Editorial

The news on the eve of the President’s ‘Throne Speech’ opening a new session of Parliament that Sri Lanka’s overseas creditors were willing to support and restore the country’s economic stability did not seem to deter trade unionists from going ahead with their scheduled protest in Colombo against new taxes nor the monks from protesting the ‘full implementation’ of the 13th Amendment (13A) to the Constitution.

The group of major creditors known as the Paris Club, to whom Sri Lanka must repay the loans taken over the years, signalled it was agreeable to provide financing assurances to support the IMF approval for an EFF (Extended Fund Facility) that will unlock more credit for the country to ride over the economic storm.

It was a long awaited positive signal to the country, since it started, rather belatedly, negotiating with the IMF for a bailout. Some of the operative words in the official communique from the Paris Club were that the major creditors recognised the Government has “presented its reform programme” that will be supported by an IMF arrangement requiring a debt treatment to restore debt sustainability.

The Government has opted not to make public its “reform programme”, but the steep direct tax regime that has come into force aimed at filling the empty coffers of the General Treasury is clearly one item on it. That is precisely what the unionists from the port to the hospitals were on the streets on Tuesday protesting about, with threats of more to follow.

Coinciding with these protests was the President spelling out his own plans to pick up the pieces of a shattered economy, and put them together again. He was at pains to explain the situation as it is. He gave the positives of how hard life was only a few months back but was easing out and that there was still, a long road to traverse. And yet, there was light at the end of the tunnel, he said, if only his countrymen and women can endure the hardships of the next months.

The President told Parliament that the IMF bailout is the only option available to salvage the nation from its predicament. He invited those who had better ideas, to offer them. Many in the vanguard of the anti-government protests have been critical of taking the IMF bus, but no one has really suggested what different bus to take, except the Central Bank’s former Governors who simply missed the IMF bus and left the people of Sri Lanka stranded.

The fact that the Paris Club said it would support Sri Lanka before the IMF does not auto-matically mean the IMF’s EFF is in the bag. It only means a vote of confidence from its major creditors. But there’s many a slip between their expression of confidence and final approval by the IMF board.

The application for a bailout is at an important junction. China remains a hurdle to be cleared. India has come out firmly with an assurance from its Finance Ministry to back Sri Lanka. China, on the other hand, has only given its assurance through its Exim Bank, which seemingly is not the same as an assurance from the Beijing Government.

Whether the IMF board is willing to proceed without China’s definitive and authoritative assurance is to be seen. The Paris Club creditors minus China still can garner a 50 percent threshold of its debts. Almost 50 percent of Sri Lanka’s debts are with China, and China may want to explore a bilateral credit deal with Sri Lanka so that it does not become a precedent when it comes to its other debtors in Africa and Latin America. Unfortunately, Sri Lanka’s negotiating prowess with China is thin, to put it mildly.

It is significant that both the Chinese Finance Minister and the Central Bank Governor will be in Bangalore later this month to take part in the G-20 meeting of finance ministers and governors. China surely does not want to get ‘cornered’ as a result of the Paris Club decision, nor stick out like a sore thumb in Sri Lanka’s debt crisis.

The Paris Club communique makes no specific mention of domestic debt restructuring. However, some 30 institutions that hold outstanding international bonds issued by Sri Lanka are reported to have demanded that the Government ‘re-organise’ domestic debt as well. Many countries that fell into Sri Lanka, like shoes viz., Argentina, Greece, etc., had to see to this aspect as well — meaning, settling debt owed to creditors within the country.

The knock-on effects on the domestic economy are bound to create more hardships for the people who are seemingly unwilling to tighten their belts more, however much the rhetoric is that they accept taxes. The country is bound to see more street demonstrations and the possible paralysis of the state machinery that will have a secondary impact on the poorer people. For them, it will be a case of double jeopardy. Thus, it is a welcome move for the Government to reach out to the unions even though some of them may have their own political agendas, come what may.

Separately, but not unrelated, the President’s statement on Tuesday seems to indicate his option to postpone the tackling of corruption and punishing the wrongdoers of the past who brought about this misery on the people. He recognises the public outcry, but says he wants to prioritise curing the economic malady first.

He will find it increasingly difficult to punish those who ruined this country because he must rely on their very parliamentary support to get his legislation passed. Otherwise, he becomes a lame-duck President. Equally, in not showing any movement on this front he continues to be accused of protecting these culprits. Passing laws in Parliament alone will not suffice.

He has also opened up another front by pledging to “fully implement” 13A. This is almost a non-starter at a time like this. What is bewildering is why the Opposition MPs who boycotted the ‘Throne Speech’ and gave sound bites to the media under a shady tree in the Parliament gardens cannot initiate and execute moves to repeal 13A through Parliament. Or at least, remove its objectionable clauses. After all, it is only a constitutional amendment with 150 votes needed if they feel so strongly about it. They should walk the talk.