‘AKD Govt. continues IMF agreement ignoring people’s mandate’

Labour Minister and Economic Development Deputy Minister Prof. Anil Jayantha Fernando chairs a meeting with the IMF Staff delegation in November as part of the third review of the $ 3 billion Extended Fund Facility program – File photo 

• Following is the full text of Opposition Leader Sajith Premadasa’s speech in Parliament last week on Sri Lanka’s international debt negotiations

Opposition Leader Sajith Premadasa

“A Prosperous Country, A Beautiful Life” – the current Government’s policy statement – I am prepared to point out that the moment this Government came to power, they violated their electoral mandate and betrayed the people’s rights. In the same manner, fully agreeing to the International Monetary Fund’s (IMF) program can be considered the largest betrayal in recent times.

On page 105 of the ‘Prosperous Country, Beautiful Life’ policy document, there is an alternative debt sustainability analysis through which the NPP Government claims it would implement the understandings reached with the IMF.

I raise two primary questions:

First, did you implement the current IMF agreement through the alternative debt sustainability program negotiated with the IMF, or was it the debt sustainability program implemented during former President Ranil Wickremesinghe’s Government?

My second point is that the NPP Government’s aspiration, as they claim, is to create a ‘Prosperous Country, Beautiful Life’. However, if they proceed with the current sovereign bond agreements, the journey to creating a prosperous and beautiful life will completely collapse.

The IMF noted in their March 2023 country report that resuming debt payments in 2033 would be sufficient. The report also states that implementing sovereign bonds since 2023 is adequate, not just bilateral debt.

Agreement has put Sri Lanka in danger

Under this agreement, debt repayment begins in 2028, which is four years from now on. Do you believe the country can build a strong economy within four years, regardless of who is in power? This agreement has put Sri Lanka in danger.

At a time when debt repayment could have started in nine years, the previous Government agreed to implement it in four years. The current Government is following the same path. This is the shortcoming we see. This is the mistake we see.

The policy on page 105 of the ‘Prosperous Country, Beautiful Life’ policy statement has been completely violated. Moreover, without reading the IMF agreement or conducting any review, the current Government has reached an understanding with the IMF to start debt repayments from 2028. They have hastily signed a staff-level agreement. Focusing solely on obtaining an extended credit facility is a dangerous situation. The current IMF agreement is a weak agreement. We must go beyond this agreement.

I would also like to present facts about Ghana’s agreement with the IMF. The same institution that intervened in Sri Lanka’s sovereign bond issue – Lazard and Clifford Chance – also represented Ghana. Ghana was able to cut its primary debt by thirty-seven percent and agree to an interest rate of 6%.

However, if we calculate the average GDP between 2025 and 2027 as 117 billion, they will need to pay more than 2.3 billion in debt. Moreover, the interest rate will be 6.8% from 2028, rising to 9.65% by 2032.

Why can’t Sri Lanka do the same?

I want to ask the Government a simple question. Ghana had the ability to reject the first sovereign bond proposal and reach a better agreement. So why can’t Sri Lanka do the same? Although they attempted to show a good debt reduction, the existing plan requires paying even more debt than before.

Ghana had a sovereign bond debt of 13.1 billion, while Sri Lanka has 14+ billion. Specifically, Ghana managed to achieve a 37% debt reduction. However, Sri Lanka was unable to obtain such a debt reduction. Ghana was able to negotiate an interest rate of 6%, while Sri Lanka faces an interest rate increasing from 6.8% to 9.65%. Both Ghana and Sri Lanka are low middle-income countries.

The current Government’s agreement with the IMF will aggravate the country’s debt burden; increase public distress and pressure; increase poverty; cause significant harm to vulnerable groups like children, mothers, disabled communities, and youth and divert significant state revenue from investments in education, healthcare, agriculture, fisheries, industries, and public welfare.

We are ready to propose solutions to all these issues. We have the ability to facilitate the Government’s task. International sovereign bondholders now have an opportunity to express their opinion about the agreed ISB agreement, scheduled for 12 December. Before 12 December, if Parliament is convened to present, debate, and discuss the ISB agreement, we are prepared to support the Government.

I urge the Government to examine Ghana’s path. Ghana’s sovereign bondholders did not agree as claimed by the Creditors and the same institutions (Lazard and Clifford Chance) were involved. We are ready to come together to find a solution.

This agreement will not create the “Prosperous Country, Beautiful Life” the Government hopes for. We will inevitably become victims of an unequal debt cycle, transforming Sri Lanka into a debt-laden country for decades. Therefore, I propose that before December 12th, we should bring the sovereign bond agreement to Parliament, debate it, and take a vote. By doing so, the Government and Opposition can unite to reject an agreement harmful to the country and permanently indebting it.

Travel the middle path

We must travel the middle path. Neither extreme capitalism nor extreme socialism is suitable. However, the current Government has become the primary follower of the neoliberal concept pursued by former President Ranil Wickremesinghe. The country’s problems cannot be solved by either extreme capitalism or extreme socialism. Solutions are possible only by taking the middle path, through concepts of social market economy, humanistic capitalism, and social democracy.

Prime Minister Harini Amarasuriya and Minister Vijitha Herath previously voted against the IMF agreement in Parliament. When restructuring domestic debt, when the Employees’ Provident Fund was misappropriated, President Anura Dissanayake and three JVP parliamentarians, along with us, voted against it. How can they now agree to them?

We must collectively and unanimously declare to sovereign bondholders that we will not agree to this agreement, transcending political affiliations and ideologies. Let’s unite for the country and make this decision.

Moreover, micro, small, and medium-scale entrepreneurs are the primary drivers of our country’s economic growth. By 15 December, the temporary suspension of the parate law will end, and the auction system will restart. I request the Government to develop a comprehensive program, temporarily suspending the parate law and creating a planned program addressing the debt issues of micro, small, and medium-scale entrepreneurs, focusing on access to capital and access to working capital.