Finance Ministry, Cabraal came down hard on Opposition and economists’ assertions that a deal with the IMF was the only way out for Sri Lanka’s current pandemic-triggered challenges.
“The Opposition has forgotten what happened to them by going to the IMF. Their Government lost office by following prescriptions of the IMF,” alleged Cabraal, a former Governor of the Central Bank.
He stated that it was he that knew best of IMF conditions and implications having participated in several rounds of negotiations for a $ 2.9 billion stand-by facility for Sri Lanka during his time as Central Bank Governor.
“A new deal with the IMF will only mean increasing interest rates, devaluing the rupee, cutting the number of state sector employees, and hiking taxes. All these means imposing additional burden on the people at very challenging times like a pandemic,” Cabraal argued.
“The Opposition knows what happened to them. IMF prescriptions led to the toppling of the then Government. By suggesting we go back to the IMF, the Opposition is setting a trap for more difficulties for the people and hoping to discredit the Government which has so far responded well to unprecedented challenges brought on by the pandemic.
“We don’t need to go to the IMF.”
Cabraal claimed that the Government had successfully cushioned the country and people from pandemic-induced internal and external shocks. He also questioned the mindset of economists and the Opposition, including the JVP – which in the past had rejected external influence on policy – for championing the IMF prescription instead of supporting home-grown strategies, which Cabraal said had been pursued successfully so far.
“Yes, there are challenges,” the State Minister said, referring to upcoming foreign debt servicing amidst shrinking reserves and other issues. “As a Government we are facing it confidently. We have a plan. We have faced similar crises before, and successfully emerged in the past.”
He also claimed that if the Yahapalanaya government hadn’t mismanaged the economy and foreign reserves during its tenure, Sri Lanka wouldn’t be facing a debt or forex crisis at present.
Cabraal shared an exhaustive list of economic and other comparative indicators (2010-2014 versus 2015-2019) to prove his remarks. He said that the previous Government issued $ 12 billion International Sovereign Bonds (ISBs) and reduced reserves to $ 7.6 billion from $ 8.2 billion. The country also saw the rupee depreciating by 39% to Rs. 182 for the dollar from Rs. 131 in 2014. “To defend the rupee, the Yahapalanaya regime intervened to the tune of $ 3 billion. If this was avoided the country could have had reserves worth $ 10.7 billion,” argued Cabraal.
Among other indicators were economic growth reduced to 2.3% from 6.8%, debt increasing to Rs. 13 trillion from Rs. 7.5 trillion, and the public debt as a percentage increasing from 72% to 84%. “The fact that it rose to over 100% last year is because of the contraction of the economy amidst a rise in borrowing,” Cabraal explained.
The State Minister also said that the current Government had delivered in terms of maintaining low interest rates, continued with low taxation, stabilised the rupee, ensured essential goods were imported, undertook over Rs. 260 billion of COVID-related expenditure and settled all foreign debt to date.
