Sri Lanka, India bilateral naval exercise in Sea of Sri Lanka

A bilateral naval exercise between Sri Lanka Navy and Indian Navy commenced in seas off Colombo on 26th March and it will be held until 29th March.

The exercise is being conducted by Sri Lanka Naval Ship Sayurala and the shipborne Advance Light Helicopter – IN 715 of Indian Naval Ship Sharda, which arrived in Colombo on 23rd March.

Chief among the exercises demonstrated were deck landing and communication exercises between the ship and helicopter. The exercise is also joined by a group of personnel from Sri Lanka Air Force.

This bilateral naval exercise is expected to increase operational readiness and interoperability between both navies when conducting coordinated search and rescue operations, anti-smuggling operations in the Indian Ocean Region as well as to strengthen cooperation between both partners.

Further, this kind of naval exercises will pave the way to find collective solutions to common maritime challenges in the Indian Ocean Region as well.

Give the Finance Minister post to PM – Ven. Muruththettuwe Ananda Thero

Venerable Muruththettuwe Ananda Thero says that in order to minimize the public dissatisfaction which has built up towards the government, the Finance Minister’s position should be handed over to the Prime Minister.

Speaking to reporters in Colombo, the Chief Incumbent of the Abhayarama Temple in Narahenpita said that the people of the country did not appoint a government to stand in queues or stay in the dark or travel by foot.

He said that the aspiration of the people was to develop this country and build a beautiful Sri Lanka. The Chancellor of the University of Colombo said that although 69 lakh people voted to give power to the government, it is not listening to those 69 lakh people.

He accused the government of listening to only one person and doing that person’s work and that this has led to an increase in the public’s dissatisfaction.

He proposed that to minimize the disappointment and frustration of the people, the Minister of Finance Basil Rajapaksa should be handed another development task, and the the affairs of the Ministry of Finance should be handed over to the Prime Minister for him to take the country forward.

The Venerable Thero said their only demand is that the President continues to hold the presidency.

He said that if this “era of queues” continues for much longer the people of the country will fall from the prying pan to the fire.

Sri Lanka Crisis: India Helps, China Holds Back -NDTV

Hi, This is Hot Mic and I’m Nidhi Razdan. This week, you may have seen the heart-wrenching pictures of a batch of Sri Lankan refugees arriving on the coast of Tamil Nadu. Including little children, one as young as four months old. They are fleeing an unprecedented economic crisis in their own country. The situation in Sri Lanka is so bad at the moment that there is a shortage of food, a shortage of fuel, long power cuts and a massive rise in prices across the board. Intelligence agencies in Tamil Nadu say that thousands more may land upon Indian shores in the next few weeks. So why has this happened? What has caused this economic crisis – the worst that Sri Lanka has ever seen?

The meltdown has been driven by a shortage of foreign currency, which has led to a reduction in the imports of essential items. Sri Lanka depends heavily on imports, whether it’s for essentials like food, sugar, daal, petroleum, paper, medicines, cement and much, much more. The shortage of foreign currency has hit these imports badly, so badly, in fact, that the Sri Lankan government has had to cancel all examinations for schools for millions of children simply because they didn’t have paper. There have been long queues of people waiting to buy food and fuel. Angry protests have also broken out on the streets.

On Tuesday, the army was sent in to prevent protests from breaking out at petrol pumps because people had begun protesting there. There were reports that three people died while waiting for fuel in a queue for several hours. So how has the shortage of foreign currency actually happened?

Well, last week Sri Lanka’s president said in an address to the nation that the country has a trade deficit of $10 billion. This basically means that the country imported more items last year than it exported. That means more money went out of the country and less money came into the country. Over the years, this policy has led to a shortage of foreign currency within Sri Lanka. The collapse of Sri Lanka’s tourism industry is a major reason for this, since it contributes to around 10% of the country’s GDP. The 2019 serial bomb blasts across Colombo during Easter had already hit the country’s tourism sector. And then the last couple of years of the pandemic have made things exponentially worse. Another reason that Sri Lanka’s foreign currency reserves have gone down is that foreign direct investment into the country has also plummeted over the last few years. If you look at government data, FDI into Sri Lanka decreased to $540 million in 2020 compared to $793 million the previous year. And $1.6 billion in 2018. In this crisis, Sri Lanka has turned to other countries for help, including India.

