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Friday, June 14, 2024

Sri Lanka: Trade unions accuse IMF of supporting anti-people reforms

Image of TU protest IMF-backed EPF robbery from  Social Media. 
 

  • Says IMF has chosen to ignore protests of the people against harmful reforms 
  • Claims dismantling of social security policies has sped up with decision to subject EPF/ETF to DDR
  • Accuses IMF and World Bank of sanctioning attack on social security of workers in SL 

A collective of 80 trade unions yesterday wrote to the International Monetary Fund (IMF) to express their concerns about the ongoing Domestic Debt Restructuring process affecting the most vulnerable and marginalised citizens of the country.

The trade unions said while people began to feel the brunt of the IMF’s Extended Fund Facility agreement after the Government commenced reforming economic and social policies, the dismantling social security policies has gained speed with the proposal to subject the Employees Provident Fund (EPF) and Employees Trust Fund (ETF) to domestic debt restructuring.

“The IMF and the World Bank have sanctioned this attack on the social security of Sri Lankan working people who are still reeling from the devastating socio-economic impact of the global COVID-19 crisis,” the group alleged.

The collective listed out the many tariff increases in recent times imposed by the Government along with the hike of indirect taxes and job losses.

The Government has decided that the burden of reducing GDP’s debt-serving requirement by 0.5% should be borne by the superannuation funds, including the Employees Provident Fund (EPF) and the Employees Trust Fund (ETF), which is the only savings available to a majority of working people. We want to highlight that many contributors to the EPF and ETF earn wages below even the lowered taxable income threshold, yet their pension funds pay the highest corporate taxes in Sri Lanka,” they noted.

“Subjecting their pension funds to DDR will diminish the returns to wage-earners and deplete the fund to half its current value. Being witnesses to the innumerable disasters that IMF and World Bank reforms have had on the working people in Sri Lanka, we urge attention to the catastrophic impact that DDR would have on the retirement benefits and living standards of low-wage-earning working people,” they added.

The group said the IMF has chosen to ignore the people’s protests despite IMF-backed reforms that have disintegrated Sri Lankan society.

“We are outraged about the economic and social crimes the Sri Lankan Government and international creditors are committing against our country’s working people and poor. You are aiding and abetting these crimes. Therefore, we now hold you responsible for the calamity you have caused us,” they said.

Following is the full text of the letter titled “Domestic Debt Restructuring in Sri Lanka: Forcing the poor to pay the debt of the rich” sent to the members of the Executive Board of the International Monetary Fund.

The IMF program in Sri Lanka is devastating the common people of Sri Lanka, especially the most vulnerable and marginalised among them. Working people began to feel the brunt of the IMF’s Extended Fund Facility agreement with the illegitimate Government of Sri Lanka when the regime of unelected President Ranil Wickremesinghe commenced radically reforming economic and social policies in Sri Lanka, particularly energy, and social security, to qualify for new loans from the IMF and World Bank. Dismantling social security policies has gained speed with the proposal to subject the Employees Provident Fund (EPF) and Employees Trust Fund (ETF), the only savings of the working people in Sri Lanka, to domestic debt restructuring. Whereas the immediate priority for debt sustainability is to write down Sri Lanka’s external debt, Sri Lanka’s Finance Minister and the Central Bank of Sri Lanka are engaged in domestic debt restructuring to convince foreign private creditors that they are being equally treated with domestic creditors. The IMF and the World Bank have sanctioned this attack on the social security of Sri Lankan working people who are still reeling from the devastating socio-economic impact of the global COVID-19 crisis.

Abiding by the recommendations outlined in the IMF’s Staff Report, the Government of Sri Lanka increased electricity tariffs by 165% between June 2022 and February 2023. The Government reasoned these reforms, as mandated by the IMF, to achieve market pricing of the energy sector in Sri Lanka, reduce the debt of the Ceylon Electricity Board, and prepare the way for the entry of private sector players. In addition to lowering the direct income tax threshold to rob lower middle-class households of more of their monthly pay packet, regressive indirect taxes (VAT) almost doubled to 15% between June and September 2022. As a result, the poorer sections of the population shoulder the burden of taxation today. Food inflation shot up to almost 95% in September 2022. With headline inflation at 57% at the end of last year, real wages have fallen by nearly 50%. The World Bank estimates that 500,000 jobs have been lost as of 2022. Against this backdrop, the Government has replaced the Samurdhi social protection scheme with Aswasuma, a new cash transfer scheme to reduce the number of people eligible for public assistance.

