IMF matters

Tuesday, 6 July 2021 00:00 - - {{hitsCtrl.values.hits}}

With every passing day, the idea of engaging the International Monetary Fund (IMF) for financial relief in dealing with the country’s burgeoning foreign exchange and debt crisis seems to grow more appealing – for everyone except for those in charge, that is.

Over the course of its short tenure, and right throughout the pandemic, this Government has had many instances of flip-flopped decision making, and given off a general air of uncertainty, but the one area in which it has never once failed to show a unified front has been its staunch opposition to IMF intervention/aid. This, despite many activists and Opposition politicians pleading with the Government to enlist such assistance, highlighting it as among the safest ways to gain the necessary relief.

The Government, however, has instead chosen to utilise a combination of loans and currency swap agreements with China, India and Bangladesh, while simultaneously continuing to print record levels of new money. But these efforts have seemingly been more akin to a band aid than anything else, as the country’s foreign exchange reserves continue to deplete at an alarming rate. So it’s important to ask at this juncture, why has the Government been so resistant to IMF aid?

To gain a clearer understanding, let’s first look at what IMF aid actually entails. While the IMF mainly deals in providing lending programs, governance diagnostics and capacity building, much of this relies on them working closely with governments on issues related to governance and anti-corruption. Further, in terms of the IMF’s COVID relief programs, in return for its help it requires a great deal of transparency from the recipient governments as to how and where the money is being spent. And therein lies the rub. This Government is understandably hesitant to have prying eyes from ‘the West’ looking into its dirty laundry, so to speak.

Transparency has never been a strong point of a Rajapaksa regime, and this Government in particular has gone out of its way to highlight the need for and benefits of autocratic decision-making – even if this has led to on some occasions half-baked decisions being reversed. Further, the many public requests for details and breakdowns of spending from the Itukama fund have also fallen on deaf ears.

But if the recent GSP+ issue is anything to go by, it’s that in the midst of a pandemic, and with the country literally on the brink of a fiscal collapse, this Government has little choice but to go with the options available to it. In the case of GSP+ and the EU resolution that threatened it, the Government had no choice but to free Shani Abeysekara – something that seemed unthinkable a year ago. And now, the IMF option – something that Sri Lanka had previously utilised in 1988 and 2008 – too has begun to loom ever larger.

It’s understandable that the Government would be hesitant to enter into an agreement with the IMF, as it would very likely open the door for criticism from the public and Opposition alike if any of its old skeletons were to fall out of the proverbial closet. However with the country’s economy in as dire a state as it has ever been, now is not the time to protect one’s political standing; now is the time to finally bite the bullet and do what’s necessary to protect the public at large.