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The much talked about and much awaited International Monetary Fund’s (IMF) Board approval for the US$ 2.9 billion bail out package for Sri Lanka has finally seen the light of day.

Some details and conditions were spelt out by IMF officials at a media briefing last week. Among the officials present were Ting Yan from the IMF’s Communications Department, Sri Lanka’s Senior Mission Chief Peter Breuer and Sri Lanka’s Mission Chief Masahiro Nozaki.

The spokespersons described the package as a 48-month extended arrangement under the Extended Fund Facility (EFF) corresponding to about US$ three billion dollars to support Sri Lanka’s economic policies and reforms.  

The announcement was greeted by the lighting of crackers by a few (mostly United National Party supporters) while economic analysts were still busy studying the implications of the IMF supported programme and the conditions attached to it. For the majority of people, it will have no meaning until it positively impacts their lives.

The left wing of the Sri Lankan polity, who have always been wary of IMF prescriptions, are not impressed. Some objections to getting IMF aid voiced by the political left have been related to the conditions imposed by the world body, concerns about how it impacts economic and political sovereignty, the negative impact on the poor and failures in other countries.

From which ever standpoint the IMF programme is viewed, there is no doubt it is going to be a long and difficult haul for the Government and the country as a whole. According to the details revealed so far, the IMF US$ 2.9 billion package which will be doled out over four years and will have to be repaid in ten years, will require the Government to fulfill several conditions in the next four years.

The immediate benefit of the IMF loan is that it will enable the Government to have access to borrowing from other multi-lateral lenders such as the World Bank and the Asian Development Bank (ADB).

What is most unfortunate is that the people have had to undergo untold suffering as a result of what the IMF euphemistically calls “policy missteps” but in reality was total mismanagement and incompetence of the Gotabaya Rajapaksa government. What compounded the misgovernance of the Gotabaya Rajapaksa Presidency was the obstinacy of the then President in refusing to heed the advice of independent economists, such as former Central Bank Deputy Governor Dr. W. A. Wijewardene, and others who suggested to President Gotabaya Rajapaksa in December 2019 that IMF support should be obtained.

Added to this is Foreign Minister Ali Sabry’s repeated statements that they knew at that time that they had to seek IMF assistance but did not do so.

These and other unforgiveable governance lapses have condemned the people to undergo difficulties including food shortages, fuel queues, cooking gas queues, high prices of essentials and a shortage of drugs and more long term effects including malnutrition among adults and children.

While economists wade through information on the IMF package in the public domain, it is useful to focus on some of the “non-economic” aspects of the IMF programme. Many of these “non-economic” aspects relate directly to shortcomings of the Gotabaya Rajapaksa Presidency and are a damning indictment of governance during the 2019-2022 period.

According to IMF spokespersons the reform programme supported under the EFF arrangement is built on strong policy measures and prioritises five key pillars.

One of the five pillars is the implementation of structural reforms to address corruption vulnerabilities and enhanced growth.

The IMF has emphasised the importance of anti-corruption and governance reforms as a central pillar of the EFF support programme. They welcomed the Government’s expressed commitment to fundamentally improve public financial management and strengthen the anti-corruption legal framework in line with the United Nations Convention Against Corruption.

Another condition the government has consented to is the IMF conducting an in-depth governance diagnostic exercise which will assess corruption and governance vulnerabilities in Sri Lanka and provide recommendations. Sri Lanka will be the first country in Asia to undergo a governance diagnostic exercise by the IMF.

According to the IMF spokespersons the diagnostic assessment analytical report will be produced by the IMF governance mission. It is a diagnostic exercise with the Government and strong coordination engagement with stakeholders including civil society. The objective is to examine the severity of corruption in Sri Lanka and identify key governance weaknesses and corruption vulnerabilities. It will also assess the adequacy of the anti-corruption framework, and policies that are needed to address corruption vulnerabilities.

The focus of the IMF diagnosis will be IMF’s core issues, including fiscal governance, financial sector oversight, Central Bank governance, market regulations, rule of law, and measures against money laundering and counter terrorism.

According to the IMF spokespersons the Sri Lankan government has committed to introduce anti-corruption legislation which will include both asset declaration and asset recovery. It is significant to note that in the Government’s original draft of the anti-corruption legislation, asset recovery was not included but has now been added clearly on the IMF’s insistence.

The new legislation relating to the Central Bank, which was prepared by the Government, has been prompted by the IMFs objective to preclude the Central Bank’s financing of fiscal deficits which happened in Sri Lanka in the recent past as a result of the economic crisis. How Parliamentarian S.B. Dissanayake will view this proposal remains to be seen, in the light of his insistence in a recent interview that the policies followed by Ajith Nivard Cabraal and Prof. W. D. Lakshman were correct.

President Ranil Wickremesinghe can rightly claim credit for succeeding in obtaining IMF support. However he has a long way to go in carrying the country with him in implementing the IMF conditions which can prove painful to a long suffering people. Apart from peoples’ reaction, the followers of Gotabaya Rajapaksa, who are his current allies in Government, are not likely to support the implementation of the IMF conditions–particularly the ones relating to corruption.

(javidyusuf@gmail.com)