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Thursday, February 22, 2024

April 25th, IMF package and the Opposition: Resist and renegotiate

BY Dr. Dayan Jayatilleka.

President Ranil Wickremesinghe maintains a much faster pace than his opponents, though the pace may be expended in the wrong direction. While his opponents from centre-right to far left showed no sign of public activity during the long Avurudu weekend and its aftermath, the President was making promises (virtually) to international players convening in Washington DC while pushing a snap parliamentary vote on the IMF package (and possibly the ATA). The Opposition displays only low-intensity signs of life in the face of Ranil’s blitzkrieg.

  • A debt restructuring group on Sri Lanka, consisting of important global players – India, Japan, France–met in Washington DC on the sidelines of the Spring sessions of the IMF/WB.
  • President Wickremesinghe addressed it and signalled his intentions, including giving legal lock-in to his agreement with the IMF. The latter is unprecedented and would entrap the country: “Wickremesinghe further said he would present Sri Lanka’s agreement with the International Monetary Fund (IMF) to Parliament for approval and bring in legislation to ensure its implementation.”
  • A committee was set up by the Finance Ministers of India, Japan, France and Sri Lankan officials. China wasn’t part of the meeting though it should have been and Sri Lanka should have held off until it was.
  • The private creditors have presented a plan which is as yet opaque: “A committee of Sri Lanka’s international private creditors sent its first debt rework proposal to the country’s authorities regarding over $ 12 billion in bonds outstanding, according to three sources with direct knowledge of the matter… It is a first formal step to engage with the country’s authorities, said one of the people, who asked not to be named because discussions are private, Channel News Asia reported…Representatives for the government did not respond to a request for comment. A spokesperson representing the creditor committee declined to comment. The group of about 30 creditors includes global investment companies Amundi Asset Management, BlackRock, HBK Capital Management and T. Rowe Price Associates. Bondholders and government officials met in Washington this week, with legal and financial advisers for both sides present, said two sources.”

No one has said the Bondholders’ proposal will be presented to Parliament or when that will be. Nobody in the somnolent, parochially preoccupied Opposition has demanded that it be. Nobody has noted that most of the $ 12 billion was incurred under Prime Minister Ranil Wickremesinghe in 2015-2019. The fact that the main Opposition’s economists were on Ranil’s economic team when the bonds were purchased, doubtless explains the silence.

Recall also that the SJB’s chief economist Dr. Harsha de Silva was also the first to call (stridently) for domestic debt restructuring, an undertaking the consequences of which former Finance Minister Prof. G.L. Peiris has sounded the fire-alarm on.

Burning SL’s China card 

President Wickremesinghe’s official letter to the creditors in March this year commits to “equitable and comparable” treatment of creditors. He writes that:

“…We also understand and acknowledge that we must ensure that appropriate safeguards are in place to ensure equitable burden sharing and comparability of treatment… There are commitments that we can make to those of you willing to take action ahead of the others.

We commit to communicate transparently with all of you on any debt treatment terms that are agreed with any creditor or group of creditors, before being formalized. …We commit to report regularly on our indebtedness, ensuring no financial liabilities incurred by the country are undisclosed.

…we commit not to resume debt service to any creditor unless that creditor agrees on a comprehensive debt treatment in line with IMF-supported program parameters and the comparability of treatment principle.

…We reiterate our commitment to a comparable treatment of all our external creditors, with a view to ensuring all-round equitable burden sharing for all restructured debts. To that end, we will not conclude debt treatment agreements with any official bilateral creditor or any commercial creditor or any group of such creditors on terms more favourable than those agreed under any multilateral platform put forward by our official bilateral creditors. Offering a debt treatment outside of the perimeter set by the debt targets under the IMF program would risk making Sri Lanka’s debt unsustainable again. We…will not make any side arrangements with any creditor aimed at reducing the debt treatment impact on that creditor….”

So, President Wickremesinghe has pledged that we will not cut a deal, however favourable it will be to Sri Lanka, with any single creditor or group of creditors. Thus:

  • He foreswears giving our country any elbow-room through skilful economic diplomacy and diversification, unless the creditor concerned has agreed to a common plan endorsed by the IMF and involving all creditors.
  • He relinquishes Sri Lanka’s China card, precisely when most of the global South pins its hopes on the countervailing capacity China brings to the table.
  • He throws away the last shred of Sri Lanka’s sovereignty in the management of our debt crisis.

It is the economic equivalent of Ranil’s Ceasefire Agreement (CFA) with Prabhakaran. The country had to bust out of that, firstly by electing someone likely to do so. In 2024/5 we shall have to re-load that resolve.

Ranil’s March 2023 letter also impinges on the strategic economic interests of our staunch friend, China.

