Colombo’s Independence Square, built to celebrate granting of Independence by the British in 1948. Most of the population ignored the 75th anniversary of ‘independence’. Photo: Kalinga Seneviratne.
By Kalinga Seneviratne
SYDNEY, 1 April 2023 (IDN) — On March 21, when the International Monetary Fund (IMF) made a long-awaited official announcement that it has approved a $3 billion “bailout” for Sri Lanka, President Ranil Wickremasinghe’s supporters lighted firecrackers to welcome the news. But local sceptics doubt whether the IMF is really bailing out the people of Sri Lanka or serving US geo-political interests.
Sri Lanka’s independent newspaper, The Island, in an editorial on March 22 reflected this very well. “The government has been able to secure the IMF bailout package because it readily agreed to all loan conditions, some of which have not been made public yet,” it noted.
Opposition lawmaker and former banker Eran Wickramaratne addressing a media conference on March 23, claimed that the IMF had blanked out sections of the report that was released to parliament, which IMF deems market-sensitive information.
“The IMF should look into its own transparency,” the former banker remarked, holding a copy of the report. “Some of these global institutions speak to countries like us about transparency, but why not your policy intentions? What is so secretive about your policy intentions being known?” he asked.
Pointing out that the IMF Board announced their decision on ‘World Puppetry Day’, The Island sarcastically remarked: “The grandees of the Rajapaksa-Wickremesinghe regime claim to be managing the economy themselves but they are only a set of puppets controlled by the IMF (and) they have to do as the IMF says.”. The newspaper warned that “a perfect storm is brewing on the horizon with workers taking to the streets in large numbers”.
Using the IMF approval, Wickremasinghe is projecting himself as the saviour of the nation to dispel the widely held notion in the country that he is an unelected President who is heading a government that is backed by the ousted President Gotabaya Rajapakse’s Sri Lanka Podujana Peramuna (SLPP) that commands a majority of seats in the parliament gained in the 2020 election.
“Sri Lanka is no longer a bankrupt country,” declared Wickremasinghe in presenting the IMF agreement to parliament on March 23 and asserted that the island state could now obtain “credit from other international financial institutions at low-interest rates”.
He failed to tell parliament that under the IMF agreement, Sri Lanka could only borrow from the World Bank and the Asian Development Bank—both controlled by the West and Japan. He also did not explain how this agreement will help Sri Lanka renegotiate the loans owed to western hedge funds.
For almost two years, the western media, aided by its Indian counterparts, have flogged a false narrative of predatory Chinese lending as the cause of Sri Lanka’s debt crisis, ignoring the fact that the main cause is reckless borrowing and lending in the International Sovereign Bond (ISB) markets.
< Source: Department of External Resources, Sri Lanka.
Western hedge funds mainly control the ISB market. In April 2021, Sri Lanka’s Department of External Resources released a colourful chart showing that 47 per cent of the country’s debts are “market borrowings” (meaning ISBs) and that the exposure to Chinese loans constitutes only 10 per cent. ISBs lend around 5-8% at high-interest rates, while Chinese and most bilateral loans are between 2-3%.
“Manufacturing consent”
In what Noam Chomsky calls the theory of “manufacturing consent” in the function of the news media, taking the cue from western news sources, Sri Lanka media created an environment where the local public agenda was mainly focused on why Sri Lanka needed to go to the IMF for a bailout.
This suited the US geo-political agenda perfectly, as it gradually changed the Sri Lankan public perception of China as an “all-weather friend” who can be depended upon to help the country’s development funding needs.
Manju Nishshanka—a former Vice President of International Banking at Merrill Lynch and currently the leader of the Global Sri Lankan Congress, in a one-hour discussion on the social media site POD TALKS, with the IMF report on hand—explained how IMF’s programs are designed to support market-driven economic policies and globalization, which its member countries believe in.
“IMF has predicted that if the government implement some of their recommendations, there could be social and political chaos,” he noted. “It is people who will be affected when tax is raised or when government enterprises are privatized. The government has promised (to IMF) that electricity and fuel subsidies will be eliminated, which also affect peoples’ pockets. And when peoples’ savings (in Employee Provident Fund accounts) are siphoned off for (domestic) debt structuring that will create resentments.”
In a meeting with editors and news directors on March 23, Wickremasinghe asked them to tow the government line and support the IMF program. He scolded those media who predicted revolution if the IMF program is implemented and for suggesting that Sri Lanka would become a pawn of the West.
The London-based campaign group Debt Justice which includes 182 economists and development experts from around the world, has pointed out that some of the world’s most powerful hedge funds are the cause of Sri Lanka’s debt crisis.
“Such lenders charged a premium to lend to Sri Lanka to cover their risks, which accrued them massive profits and contributed to Sri Lanka’s first-ever default in April 2022,” they maintain. “Lenders who benefited from higher returns because of the ‘risk premium’ must be willing to take the consequences of that risk.”
But they are not in the mood for that and nor is IMF pushing for it. Sri Lanka is already facing a lawsuit in the New York federal court by St Kitts and Nevis-based Hamilton Reserve Bank, which holds more than $250 million of Sri Lanka’s ISBs. In their submission to the court in June 2022, Hamilton’s lawyers said that the default is “causing American retirees tremendous suffering from potentially massive losses of up to 80 per cent of their original investment value”.
Most of the money that will come from the IMF will be used to pay off such debts to ISBs. Wickremasinghe would have constitutional powers after March 2023 to dissolve parliament and ask for a fresh mandate from the people to implement the IMF plans. But that is the last thing he wants to do. He even refused to make funds available to the Election Commission to hold local government elections in March.
In a widely circulated social media interview on the Mee Masso (stinging bees) YouTube channel, Yamuni Thushara, President of the Anti-Corruption and Anti-wastage Peoples Organisation, pointed out that within hours of taking over in July 2022, Wickremasinghe had signed an order to import 5,000 canisters of tear gas and in January 2023, he has doubled it.
“Government knows that there will be three to four years of protests (over the IMF program), and tear gas is needed to suppress peoples’ dissent,” he says. Recently a security guard at Colombo University died after police fired teargas at protesting students.
Tushara knows that IMF is far from concerned about democracy. With another episode of social unrest brewing in Sri Lanka, the US likes such chaos. That will give them the perfect excuse to interfere militarily in the country which they have been craving for a long time—perhaps with “peace-keeping” forces sent to “help the government to restore order”.
Perhaps India would be called upon to do the sub-contract for them under a deal that could be cooked up under the QUAD grouping that was set up in collaboration with India, Japan and Australia to contain China in what they call the Indo-Pacific. A geopolitical battle is certainly hotting up in the Indian Ocean, with IMF very much its centrepiece. [IDN-InDepthNews]
Colombo’s Independence Square, built to celebrate granting of Independence by the British in 1948. Most of the population ignored the 75th anniversary of ‘independence’. Photo: Kalinga Seneviratne.
IDN is the flagship agency of the Non-profit International Press Syndicate.