On the 17th of March, India announced a $1 billion line of credit to Sri Lanka to procure food, medicines and other essential items. Last month, India extended a $500 million line of credit to Sri Lanka to help it buy petroleum products. But ironically, one of Colombo’s closest friends, China, has actually added to their problems and turned out to be less dependable than they had hoped. Sri Lanka has been borrowing recklessly from China over the last few years to fund its infrastructure projects. Before the pandemic, Sri Lanka owed China, about $5 billion amounting to 10% of the country’s external debt that is dominated by sovereign bonds. Faced with the economic crisis now, President Rajapaksa had asked China to restructure its debt to the country.

But according to a report in the Hong Kong Post a few days ago, Beijing actually turned its back on Colombo. Publicly, China has only said that the two sides are negotiating the matter and hasn’t given any specific details. In recent days, soon after New Delhi extended help to Sri Lanka, Sri Lanka sought a new loan and buyer’s credit from China for $2.5 billion. It’s interesting to note here that President Rajapaksa has been seen as pro-China. But over the last year or so, the mood within Sri Lanka has turned more wary about Beijing. A lot of the debt burden on Sri Lanka is a result of China’s Belt and Road Initiative projects like the Hambantota Port and Colombo Port City, for which Chinese agency lent large amounts to Sri Lanka under stiff terms of repayment.

A media report recently said that China-assisted projects in Sri Lanka are likely to deepen the debt of the island nation. Moreover, locals have been protesting against some of these projects which they say will affect their livelihoods. One of these projects is an industrial park attached to the Hambantota International Port, which has incited violent protests by locals because they fear that the area will turn into a Chinese colony. As a result of all of this, Sri Lanka may be reassessing the extent to which it can bank on China At the end of the day, India has turned out to be a more dependable neighbour.

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Citing Sri Lankan crisis, Kerala Finance Minister asks Centre to correct its policies

Citing the financial crisis in Sri Lanka, Kerala Finance Minister K N Balagopal on Sunday said that the Central government should correct its policies and added that states should be given Goods and Services Tax (GST) compensation and additional grants.

“Central government should look into the financial crisis of Sri Lanka which is happening due to international policies. The Indian government is also following the same and should correct its policies. States should be given GST compensation and additional grants,” Balagopal told ANI.
“The price hike is a basic issue which we would be going to face in a big way. The cost of administration and cost of living will be increasing in every sphere, which will get very difficult for the state,” said Balagopal.

Sri Lanka’s economy has been in a free-fall since the COVID-19 pandemic due to the crash of the tourism sector. The country’s foreign reserves have dried up and the country is facing a severe shortage of fuel and other essential commodities.

Sri Lanka’s currency has devalued by almost SLR 90 against the US dollar since March 8, as the country’s central bank attempts to stabilise the economy.

India provided more than USD 500 million in foreign currency swaps to strengthen Sri Lanka’s foreign reserves, taking the total up to USD 900 million. India also extended the repayment time frame for the USD 500 million debt of Sri Lanka under the Asian Clearance Arbitration. (ANI)

Tamils fear prison and torture in Sri Lanka, 13 years after civil war ended -UK Guardian

The sun had barely risen the morning that the military turned up for Vijay*. Grabbing him from his home in a village in the Northern Province of Sri Lanka while his pregnant wife and baby lay asleep next to him, they blindfolded him and drove him deep into a jungle.

For the next 12 hours, in a small dark shack away from prying eyes, they interrogated Vijay. Pliers were repeatedly brandished, with threats that his finger nails would be removed if he did not give the army officers the information they wanted.

The accusation hurled at him over and over again was the same: that Vijay was part of a conspiracy to restart the militant Tamil separatist group the Liberation Tigers of Tamil Elan (LTTE), widely known as the Tamil Tigers, and was involved in training and recruitment.

