• Prof. Steve Hanke claims IMF a temporary relief 
• Points at SL and says ‘tremendous recidivism’ awaits

None of the programmes by the International Monetary Fund (IMF) has worked in the long term for countries that have sought assistance while there is only temporary relief in anticipation of a bailout, John Hopkins University Professor of Applied Economics Steve Hanke said.

Speaking to CNBC, Hanke noted that since 1965, 16 IMF programmes have failed in Sri Lanka while they provided only temporary relief in anticipation of the IMF bailout, similar to what Sri Lanka is going through at the moment but added that fundamentally, in the long term, nothing has really changed.

He noted that the Sri Lankan rupee has appreciated by about 12.5% since last Thursday (2) and that as a result, the daily inflation as measured by him has come down to 31% per annum while the official rate stood at 53.2% as of January.

He went on to say that while the country will experience some temporary relief in anticipation of an IMF bailout, “in the long run, you get tremendous recidivism because none of these IMF programmes work”.

Moreover, he said that according to a study recently completed by him, countries that have not come to an agreement with the IMF have ended up in better shape than those that had come to an agreement.

Hanke said that unemployment rates, real economic growth, export growth, and the government debt-to-GDP ratio have been better in countries that did not have an agreement with the IMF compared to those that had an agreement.

“The only thing that appears to be a little better in the IMF programmes, according to the study, is that inflation is controlled a little bit more than it would have otherwise,” he said.

Further, in the case of China providing financial assurances to Sri Lanka, he said that everybody knew China would come to an agreement as China had no choice. 

“What was China to do? Try to squeeze a dry lemon?” Hanke remarked.