Financial Times

Donor aid tied to peace talks

While the $4.5 billion dollars that bilateral and multilateral donors announced they were pledging to Sri Lanka over a four-year period in Tokyo last week is certainly welcome news and a vote of confidence in the government and the country, much of it is not new.

Quite a big chunk of it, such as the money from the International Monetary Fund and the World Bank, had been announced earlier. Most of the money is in the form of loans, albeit at low interest loans and with lengthy repayment periods.

Although the grant component is certainly significant it also means that the country's already massive debt burden will inevitably increase, as the opposition has taken pains to point out, no doubt miffed that it was a UNP government that received such a big sum of aid.

It is still unclear how much of the funds would be spent on rehabilitation and reconstruction in the north and east and how much will be available for spending in the rest of the country, particularly the long-neglected south, which has seen two youth uprisings these past three decades.

The aid has also come with some pretty strong strings attached - conditions that perhaps are unprecedented and could even lead to interference in our internal affairs.

The disbursement of the aid, the donors have unabashedly and repeatedly pointed out, would be conditional on the progress of the peace process. Aid money might not be forthcoming if the peace talks are not resumed, and in all probability, do not progress in the direction desired by those donors who are also key players in the effort to resolve the conflict.

This means that the LTTE becomes a key player in determining this country's immediate economic future. Not that it did not earlier - the best example of the LTTE's ability to influence economic growth was the impact of their attack on the Katunaike international Airport. However, the conditions attached to the aid only serves to strengthen the LTTE's influence. By boycotting the talks and interfering in the peace process in other ways, the LTTE can hold the country to ransom and wrest concessions that the government might not otherwise be inclined to give.

Already, we have seen how political leaders of the countries taking part in the peace process, such as Norway, have made pronouncements that infringe on our sovereignty and are partial towards the LTTE.

Will this massive dollop of aid be used to drive the peace process in a direction the international community wants it to go? Will it be used to twist the government's arm and make it concede LTTE demands it would otherwise not concede? Also, if by some remote chance there is a return to war, does it mean that the rest of the country will not get development aid?

Furthermore, these are still pledges. How much of this $4.5 billion will actually be disbursed remains to be seen. It is a well-known fact that aid disbursements in other post-conflict situations such as South Africa and Afghanistan have been below expectations.

A key concern is the way the pledged aid would be used when disbursed. Implementation has long been a problem and although there has been much talk of improving the way aid money is used, clearly much remains to be done.

The proposal to set up a separate agency for the work is indeed a good one although care must be taken to ensure it does not become just another layer of red tape or a white elephant such as the Southern Development Agency tried by the previous regime.