The military let Vijay go after two days of clandestine interrogation but it was only the beginning of his ordeal. On the third day, it was officers from Sri Lanka’s notorious Terrorism Investigation Department who turned up for him. This time, his arrest was official.

Sri Lanka’s brutal and bloody ethnic conflict officially ended, after 26 years, on 20 May 2009. Yet Vijay’s arrest was in June 2020. Though it has been 13 years since the end of a war in which at least 100,000 people were killed and the LTTE was defeated by the Sri Lankan army, the roots of the conflict remain unresolved. The country is as segregated as ever, with the Sinhalese Buddhist-majority concentrated in the wealthy south and the Tamils in the less-developed and heavily militarised north and east of the country.

In recent years some of the worst abuses that were rife in the years after the war, from white-van abductions, torture and sexual crimes against Tamils, have abated. What never disappeared was the draconian Prevention of Terrorism Act (PTA). Since it was passed in 1979, the PTA has been a stain on Sri Lanka’s human rights record, enabling arbitrary arrest, detention without charge or evidence, forced confessions and torture of anyone suspected of terrorism.

Vijay was detained for a year and a half under the PTA. He endured daily interrogations, in which he was accused of involvement in assassination attempts and asked to name Tamil Tiger accomplices, without any evidence being presented. On one occasion they brought out a confession written in Sinhala, the language of the Sinhalese majority, which Vijay, like many Tamils, does not speak.

“They were making threats that they would shoot me if I did not sign it, holding the gun against my leg, so I signed it even though I don’t know what it said,” he said. “I didn’t think I would survive otherwise.”

As a young Tamil man growing up in the north of Sri Lanka where civil war waged between the Tamil Tigers and the state until he was aged 10, he was no stranger to harassment and violence at the hands of the armed forces. His elder brother, then a separatist militant, had been abducted by the army years before, and friends had died and disappeared. But that was over a decade ago.

“They say the war is over but they are still doing what they have always done to Tamils: abducting us, torturing us, taking our land and using PTA to imprison us on no evidence. Tell me what has changed?” said Vijay, who was finally released in February. Repeating an oft-heard refrain in the Tamil north, he added: “We are still living in an open prison.”

A 2020 report by the Human Rights Commission of Sri Lanka found that 84% of PTA prisoners were tortured after arrest and they are regularly held for between five and 10 years without trial. The European parliament recently declared that the act “breaches human rights, democracy and the rule of law”.

Previous hopes for the law’s repeal disappeared in late 2019, when Gotabaya Rajapaksa, a fierce Sinhalese nationalist who was in charge of the military in the final, bloodiest years of the civil war and has been accused over overseeing war crimes, was elected as president.

“The abuses of PTA, the surveillance never went away,” said Ambika Satkunanathan, the former human rights commissioner of Sri Lanka. “But since 2019 when Rajapaksa came back to power, it’s just become more overt, more brazen. Every week, I can give you a minimum of one or two incidents related to the PTA being used to harass and intimidate civil society organisations and journalists.”

Over the past two years, human rights organisations and the UN have reported an escalation of the harassment, surveillance and arbitrary detentions of Tamils, journalists and civil rights activists, and a “colonisation” policy, involving the systematic seizure of Tamil land by the government and military.

In the aftermath of the deadly Easter suicide attacks carried out in churches and hotels by Islamist militants in April 2019, Muslims, too, have become targets of the state. In November 2021, Police Scotland suspended their programme training Sri Lankan police officers over human rights concerns.

The Rajapaksa government, faced with mounting international pressure and the prospect of losing a multi-million dollar trade concession with the European Union, has denied all abuses of the PTA. The country’s foreign minister recently told the UN Human Rights Council that “we endeavour to strike a just balance between human rights and national security when dealing with terrorism”.

