Navigating crisis

“The winds and waves are 

always on the side of the ablest navigators” – Edward Gibbon 

At a recent book launch organised by Advocata Institute, former President Ranil Wickremesinghe made a startling statement. A substantial section of the cognoscente on economics in our land perceives him as our preeminent strategic thinker. 

Commenting on US tariffs he said, “US is a member of the OCC. And the US has signed on to the EFF and their time limits which means they must help us now… Otherwise they are in breach of the agreement.”  

“They are preventing us from repaying bondholders, the former President pointed out adding, “And now we must tell the IMF…tell the bondholders to go to the US and collect the money.”

He hoped the current administration will succeed in getting the Trump tariff down as Sri Lanka “cannot survive with 30%”.

The gathering he addressed had many outstanding people in the field of finance and commerce.

None seemed to remember that Wickremesinghe in 2007 as leader of the Opposition and the UNP wrote to the foreign banks that a “future UNP government would not permit the repayment of the proposed US $ 500 million bond.” His Government did not repudiate the ISB debts. Instead, it tripled ISB borrowings. 

The IMF is the Global Overseer ensuring good behaviour of debtor countries. The Land of Trump with a $ 36 trillion debt is exempt from its watch. 

Former President Ranil Wickremesinghe

US President Donald Trump

The US Dollar is the main global reserve currency – which the French have insistently maintained as ‘an exorbitant privilege’. 

The former President’s cynical economic wisdom is shared by many who are pleased to see AKD’s cautious compliance of the IMF’s conditions. 

Our Strategic Thinker’s cavalier advice brings to my mind Barbara Tuchman’s luminously wise observation in her celebrated tome – The March of Folly. 

“Wooden headedness, the source of self-deception, is a factor that plays a remarkably large role in government. It consists in assessing a situation in terms of preconceived fixed notions while ignoring or rejecting any contrary signs. It is acting according to wish while not allowing oneself to be deflected by the facts.” 

President Trump’s Bully Pulpit postures have not intimidated China. We are helpless onlookers of a greater game.  

Economic Counsellor and Director of Research of the IMF – Pierre-Olivier Gourinchas in a commentary on global economic growth made on 22 April 2025 noted that the global economy has entered a new era.

“The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. Existing rules are challenged while new ones are yet to emerge. Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near universal levies on 2 April. The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners significantly pushed up the global rate.”  

Next day, President Trump’s Treasury Secretary Scot Bessant reacted. The International Monetary Fund, he said, should be a brutal truth-teller. Instead, he claimed, it was “whistling past the graveyard.”

“The IMF needs to call out countries like China that have pursued globally distorted policies and opaque currency practices for many decades,” he said. 

The Financial Times qualified Bessant’s remarks further. It said that Treasury Secretary Bessent signalled that the fund was becoming too close to Beijing, and said a key report published last year drew “Pollyannaish” conclusions on imbalances in the global economy, where Washington believes China is the prime culprit. 

The Financial Times reporters got the US Treasury Secretary’s mindset with absolute precision. The Pollyanna principle is the tendency for people to recall what’s favourable more accurately than unfavourable ones.  

The $ 36 trillion debt is not a comfortable truth. 

The United States remains world’s preeminent military power with its arsenal of Bunker Busting Bombs. But as an industrial power, the US has been clearly overtaken. It is not falling behind. It is already behind China in some essential sectors. In a recent analytical essay ‘Under Estimating China’ in ‘Foreign Affairs’ two US China experts Rush Doshi and Kurt Campbell have said: “China makes 20 times more cement and 13 times more steel than the US. It makes more than two-thirds of the world’s electric vehicles, more than three-quarters of its electric batteries, 80 percent of its consumer drones, and 90 percent of its solar panels. China’s shipbuilding capacity is several orders of magnitude larger than America’s, and its navy will be 50 percent larger than the U.S. Navy by 2030.” 

The tortoise has overtaken the hare. Aesop has told us how it ends.

References: 

https://www.imf.org/en/Blogs/Articles/2025/04/22/the-global-economy-enters-a-new-era 

https://fortune.com/article/scott-bessent-world-bank-imf-overhaul-mission-creep/ 

https://www.theatlantic.com/ideas/archive/2025/05/maga-maoism-trump/682732/