A Staged Default: Sri Lanka’s Sovereign Bond Debt Trap and IMF’s Spring Meetings Amid Hybrid Cold War (Parts1, 2 & 3)

This is the third in a series of three articles. Please click here for Part 2.

Viewpoint by Darini Rajasingham-Senanayake *     29, April 2022

In Depth News (IDN)

An Unsinkable Aircraft carrier? Asset stripping a strategic island

COLOMBO (IDN) — Former US Under Secretary for South and Central Asia, Alice G. Well, a few years ago called Sri Lanka a “valuable piece of real estate” in the Indian Ocean, and the country not long ago turned down a Millennium Challenge Corporation (MCC) Compact and a Status of Forces Agreement (SOFA).

Others have termed Sri Lanka “an unsinkable aircraft carrier” in the Indian Ocean—more strategic than the Chagos Islands whose citizens were forcibly evicted by US marines in the early sixties in order to set up the Diego Garcia military base and CIA Black site, which was recently Green washed by the occupying British Government as a Marine Protected Areas (MPA).

In February 2019 the International Court of Justice in the Hague had ruled that the British and hence US occupation of Chagos Islands is illegal under international law as the Island belongs to the government and people of Mauritius.

In this context, it is noteworthy that the Sri Lanka Business Times of April 17 announced that the Government heading into IMF negotiations is hoping to raise US$8 billion from the lease or sale of valuable public assets to bolster its rapidly dwindling foreign reserves, based on a report of a newly-appointed economic advisory committee.

Among the main items for sale or long lease were the Katunayake International Airport for $2 billion, Mattala Airport for $300 million and Ratmalana Airport for $400 million. The Colombo North Port Development Project was to be handed over for an investment of $600 million while Colombo Port City lands would be leased out at a total of $4 billion.

Shares of Sri Lanka Telecom will be sold at a price of $500 million and Sri Lanka Insurance Corporation shares for $300 million. The strategic island’s telecom frequencies, important for cyber-security, 5G technology and surveillance and security of Under Sea Data Cable Routes (UDC) and Indian Ocean SLOC in Sri Lanka’s marine Exclusive Economic Zone, had been previously targeted by the MCC that also targeted the island’s land, transport and energy sectors, by the MCC.

Divestment of non-strategic state-owned assets, such as lands owned by Sri Lanka Railways and Sri Lankan Airlines has been suggested as a part of the government’s multi-pronged plan in the short-term to improve their operational and financial efficiency while increasing the country’s reserves position.

Divesting strategic assets because of cultivated corruption in the targeted public institutions is tantamount to throwing the baby out with the bathwater! Moreover, there is a difference between illiquidity and insolvency that has been ignored in the rush to monetize strategic transport, energy, land and cyber security assets in this island at the center of the Indian Ocean SLOC.

Questions arise as to who made the above valuations of Sri Lanka’s strategic assets? When and on What basis? In the context of the island being deemed ‘valuable real estate in the Indian Ocean SLOC with extensive ocean and mineral resources, including highest grade Graphite and Rare Earth Elements the island may actually suffer from a geostrategic resource curse, that made it a donor darling in the past and the subject of various Colonization projects in the name of ‘Development Aid’.

However, the sale of strategic land and transport assets of the island that had been previously earmarked by MCC seems to be a pre-condition for the IMF–“lender of last resorts” to bailout Lanka. It is increasingly evident that the island’s debt crisis has many external dimensions and is not entirely internally driven. The strategic island has long been in the crosshairs of big power rivalry.

Geopolitics of Sri Lanka’s permanent crisis: A Staged Default and the Dollar Weaponized:

The IMF was gracious in Washington and commended Sri Lanka’s brand-new Finance Minister, Ali Sabry, who was previously Minister for Justice and Lawfare, for his dash to Washington for a “bailout” and for the steps it has taken to stabilize the economy. Sri Lanka was urged to apply for Rapid Financing Instrument (RFI) having delayed debt restructuring for two years.

Meanwhile, Indian Finance Minister Nirmala Sitharaman who was also in DC for the Spring Meetings, made representations on behalf of her dear debt-trapped southern neighbour. India is a US Quadrilateral Group (QUAD), partner in America’s confrontation with China in the “Free and Open Indo Pacific”.

Sri Lanka was advised to find financial and legal advisers in 15 to 20 days to chart the restructuring and payments of debts: Asset managers BlackRock Inc. and Ashmore Group Plc. were among the creditors organizing in a group ahead of the IMF talks and had hired law firm White & Case for advice.

Notably, absent at the IMF meetings was the President’s brother, dual US citizen and ex-Minister of Economic Disaster who had staged and led Sri Lanka’s Default into Washington’s arms.

Back in 2020 during COVID-19 lockdowns, the law of the land was changed to enable Basil Rajapaksa, a high-school dropout, known as Mr. 10 per cent for seeking commissions and corrupt deals with cases stacked against him to enter parliament and later head the COVID-19 Task Force. He directed two years of militarized COVID Lockdowns and excessive purchases of injections, including Pfizer “boosters” with a Health Sector that had been largely bought by big pharmaceutical companies. Basil Rajapaksa was supposed to lead the GoSL delegation to the IMF’s Spring meeting but had become a liability as questions are asked about the external actors behind Sri Lanka’s staged default.

Questions had been raised about foreign interests and hands behind Sri Lanka’s crisis following Pakistan Prime Minister, Imran Khan’s allegation of regime-change operations in his country: Was the long-planned and anticipated plunge of the Sri Lankan rupee against the ‘exorbitantly privileged’ US dollar that came to pass just in time for the IMF’s Spring meetings partly to pre-empt a rescue from China which has invested heavily in Sri Lanka?

In the final analysis, questions arise if Sri Lanka, ruled by a hybrid Rajapakse family comprised of dual American citizens is being targeted for hybrid economic warfare? With the USD increasingly weaponized also against sanctions-hit Russia and other emerging economies? This is not just a theoretical question. Is the debt crisis staged, by local and global networks of financial corruption at play on this strategic island in order to deliver Sri Lanka on a platter to Washington and its Consensus? After all, we live in a post-Covid 19 world where conspiracy theories increasingly seem to come true.

Finally, Debt Cancellation, NOT IMF bail-ins and Asset Stripping are the need of the hour in Sri Lanka and other parts of the Global South that were subject to Covid 19 bio-warfare, including global media narratives promoting fear and economically debilitating Lockdowns in the past two years. [IDN-InDepthNews – 25 April 2022]

* Dr Darini Rajasingham-Senanayake is a social and medical anthropologist with expertise in international development and political-economic analysis. She was a member of the International Steering Group of the North-South Institute project: “Southern Perspectives on Reform of the International Aid Architecture”.

Image Credit: RepublicWorld.com

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