In a bid to appease international critics, the Rajapaksa government last week passed a bill amending the PTA. But UN experts, human rights groups and the political opposition were damning of the amendments that left “intact some of the most egregious provisions of the PTA” and called into question Rajapaksa’s real commitment to reform.

“What is needed is a complete scrapping of the PTA and not cosmetic changes,” an opposition MP, Anura Dissanayake, told parliament.

In Jaffna, the capital of the Tamil-majority Northern Province, the fear was pronounced. Komahan Murugaia, who was detained and tortured under the PTA between 2009 and 2016 and now runs an organisation in Jaffna to help the families of those imprisoned under the law, said that “under the present government the situation for Tamils is getting much worse,” with more than 100 arrested under the legislation, accused of regrouping the Tamil Tigers.

“It’s not as bad as 2009 when the war ended but there’s torture, and harassment, our right to freedom of speech is reduced, more arrests are happening, more surveillance,” said Murugaia. “My passport has been blocked and I have been summoned in for a police inquiry for participating in a memorial. There is a lot of fear.”

This month the wives and children of several Tamil men detained under the act since 2020 stood in protest outside a government office. As rain poured down, ink wept from damp signs pleading “Please release my father”.

Kamalaharan Easwary, 37, said her husband had been held under the PTA for 18 months, accused of trying to recreate the LTTE, but had not been charged. “There is no evidence. How can they do this? “ she said.

“Without him we have no income. Life is so difficult. This law is being used to repress the Tamils even after the war is long over, and it is radicalising people, pushing them back to war again.”

Muslims, too, have increasingly been subjected to sweeping arbitrary arrests under the PTA in the wake of the Easter 2019 bombings. More than 500 Muslims arrested under the act in the aftermath have languished in jail for more than 34 months without charge, including two maulvis – Islamic religious leaders – who have alleged to the courts they were tortured and beaten with pistols.

One of the most prominent arrests was Hejaaz Hizbullah, a Muslim human rights lawyer from Colombo, who had been outspoken against actions taken by the Rajapaksa government. Arrested under the PTA in April 2020 on what human rights groups described as “no credible evidence”, Hizbullah was held in jail for more than 22 months without charge as security agencies sought to prove an unsubstantiated theory that he had “aided and abetted” the Easter attacks.

In the end, none could be found, and after international pressure, including Amnesty International designating him a “prisoner of conscience”, he was released on bail in February, though he still faces charges of radicalising children through a charity.

Hizbullah’s wife Maram confirmed that the harassment began in late 2019 when Hizbullah and his relatives started receiving warning messages and strange calls warning him to “be careful, keep quiet and stop all his human rights work”. His sister and father were called in for questioning by the Criminal Investigation Department (CID) and then one of his clients was told to drop him as their lawyer because he was on a “hit list”.

In his first interview since his release, Hizbullah spoke cautiously, still fearful of repercussions for his ongoing case.

“I have worked on many PTA cases as a lawyer but my own case was the worst I had ever seen,” said Hizbullah, who missed the birth of his child while he was detained. “From the beginning my lawyers were clear that there was no evidence to detain me but the CID were looking for something really big to pin on me. The officers kept telling me my life was over. Now we know for sure, after all those months of pain, they could find nothing.”

“The key objective,” he added, “was to silence me forever.”

* Vijay’s name has been changed

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Sri Lanka to introduce ‘Paradise Visa’

A new type of visa named ‘Paradise Visa’ will be introduced, says Minister of Youth and Sports, Namal Rajapaksa.

Speaking at the event of a Maldivian aircraft landing at the Ratmalana International Airport after 54 years, the Minister stated that he hopes to issue the ‘Paradise Visa’ to long-term travelers in Sri Lanka.

Moreover, he stated that he hopes to issue such visas to investors in the City of Colombo and outside Colombo.

“Foreign tourists usually prefer to visit small airports in Sri Lanka, and they will be offered the Paradise visa,” he added.