  • The phraseology of the President’s letter indicates a gambit to get China to agree with a formula that all creditors and the IMF agree upon. Why should China carry an equitable rather than proportional share of debt-restructuring, proportionate to the terms of the loans and repayment? It is not in China’s interest because it may trigger a chain reaction from its debtors globally, which China would be unwise to accede to except on a bilateral basis, given the current dynamics of China’s economy.
  • A bigger game is underway: chipping away at China’s sovereign economic decision-making while also trying to lock it into multilateral platforms dominated by coalitions which are hardly favourable to China.
  • This is also an attempt to divide China from Russia by enticing China deeper into a multilateral net while the collective West shuts Russia out of the world economy.

25 April to 2025

The vote on 25 April is not a vote for or against a process with the IMF, still less a vote on the IMF itself. It is a vote on this specific agreement that an unelected President and his bureaucrats have arrived at, with no parliamentary transparency still less national consultation and consensus, with the IMF.  It should be voted against.

Ranil Wickremesinghe wants the Opposition to vote with him while he deprives it of a long overdue, Supreme Court mandated local government election and his minions talk of the desirability of an uncontested Presidential run next year.

The Ranil regime intends to present the new Anti-Terrorism Act, deadly to fundamental democratic freedoms, roughly around the time that the IMF package comes up for a vote. The incredible arrogance of the unelected President is such that he doesn’t see the need for any trade-off, i.e., elections for endorsement.

If as President Wickremesinghe hopes, the Opposition goes along with the Government at the parliamentary vote of 25 April, it locks-in the country as a whole. Worse, if Ranil proceeds with his proclaimed plan to give legislative form and status to his agreement with the IMF, it formally cages the country and hands the cage and its inhabitants over to external players.

This would leave only one path open to Sri Lankans who wish to reassert popular sovereignty over the island’s direction and destiny. That would be to vote at one or both national elections –Presidential and parliamentary—for those who do NOT vote ‘Yes’ on 25 April in favour of the RW-IMF agreement.

  • Any Opposition vote in support of the Government on 25 April would mean that a sector of the Opposition is willing to prop up the regime which is itself unwilling to abandon its unprecedentedly repressive ATA or commit to the constitutionally-mandated democratic electoral calendar.
  • It would also signal that if a party with a significant representation of a YES vote in its ranks forms the government, it would continue the Ranil-IMF program without any significant re-set.
  • An abstention or absenteeism instead of a NO vote on the part of any Opposition formation would mean that such a formation would not resist the RW-IMF program and renegotiate the current arrangement when in office.

The proof of the pudding being in the eating, what political parties and parliamentary politicians do or not do on 25 April “cannot be unseen” once voting is done. Anyone who fails to vote against the Ranil-IMF package basically agrees with it or has no alternative to it and is morally culpable for every savage cutback and casualty that takes place as a result of it.

IMF austerity packages don’t start painfully and then get better. They start painfully and keep getting worse in widening circles and a downward spiral—unless purposively renegotiated. 

As the pain of austerity and structural adjustment increases, the needle of public opinion will veer in election years 2024-2025 towards whichever personalities, party or parties vote against the RW-IMF package –and its future formalisation as legislation.

The 25 April vote will reveal which party and politicians are willing, and which are unwilling, to stand up for the people, against the moral atrocity of deliberate contraction of the economy and the majority of citizens having to pay the price of the debt crisis that the Rajapaksas and Ranil Wickremesinghe created and the super-rich profited from over the last 15 years. While I remain staunchly convinced that Sajith Premadasa is the country’s best choice as president next year, the case for the SJB as sole governing party or the SJB Alliance as the only governing coalition is increasingly less obvious.

In 2024 the public will need a post-neoliberal economic policy, not a continuation of the neoliberal package. If the 25 April parliamentary vote proves that the SJB’s pro-Ranil economists are going to continue President Wickremesinghe’s policies under an SJB administration, there are three scenarios which are far better from the standpoint of the national and public interest:

  • A Sajith Presidency with a progressive-centrist governing bloc i.e., SJB plus FPC (the GL-Dullas-led group) rather than an SJB/SJB Alliance Cabinet.
  • A co-habitation outcome of a Sajith Premadasa presidency with a leftwing (JVP-NPP led) government. Sajith as President, AKD as PM.
  • A Premadasa presidency, an SJB-FPC coalition government, and a strong JVP-NPP Opposition which can counterbalance neoliberal economic butchery.

Looking Left 

If the bipartisan neoliberal ‘pharmacists’ keep dumping “bitter medicine” on the people, the sovereign people may decide to administer some bitter medicine of their own, and vote en masse for the Left as they have done in two cycles (‘Pink Tide 1.0 and 2.0’) over a quarter century across Latin America.

