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No time like now for painful reforms

02 Sep 2022

One of the most hackneyed slogans in Sri Lanka’s politics has beeb “this is the last chance to save the country”, but the current Government is now facing this scenario in very real terms. This last chance is none other than the long-awaited International Monetary Fund (IMF) assistance. Yesterday (1), it was announced that the IMF and the Sri Lankan Government have reached an IMF staff-level agreement, through which Sri Lanka would receive an Extended Fund Facility (EFF) of $ 2.9 billion. This agreement is, however, yet to receive approval from the IMF Management and Executive Board. Even though this is reassuring news for crisis-stricken Sri Lanka, which is desperately in need of financial assistance, this time, what Sri Lanka is receiving is not a mere handout. The EFF comes with a number of conditions, or obligations that Sri Lanka has to fulfil, the main ones being the 2023 Budget being in line with a macroeconomic framework that underlines the IMF's programmes, and Sri Lanka’s creditors’ agreeing to restructure debt. This means that the Government has to do away with its usual practice of taking loans for projects with  little to no return on investment, and instead implement programmes with tangible results and measurable outcomes.  This is where the Government’s responsibility and competence, and the support of every Member of Parliament, come in. It is more appropriate to state that it is not really on the conditions that the IMF has imposed, but on the Sri Lankan Government’s commitment towards fulfilling those conditions that the final decision on the EFF agreement depends. This is high time for the Government to understand that its actions and inaction would have a huge impact on the IMF assistance, and to therefore take the right decisions with the involvement of independent experts, not by experts with political interests. When it comes to politics, getting the support of other parties to fulfill the IMF’s conditions where necessary is crucial. To do that, both the Government and the Opposition political parties should have the flexibility required to put the country’s interests before their own. This process involves Sri Lanka’s public sector too, which has a reputation for being a loss-making and inefficient sector and therefore requires major reforms, especially in terms of cost-cutting measures and eradicating corruption. This is also a tricky situation, as a considerable segment of the public sector including trade unions have shown negative attitudes when it comes to reforms. Taking the necessary measures to meet the IMF’s requirements in a transparent manner, which involves raising awareness among the public sector as to why reforms are necessary, is important. What is more important is that the Government understands that this is actually the biggest opportunity that the country received after the economic collapse broke out, and therefore, that it must take the right decisions regarding the public sector without succumbing to various forces seeking to hamper this process. In a context where the majority of the people are demanding that the public sector be reformed in order to stop it from suffering losses for which the people have to pay, the Government will most likely have public support.  Failure to get the fullest advantage of this opportunity by meeting the said conditions is not a mere failure in getting IMF assistance, as it will send a message to the international community, including the entities that Sri Lanka could expect further support from, that the Government is not committed to implementing the reforms necessary for the country. In that sense, successfully completing this process could also attract more support, as it would showcase the Government’s competence and authenticity with regard to economic reforms.  


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