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Power crisis continue in Sri Lanka with five-hour cuts scheduled for March 27

The Public Utilities Commission of Sri Lanka (PUCSL) has approved power cuts of five hours and for parts of the island and four hours for other areas in two blocks for Monday (28). Sri Lanka is facing daily scheduled power outages as a result of an ongoing forex shortage and depleting reservoirs used for hydro power generation. According to the PUCSL-approved power cut schedule for Monday, areas P, Q, R, S, T, U, V, and W will lose power for two hours and 15 minutes from 8.30am to 5.30pm and for one hour and 40 minutes from 5.30pm to 11.00pm. Areas A, B, C, D, E, F, G, H, I, J, K, L will have power cuts of three hours and 20 minutes from 8am to 6pm and one hour and 40 minutes from 6pm to 11pm, Monday.

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Cabinet approves maritime security pact with India

A number of proposals, which have received Cabinet’s nod of approval for goods and services on grant from India before Finance Minister Basil Rajapaksa left for New Delhi to secure a US$1bn credit line, contain conditions, the Sunday Times learns.

These proposals needed to get Cabinet approval for Sri Lanka to secure the Indian loan. This was after agreements were also signed for the Trincomalee oil tanks, a renewable energy project in Sampur and an energy project off Mannar previously. They also come on the eve of Indian External Affairs Minister S. Jaishankar’s visit to Sri Lanka scheduled for the coming week. Sri Lankan Defence analysts have warned that some of these proposals hastily rushed through the Cabinet require deeper study in the national interest. For instance, according to a Cabinet paper for the supply of DO-228 Dornier Reconnaissance Aircrafts from India to Sri Lanka, New Delhi has agreed to grant one plane for free. As it will take two years to manufacture, it will loan an active Dornier (INDO) from the Indian naval fleet for search-and-rescue operations in the interim. But full deal is contingent on Sri Lanka then buying a third Donier through an Indian credit line.

The twin-engine Doniers will be used in the Sri Lanka Navy’s maritime surveillance activities and search and rescue (SAR) in and off Sri Lanka, especially to conduct reconnaissance within the Exclusive Economic Zone (EEZ) of Sri Lanka, the Cabinet paper says. It adds that Sri Lanka has sought India’s assistance in this regard.

While the Donier is on loan, a team comprising a maximum of five Indian technical officers will stay in Sri Lanka to train the Sri Lankan Air Force and Navy personnel on maintenance and handling. “This agreement ties us to buying a third aircraft, whereas I’m sure Japan, the US or another county will also give us a plane for free,” a maritime defence analyst said.

“Another issue with the Donier that is to be loaned is that the operational plan is not very clear, whether patrols will be done jointly with the Indians,” he continued. “Reading in between the lines, it is also implied that we are barred from sharing any information gathered with anyone but them.”

The relevant section of the Letter of Exchange reads: “Information gathered during the conduct of operation by the INDO shall be the property of GoSL [Government of Sri Lanka]. No classified information under this Letter of Exchange shall be disclosed to any third party by GoI [Government of India] unless authorised in writing by the GoSL. GoI shall treat such authorised classified information with the same level of classification as GoSL.”

“Whatever said and done, we have claimed neutrality and this is an Indian asset on Sri Lanka, operating out of Sri Lanka,” the analyst pointed out. “This is the way they creep into our system, or naval reconnaissance, the Defence Ministry and Air Force facilities. It compromises our basic security in terms of independence of the country.”

Sri Lanka has also agreed to a grant of 3bn Indian rupees (11.4bn LKR) to introduce a digital personal identification system for its citizens based on the Indian Aadhaar system. The Memorandum of Understanding precludes third country involvement in the project even for the elements of it that are not funded by the Indian Government.

“GoSL shall select Indian firms as exclusive contractor(s) for executing elements of the project carried out with the Grant in accordance with the requisite tendering procedures of GoSL,” it states. “Any third country involvement in the project shall be based on mutual consent. The elements of the ‘Project’ not funded through the Indian Grant shall not be executed by a 3rd country entity during the period this MoU remains in force. In this regard, the issuance of a Confirmation of No Objection by the JPMC [Joint Project Monitoring Committee] shall be an essential qualifying criterion for any entity being considered for such award of an element of the ‘Project’ not funded through the Indian Grant.”

