Is the lender of last resort IMF sending the poor to their grave?

Dear Dr. Georgieva,

Greetings from Sri Lanka. Today no political speech is complete without mentioning the IMF. The CBSL Governor who apparently is a pensioner of the IMF (he has not denied) says without the IMF we are dead. Conflict of interest doesn’t matter in Sri Lanka. Unfortunately like Greece we don’t have an ECB to bail us out. 

Weerasinghe your ex-colleague says the objectives of the new IMF-supported program is to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential. As a Bulgarian economist serving as Managing Director of the IMF you know third world politics better than your ex-colleague Dr. Christine Lagarde. 

As you know, food inflation in Sri Lanka has risen by 133%. The poverty line has risen from Rs. 27,000 to Rs. 53,000. According to the World Bank, poverty has increased from 13% to 25.6%. Unofficial figures say poverty has reached 45% in Sri Lanka. We have tripled poverty from 3 million to 9.6 million thanks to the mismanagement of the Government. 

With all this the IMF has prescribed according to a main opposition MP Kabir Hashim, a tax policy which is a death sentence to various groups including small and medium-scale enterprises, the local business industry, the export industry as well as private sector executives. 

Further, according to Hashim, the new policy will deal a death blow to the local production industry. For example, while a 36% tax has been levied on top-tier earners, taxes on SMEs have been increased from 14% to 30%. A similar increase has been announced to those involved in the export industry, taxes on locals such as taxes on deposit income has been increased up to 36%. Is there any fairness? 

People are saying the CBSL is blindly following all the proposals made by the IMF which will eventually destroy the country. What we need is widening of the tax net, those who are already paying taxes are being burdened further through the proposed taxes. This tax policy has been done without any proper analysis of the real ground situation by your local staff, who enjoy USD salaries and the Colombo cocktail circuit. This is totally unjust according to many and will be a total failure. Also, where are the major reforms for Government expenditure that are needed to address the current economic crisis? 

Why can’t the IMF tell the Government they can only have 15 Ministers and 15 Deputy Ministers? The State-owned enterprises, the loss in 2021 was Rs. 286 billion. Most of the SOEs suffering losses are not beneficial for the people. Most can be fully privatised. 

Dr. Georgieva you yourself have said publicly that economic reforms must be implemented in a manner that does not destroy livelihoods of small and medium-sized enterprises and the poor. There is no point in doing an IMF-led operation if the patient is finally going to die. Many believe we have to suffer very much more to come out of the crisis caused by the Rajapaksas. But that process must not happen by sentencing the poor people to death, whilst the party continues for the political people in power. The IMF must insist that the economic hitmen both in the Government and private sector responsible for creating this unprecedented economic crisis are reprimanded democratically. Then most people will be willing to bite the bullet, many people may even finally agree to your tax proposals reluctantly and sing hosanna for you.