On Thursday, the Government announced that it would not be implementing certain controversial clauses in the Gazette notification that was issued by the Public Services Commission to enforce a retirement plan for those public servants who don't qualify from an efficiency bar test even after 12 sittings.

It is rather disconcerting that the Government maintained that it learnt of this Gazette only from the Sunday media and trade union protests, and that it was not approved by the President. The truth seems elsewhere. Public servants were to cast their postal votes on Thursday and Friday for the Western Province council elections, and to-date, the Gazette has not actually been rescinded; only an announcement has been made that some controversial clauses will not be implemented. This shows the Government's predicament. It doesn't have the stomach to take decisive action though Sri Lanka's public servants-to-citizens ratio is one of the highest in the world. Why? It's election-time.

There is no easy-fix. On the one hand, it is some people's source of livelihood. On the other, it's a drain on the common public purse. And this points to the difficulties the Government faces, buffeted by the vagaries of the world economic downturn - the Great Recession that is rivalling the Great Depression of the 1930s. In 2007, the Government boldly told the IMF to close its office in Colombo, proudly boasting we will not need its loans hereafter. It was only when the grim reality hit earlier this year, that the IMF was invited back with open arms and asked for the biggest ever loan asked by Sri Lanka - US$ 1.9 billion (or Rs. 200,000 million).

The people were misled to believe that friendly Governments were there to help us. Then, surreptitiously the Government sought commercial loans from private banks, even a quick-fix hedging deal which back-fired. Eventually swallowing its pride, the Government went in for an IMF loan with lower repayment facilities. There is a moral to the story. Boast, only if you can afford to. On Thursday, the G 20 -- the world's most influential twenty countries meeting in London -- agreed to give an additional US$ 500 billion to the IMF to help countries like Sri Lanka. What Sri Lanka has asked for may seem a drop in the ocean, but that is not to say that the IMF will not be imposing conditions for good economic management, and good political governance. Some believe the IMF has changed its insensitive approach towards poorer countries, and will be more flexible. That is only partly true.

The day after the G20 Summit, US President Barack Obama told a Town Hall meeting in Strasbourg, France that it was the duty of rich countries to bail out weaker nations, but that there was a corresponding duty on the part of the recipient countries to ensure the money was well spent, devoid of corruption - and that they abided by democracy and the Rule of Law.
Much of Sri Lanka's flagging economy -and the signs are very ominous - is our own making. It has only partly to do with the vagaries of the world economy.

The media have repeatedly highlighted the many parliamentary and administrative findings on waste, bad management and corruption in the Government sector - findings that have not been acted upon. Central Bank supervision of the financial sector is being heavily criticized; increased Government borrowings from State banks have impeded growth by banks placing heavier restrictions on the struggling private sector. With the plantation economy stuttering, exports are in dire straits. There's a drop in foreign remittances and the question being asked is whether the country has sufficient dollars till the IMF loans comes, hopefully, by May.

Last week this newspaper reported the closure of some 50 factories especially in the Industrial Processing Zone around Colombo and the fact that as many as 300,000 people would lose their jobs. Investors are going elsewhere. The Ministry of Labour meanwhile, is preparing to relax labour laws to permit an increasing number of requests from companies for Voluntary Retirement Schemes. The sub-economies around these little industrial sites, the boarding houses, the call-centres, the shops, just like those who earned a living from the tourist industry, are without income. A vegetable mafia and a paddy mafia control prices.

Is the Government working on strategies and a Master Plan to counter the impending crisis? Some suggest that there should be greater emphasis to ensure that the private sector also does not collapse. As it is, more and more taxes and levies are imposed on it to carry the burden of a bloated-Government machinery. Some suggest making the VAT refunds (which the Government finds difficult to re-pay) negotiable documents acceptable by banks. Still others recommend a US style Chapter 11 clause which allows companies to file for bankruptcy, but still keep working - unlike here where you just close shop and leave the workers in the lurch, so on and so forth. The official version will be a firm "Yes", but this week's weakness on the part of the Government to forge ahead with the Gazette notification is a poor indicator of its political will to act decisively and responsibly.