It has been agreed to set up a joint Maritime Rescue Coordination Centre (MRCC) to strengthen Sri Lanka’s search and rescue region (SRR) on a US$ 6mn grant from the Indian Government. The agreement for this is between Sri Lanka’s Defence Ministry and India’s M/s Bharat Electronic Ltd (BEL) for the supply, installation and commissioning of the MRCC.

The MRCC will be at the Naval Headquarters in Colombo, the Maritime Rescue Sub Centre (MRSC) will be at Hambantota, and the Sub-Units at Galle, Arugambay, Batticaloa, Trincomalee, Kallarawa, Point Pedro and Mullikulam.

“Why must they be in the Navy headquarters or in the most crucial naval camps around the country?” the analyst questioned. “We must ensure that no foreign forces have access to any of those places. Even at the headquarters, they must not have access to naval operation which will happen if they place the MRCC in the naval ops center. Security should not be compromised by MRCC. It must be in a separate location but run by the Navy.”

Sri Lanka will also accept a gift of a US$ 19.81mn, 4000-ton floating dock (FD) from the Government of India for the Navy. It will be built by Goa Shipyard Ltd and “primarily be stationed in Trincomalee, Sri Lanka”, according to the agreement.

“The Floating Dock may be moved except to the port of Hambantota at the discretion of the GoSL, with prior notification to GoI, when the need arises to move it to any other location within Sri Lanka considering the safety, economic factors and efficient & effective utilisation of the FD,” it states.

The agreement shall remain in force for an initial period of five years. The dock was originally proposed to Sri Lanka by Pakistan. “It is not clear why the paperwork dictates to us where we should put the dock–in Trincomalee, not Hambantota,” the analyst commented. “If they are giving us something for free, we should have complete control of the asset.”

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Govt decides to hold parliament debate on IMF report

The government has decided to hold a debate on the IMF report when Parliament meets in the first week of April, says Chief Government Whip Minister Johnston Fernando.

Former Prime Minister and Leader of the United National Party (UNP), Ranil Wickremesinghe, had called for an immediate debate in Parliament on the IMF report on Sri Lanka.

“As the Government has agreed to engage the IMF for financial assistance, the Parliament must be briefed on their plan of action,” he had said.

Chief Opposition Whip Lakshman Kiriella had also written to Speaker Mahinda Yapa Abeywardena requesting him to immediately call for a party leaders’ meeting in order to decide on a date for the debate on the IMF report, when parliament convenes between April 05 and 08.

The International Monetary Fund (IMF) on Friday released its Article IV consultation report on Sri Lanka which highlights that the island nation faces “solvency” issues because of risks stemming from unsustainable debt levels that jeopardize the country’s economy.

“Based on staff analysis, the fiscal consolidation necessary to bring debt down to safe levels would require excessive adjustment over the coming years, pointing to a clear solvency problem,” the IMF said.

The full report provides further analysis of Sri Lanka’s debt and finances. A summary of the report released earlier in the month said Sri Lanka faced unsustainable debt levels and needed a “credible and coherent” strategy to restore stability.

IMF’s limitations in rescuing Sri Lanka – Dr .Ameer Ali

With $ 7 billion debt to be serviced this year and another $ 25 billion between 2023 and 2026, the Government has formally written to IMF for assistance, ending thereby an era of two-year self-isolation from the West. “Subsequent to my discussion with the IMF, I have decided to work with them after examining the advantages and disadvantages,” said President GR when he addressed the nation.

He must have obviously found the advantages weightier than disadvantages, and, without saying so, had tacitly admitted the ignominious failure of his so-called ‘alternate path’ and homegrown solution.

In the meantime, the Minister of Finance had succeeded in signing a deal with India for a $ 1 billion credit facility with “no strings attached”, according to him. But, Ven. Elle Gunawansa Thero in a letter to GR has demanded full details of the deal be published. India’s total development portfolio till the end of 2021 amounted to $ 3.5 billion, of which $ 500 million was for grant projects. China is also reported to be considering extending a $ 1 billion financing facility with another $ 1.5 billion buyers’ credit. This is on top of an estimated $ 3.38 billion lent already to Sri Lanka.

