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IMF has not insisted on immediate Defence spending cut: President

IMF has not insisted on immediate Defence spending cut: President

09 Jan 2023 | By Charindra Chandrasena

  • Says request is for military expenditure reduction in stages
  • Claims most IMF conditions already fulfilled 
  • Expects IMF Board approval before March

The International Monetary Fund (IMF) has not made an immediate reduction in the defence expenditure of the Government of Sri Lanka (GoSL) a precondition for the provision of the eagerly awaited Board-level approval for the $ 2.9 billion Extended Fund Facility (EFF), according to President Ranil Wickremesinghe.

“The IMF is looking for the reduction of military expenditure, but only in stages. The bulk of the military expenditure is for salaries. We can’t just ask those in the military to go home,” President Wickremesinghe told The Morning on Friday (6) at a meeting with newspaper editors.

When asked whether they could be transferred to other sectors and industries in order to reduce the military’s wages bill, the President claimed that it would lead to issues in those sectors. 

“If they are transferred, the people in those sectors will complain that their work is being taken over by military personnel. We can ask the military personnel to construct all the Government buildings, but then the construction sector won’t receive any Government building contracts.”

The Budget 2023, presented to Parliament by Wickremesinghe in November 2022 in his capacity as Finance Minister, made the highest allocation of Rs. 410 billion to the Defence Ministry. This has been termed as exorbitant by both the Parliamentary Opposition and several independent experts, particularly as it was made in the midst of an economic crisis and because the Ministries of Education and Health have been allocated Rs. 232 billion and Rs. 322 billion, respectively.

The President went on to say that the GoSL has fulfilled “most” of the conditions laid down by the IMF, and that there are a few more to be fulfilled, but that those were “not a big problem”.

He also denied the claims made by the Opposition that the delay in the board-level approval is due to the IMF’s lack of confidence about the stability or the longevity of the Government.

“Don’t worry, this Government will continue till the end of its term,” he said. 

The Opposition has claimed that the IMF is concerned about providing final approval to the current Government as it may need to renegotiate with a different Government shortly thereafter in the event of a Government collapse similar to the one seen from April to July 2022, when the Cabinet and the President were forced to resign amidst mass protests.

Stating that the only obstacle to the IMF Board-level approval is the fact that the debt restructuring negotiations with India and China have not been completed yet, the President expressed optimism that these negotiations would be completed within this month (January).

When inquired if he expects the Board approval to be received in March, he said: “Before March. As soon as we reach agreements with India and China, we can get approval.”

GoSL and the IMF reached a staff-level agreement on a 48-month EFF for $ 2.9 billion at end-August 2022, following a visit by an IMF team. It is the second IMF EFF that Sri Lanka has requested in the past seven years.

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