Transparency essential in IMF deal

President Ranil Wickremesinghe recently claimed that his Government had fulfilled 15 prerogatives set by the International Monetary Fund in order to release a $ 2.9 billion Extended Fund Facility. He informed that the increase in electricity tariffs was one of these 15 prerogatives set by the IMF. It is unclear what the rest of the conditions laid by the international donor are. 

The IMF reached staff-level agreement with Sri Lanka on a $ 2.9 billion package last September, but its executive board has not yet approved the loan. It was believed that the delay in the release of the EFF was due to the Government not finalising debt restructuring agreements with key lenders, including China.

The latest revelation by President Wickremesinghe that there was a 15-point conditionality for the release of funds must be made public. The people of Sri Lanka who are taking the brunt of the economic burden due to the colossal mismanagement by the Government, must at the very least be aware of the conditions they will be subjected to due to international agreements. The Government of President Ranil Wickremesinghe built its legitimacy on the premise of being the only administration that could deliver a comprehensive economic recovery package, anchored on the IMF loan. It however does not have a mandate to enter into secret agreements that affect the whole population. At the very least the Government has an obligation to reveal to Parliament if certain conditions have in fact been imposed by the IMF.

It is also reported that several of Sri Lanka’s creditors have now formed a group that will collectively negotiate debt restructuring with the Government. If the previous experiences of countries such as Argentina and Greece that faced sovereign defaults are to be considered these debt restructuring talks are going to be delicate, painful and complicated, requiring them to be handled with the highest degree of professionalism and competence. The creditors who are primarily private entities will not care about the state of the country or the wellbeing of its people when they negotiate a reasonable pay back scheme. Their interests will be primarily governed by the interests of their clients and the necessity to claim as much of the capital and due interest from Sri Lanka.

As witnessed in Argentina these talks can take many years and sometimes leave governments having to prioritise repayment of debt over interests of citizens. Creditors who can inundate a government, especially a third world incompetent one such as Sri Lanka, with international litigation, will squeeze governments to part with their foreign currency even forgoing basic requirements such as food and medicines for its people.

The administration of President Wickremesinghe has its legitimacy and credibility hanging on its ability to secure a meaningful path towards recovery from the current economic crisis. The Government owes a duty to the electorate to keep them informed of the efforts taken and developments with regard to debt structuring and any conditions imposed with regard to international borrowings.

As Sri Lanka goes through a painful recovery, it is imperative that the electorate is made stakeholders of the economic decisions that affect all our lives. It is only with a government that has a mandate and confidence of the people that international lending agencies such as the IMF could negotiate and come to meaningful arrangements for Sri Lanka’s economic recovery.