There is a transparent reason as to why the Lankan Left is not fulfilling its potential in a situation increasingly tailor-made for it. That is because the JVP-NPP is trying to do on its own, what no one else has done successfully.

If presidential election 2024 is sought to be postponed on the pretext that political continuity is needed for the four-year IMF program, then President Wickremesinghe will learn the lesson administered to Prime Minister Sirimavo Bandaranaike by my generation of university students and railway workers in 1976: in a designated election year, regimes implode, authority crumbles.

In 1978, as a 21-year-old undergraduate at Peradeniya, I wrote a booklet in Sinhala which was published by an outfit which the highly literate and sophisticated Marxist Dr. Newton Gunasinghe belonged to. The booklet was called ‘Experiences of the Latin American Revolution’ (“Lathin Americaanu Viplavayey Athdakeem”). In it I underscored the causal relationship between left disunity and failure, and conversely, left unity and success. The next year (1979), Nicaragua’s Sandinistas reunified by Fidel Castro after a three-way split following a military defeat, won the first victory since the Cuban Revolution 20 years before.

That lesson has been reinforced over the past decades. Pink Tides 1.0 and 2.0 in Latin America have been possible only with the widest platforms of political parties led by the unified Left.

In Brazil “In the 2002 elections [Lula’s first victory] Lula’s candidacy in the second round was supported by a broad range of parties, from the small and neo-conservative Partido Liberal (Liberal Party, PL) to practically the whole spectrum of the Left.” (‘The New Latin American Left: Utopia Reborn’, Pluto Press, UK, p46.)

Colombia’s current President Gustavo Petro, a former M-19 urban guerrilla and Senator, spent years in the hard political labour of unifying progressives on an evolving wide platform which eventually won him the highest office.

The victory of Mexico’s Andres Manuel Lopez Obrador (‘AMLO’), which initiated Pink Tide 2.0, was possible also because of the character of his party the PRD. “… The PRD emerged as a fusion of the communist and socialist left grouped together in the PMS, along with the Democratic Current that split off from the PRI.” (Ibid, p205)

The strategic political model for progressives in Latin America has been Uruguay’s Broad Front (Frente Amplio, FA) founded chiefly by the Tupamaros-MLN (of which Mujica was a leader) in 1971 and which remains the core of Uruguay’s victorious left coalitions to this day.

“The FA was conceived as a permanent front that would unite all the competing ‘families’ of the Left under a common programmatic agenda…In the first post-authoritarian elections of 1984, the Broad Front and the two traditional parties [the Communist Party and the Socialist Party] occupied almost the same…niches as in 1971.” (Ibid, p 100).

With its international connections, the Communist Party of Sri Lanka (CPSL) could and should act as mediator/facilitator of a Left Bloc.

As the pain of austerity and structural adjustment increases, the needle of public opinion will veer in election years 2024-2025 towards whichever personalities, party or parties vote against the RW-IMF package –and its future formalisation as legislation

1956 is coming 

A ‘UNP plus minorities bloc’ inevitably generates and enthrones reactive ethno-populism. Sir John’s Delft speech ensured 1956 and Sinhala Only. Ranil’s CFA yielded MR 2005. Mangala’s minoritarian strategy of 2015 spawned GR 2019.

“Whilst stating that he together with MP Rauff Hakeem initiated an effort to bring UNP and SJB under one umbrella, MP Mano Ganesan said they had to abandon the idea since the SJB leadership did not respond…”

Had the ‘umbrella’ project succeeded, the socioeconomically polarising Wickremesinghe-IMF program would have been accompanied by political-ideological Right/Left polarisation. Sajith Premadasa’s candidacy isn’t just the SJB’s best shot, it is the democratic system’s last and only shot at reconstructing an ideological centre-space.

If presidential election 2024 is sought to be postponed on the pretext that political continuity is needed for the four-year IMF program, then President Wickremesinghe will learn the lesson administered to Prime Minister Sirimavo Bandaranaike by my generation of university students and railway workers in 1976: in a designated election year, regimes implode, authority crumbles.

Mangala Samaraweera accurately (albeit approvingly) bracketed Ranil Wickremesinghe with Sir John Kotelawala. Logically this renders another 1956 inevitable. The inevitably incoming 1956 should be fused with 1957 (the Bandaranaike-Chelvanayakam Pact); 1956 as it would have been had it ridden on the spirit of Hartal 1953 rather than the Buddhist Commission report 1955.

A peaceful 1956 requires an election on schedule next year. No election and it will be forced to become a ‘1956 plus T-56’ as in the late 1980s—though this time it won’t be the JVP or FSP but the large military that would be the armed radical-nationalist vanguard.

(First published in Daily FT)


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