These help from the two regional rivals are short-term palliatives and may temporarily enable the impoverished Rajapaksa regime to import certain desperately needed consumer items and replenish at least partially the empty shelves of local retail stores. It may help to calm down the raging public anger over chronic shortages, especially when the Sinhala-Tamil New Year festivities are fast approaching.

Ironically, and in the midst all economic difficulties endured daily by the masses, including deaths caused by standing for hours in queues to buy fuel, the UN-sponsored World Happiness Report found Sri Lanka advancing from a previously 129th position to 127th among a total of 146 countries, as a land of happiness to live in! One wonders whether there is something strange about the UN’s definition of happiness or in its methodology of computation. However, this finding may give some relief to a beleaguered Rajapaksa Government, which could probably trumpet this index as one of its grand achievements.

Among the three sources of assistance, while India and China are more interested in advancing their own interests at the expense of Sri Lanka, only the IMF at least has a theoretical duty to introduce measures that could inject financial discipline to a country that has been living beyond its means for decades. Sri Lanka joined the global neo-liberal economic order in 1977. In that order, the art of prudent economic and financial management is an essential criterion for a country’s successful competition and economic growth.

In Sri Lanka, almost all governments since independence have been noted for their indiscipline in budgeting. The idea of living within one’s means or balancing one’s budget seems to have disappeared from the dictionaries of governments. Today’s public debt is the cumulative effect of a series of deficit budgets. The magnitude of that deficit increased phenomenally since 2005.

The IMF’s first target therefore would be to help the country achieve macroeconomic stability in the medium to long-term. To do that it has to adopt a carrot and stick approach. IMF’s loans are usually cheaper than those from other sources, and the terms of repayment are also flexible. While extending a larger and longer-term loan, the IMF can also assist in restructuring Sri Lanka’s existing debt with the respective parties. In return for certain concessions, IMF’s interference would provide an official guarantee to lenders against any default by the borrower. That in turn would send a positive signal to foreign investors and credit rating agencies. In short, an IMF entry would help to raise international market confidence in Sri Lanka’s economy.

Against those carrots are the sticks. Tightening the country’s monetary policy to check inflation, raising taxes and reducing expenditure to improve public revenue, reducing excess burden on public sector employment, reforming public enterprises to turn them into profit making agencies and preferably privatising them, ending corruption and removing the power of the market mafia are some of the conditions IMF would expect the Government to fulfill. While insisting on these, the IMF would be prepared to work out a safety net for the poorer sections of the community who would inevitably suffer from the short-term consequences of these measures.

It is reported that the Government is preparing to hire an international legal firm to help negotiate with the IMF. What a shame! Is the country so bankrupt of legal talent? Even then, there are limitations to what the IMF could do. The toughest hurdles to cross are corruption and structural reforms. If corruption could be eradicated, that would automatically kill the power of influence by the mafia, and if structural reforms could be accomplished and public enterprises start earning profit, that would reduce the burden of taxes levied on the public. But it is in tolerating corruption and subsidising loss-making parastatals the regime could expect to remain in power. They are the pillars on which the reigning political structure is built. This crony capitalism would therefore limit the success of IMF reforms.

In addition to these hurdles there is also another: Sinhala-Buddhist ethnonationalism. This poison like malignant cancer saps not only the vitality of the economy but also the entire polity. No amount of IMF engineered macroeconomic stability could remove this. Its eradication has to come from the political arena. But given the shocking silence of all political parties in tackling this issue and their preparedness to play politics with it, the long-term prospects of an economically stable Sri Lanka remain bleak. Thus, abolishing crony capitalism, eradicating corruption and influence of mafia, and eliminating ethnonationalism set the limitations of IMF reforms.

(The writer is attached to the School of Business and Governance, Murdoch University, Western Australia.)