By N Sathiya Moorthy
In a television interview last month, Foreign Minister Ali Sabry reportedly said that the Government of President Ranil Wicrkemesinghe has taken ‘substantial steps to move away from a Welfare State’ in the last 18 months. And he said it not as if it was inevitable under the nation’s economic circumstances and external compulsions like those from the IMF. It was the closest that true confessions of a kind could have been, in this country, and from a politician (who is not a ‘thoroughbred’? politician, as yet)…
Instead, Minister Sabry made it sound as if it was a great achievement. ““No one thought this could be done. We can’t keep on subsidizing State-Owned Enterprises (SOEs). Some SOEs are being privatized,” he said. “The recommendations they (IMF) have given us are good. They have asked us to be more efficient, less corrupt and increase the welfare dole outs to the most vulnerable.” News reports quoted him as saying.
Putting it differently and equally sternly at a different venue and and context was State Minister of Finance Shehan Semasinghe. He emphasised that the ongoing reforms, in alignment with the International Monetary Fund (IMF) agreement, were long-overdue. They should have been implemented decades ago. In the same vein, he reassured the people that the Government’s decisions will not negatively impact the country’s economy.
Acknowledging the additional burden placed on the people during the economic crisis, he said it is the responsibility of every individual, including policy-makers, to support and sustain the ongoing economic recovery in Sri Lanka. Expanding on the IMF agreement, Semasinghe said countries such as India and South Korea experienced economic growth after receiving support from the IMF, and was confidence that Sri Lanka too would witness a robust economy once the reforms are fully implemented.
Unacceptable model
The minister however did not explain what aspects of the Indian and/or South Korean experience was worth replicating to achieve similar results. The reasons are not far to seek, as the nation has limited scope for enhanced economic activity outside of the traditional farm sector. Manufacturing seems out of the question just now. Services sector other than tourism has not prospered. Even tourism faces tough competition from similarly-placed economies like the Maldives’.
Job-creation is at the bottom of the pile for economic recovery, that too of the high-employability with high-end pay-structure boom. It remains to be seen if the Government’s budget for 2024 will have indications and props for job-creation to ensure higher family incomes. The predecessor Rajapaksas’ regime’s over-dependence of China-funded ‘white elephant projects’ also came with a second hiccup, apart from unsustainable and unserviceable debt, otherwise described as a ‘debt-trap’.
The Chinese model did not create jobs. Or, whatever jobs, the Chinese investments in the country created, too, went to China. It was an unacceptable way for a prosperous economic model.
It’s true, all investor-nations involved in a Third World nation’s developmental projects over the past decades have been insisting on infra goods for the purpose coming from manufacturers in their countries. This by itself would deny the borrower-nation an opportunity to develop manufacturing capabilities.
Imagine, what if all the cement that went into China-funded projects was manufactured in Sri Lanka, even with imported limestone, gypsum, etc, etc. Those many jobs through the pipeline would have come to this country. Even granting that the borrower cannot dictate terms to the last detail, Sri Lanka could have ensured that on-site labour requirements were met from the local market. So should have been supervisory and accounting jobs, involving a different segment of the nation’s society.
That did not happen, and China got away with employing their on-site labour too. It is immaterial if many, or all of those labour, were Chinese prisoners, as some early reports citing western sources used to claim. It just did not matter as long as the jobs were not Sri Lankan.
As if to set matters right, the predecessor Gotabaya Rajapaksa regime did talk about skilling and re-skilling the nation’s future-generation labour, to meet an increasing demand that it had anticipated. Clearly, they had the China-funded Colombo Port City (CPC) project in mind. The Government, for the first time, declared, most jobs across the board would go to Sri Lankans (and their salary incomes accruing to local families, increasing their purchasing capacity, life-style, life-style expenses and hence the State’s revenue).
The Gota regime’s last budget also proposed huge investments on skills education and development, as if the written word would be enough to convert intention into reality, that too overnight. There is no knowing as to what happened to those ambitious projects, including the progress made by CPC through the post-Covid years and the promise to have maximum Sri Lankan employees and labour out there. Definitely, this Government at least is not talking about either.
Cost-recovery
It is in this background, that a recent observation of Krishna Srinivasan, Director of IMF’s Asia and Pacific Department, needs to be noted. The IMF does not support providing subsidies to everyone in the country, he said. Instead, there needs to be targeted support for the poor and vulnerable (alone), he told newsmen in Colombo.
“We fully sympathize and understand the hardship faced by people in terms of falling wages, cost of living increases, and so on, and we’re fully sympathetic to that. But again, the programme, we do have… prices reflecting cost-recovery.”
He explained why such an approach is important for the nation’s economy: “It’s important because otherwise the electricity sector faces losses and that becomes a public problem down the road. So, you have to have cost-recovery… And here we believe the targeted support to the poor and vulnerable is the way to go,” he said.
In a related context, Srinivasan said that efficiency in the energy sector and the electricity sector could be increased through structural reforms. “In general, SOE reforms are important in Sri Lanka,” he said in reference to ‘State-owned Enterprises’. “And that’s part of the programme we have where the IMF working at the World Bank is pushing ahead with reforms to SOEs, including in the electricity sector,” he added.
From the citizen’s point of view, it means higher tariffs, at times based on cost of power-generation and not affordability in terms of per-pricing, leave alone per-capita income of families and communities, as one divided the country into rich, poor and middle class, urban and rural, factory and farm sectors.
Expectations, aspirations
Truth to be told, the nation faces an uncertain future, particularly in terms of political stability, if it were to proceed unilaterally with IMF prescriptions as it has been doing for the past 18 months. The signs are there for everyone to see, everywhere.
Despite ‘behaving’ for a time, the labour unions, especially in the Government and SoE sectors, are restless and have been taking to the streets increasingly through the past weeks and months. The high prices that the shock-value of last year’s economic crisis and Aragalaya hopes instilled uninvited is increasingly giving way to despondency.
Whatever might have been the fate and future of IMF reforms in other countries, including India and South Korea, in the neighbourhood and other developing and under-developed nations elsewhere across the southern hemisphere especially, through decades, the Sri Lankan political experience has been different.
Such frustration in the post-Independence era, with the failure of socialism that replaced the short-stint laissez-faire western model of market capitalism, together fed left militancy, even now dreaded as ‘JVP insurgency I&II’. It can safely be argued that the ethnic strife culminating in the decades-long LTTE war was the other side of the same coin.
Today, not just memories, but also the seeds from the past still remain. Periodic opinions in the post-Aragalaya months showing a greater acceptance level for the post-militant moderate JVP and the party’s middle-aged leader, Anura Kumara Dissanayake, AKD, has a message of its own. A mass of people tilting towards centre-left politico-economic ideology should not be seen as an alarm-bell that needed to be heeded in the way urbanites have often been conditioned to view.
Instead, it is the ground reality that needed heeding and attention. Implied in it is the need for policy-makers, now and later, providing recovery-cushion for altering the IMF agenda, depending on what the economy can take in their perception, but what the domestic constituency and consumer can take, over the medium and long terms. Failure to address economic realities might have been the cause for the current scaled-up crisis.
Refusal to hear out the suffering people might cause a political crisis, which could take the economic reforms with it. This was the philosophy and approach of successive governments after the JVP insurgencies consciously opting for creating unsustainable jobs in the public sector, and extending all other forms of subsidies, too. It came to be seen exclusively as populist, poll-centric measures.
Whether the packaging or marketing was bad, but the realities that they all signalled are still there. They have re-emerged with greater vigour and vitality as the intervening Aragalaya protests especially had triggered popular hopes, expectations and aspirations beyond the unthinkable.
Balancing those aspirations with the IMF kind of ‘economic realism’ (?), if it is any, is not going to be easy for the government, now or later, after the presidential polls next year. It is going to be even more difficult for the nation that is Sri Lanka, now and later.
(The writer is a policy analyst & political commentator, based in Chennai, India. Email: sathiyam54@nsathiyamoorthy.com)
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