In this context of heightened precarity and rising unemployment, a Government too scared to hold free and fair elections is embarking on domestic debt restructuring (DDR). The Government has decided that the burden of reducing GDP’s debt-serving requirement by 0.5% should be borne by the superannuation funds, including the Employees Provident Fund (EPF) and the Employees Trust Fund (ETF), which is the only savings available to a majority of working people. We want to highlight that many contributors to the EPF and ETF earn wages below even the lowered taxable income threshold, yet their pension funds pay the highest corporate taxes in Sri Lanka. Subjecting their pension funds to DDR will diminish the returns to wage-earners and deplete the fund to half its current value. Being witnesses to the innumerable disasters that IMF and World Bank reforms have had on the working people in Sri Lanka, we urge attention to the catastrophic impact that DDR would have on the retirement benefits and living standards of low-wage-earning working people.

Similar to the previous instances of reforms, the Government claims that DDR is a precondition to external debt restructuring, particularly with private creditors holding the lion’s share of Sri Lanka’s foreign debt. The Government states that the private creditors demanded equal treatment if they were to take a 30% haircut. Once again, we note the obvious to the arbiters of the global financial and economic system. The dollar debt is not comparable to the rupee debt. Low-income earners’ pension funds are not comparable to the biggest speculators in the capital markets. Dollar debt is supposed to have higher yields and, therefore, higher risks. The rupee debt has a lower yield, so the risk is supposed to be lower. However, the international private bondholders backed by the IMF and the World Bank have conveniently passed the risks of their odious debt to the Sri Lankan people while keeping the gains to themselves.

Even though the people of Sri Lanka are protesting against unfair reforms, including the depletion of pension funds, the IMF has chosen to ignore them and claim ‘people’s buy-in’ of the economic reform package. IMF-backed reforms have disintegrated Sri Lankan society. Malnutrition has increased. The impact these years will have on the health of our children is unimaginable. Houses do not have electricity or running water. School dropouts have increased. The streets are overflowing with homeless people. Drug usage has increased. The mental health crisis is reaching a tipping point. There is a mass exodus of skilled people from Sri Lanka because Sri Lanka is no longer a country where people can scrape even a bare minimum living.

Your debt restructuring program is crippling working people in Sri Lanka who run our economy and create value in our society. The economic reforms you have imposed on us, without reflecting on the negative consequences of the previous reforms enacted over 16 IMF interventions, are crushing our economy. Denied of skilled working people, our biggest strength, you are simply nurturing a financial system that keeps ensnaring more countries like Sri Lanka and more people like the masses of Sri Lanka.

We are outraged about the economic and social crimes the Sri Lankan Government and international creditors are committing against our country’s working people and poor. You are aiding and abetting these crimes. Therefore, we now hold you responsible for the calamity you have caused us.

A Collective of Trade Unions and Civil Society Organisations in Sri Lanka

Signatories

1.Affected Womens Forum (AWF)

2.All Ceylon Development Officers Union

3.All Employees’ Union of Information and Telecommunication

4.All Island Samurdhi Development Officers Society

5. Ceylon Bank Employees’ Union

6. Ceylon Teachers Union (CTU)

7. Commercial and Industrial Workers Union (CIWU)

8. Community Welfare and Development Fund (CWDF)

9. Customer Care and Parallel Services Officers Union

10. Dabindu Collective Union

11. Eastern Social Development Foundation (ESDF)

12. Equal Ground Sri Lanka

13. Families of the Disappeared (FoD)

14. Free Trade Union Center

15. Free Women

16. Health Workers Centre

17. Hill Country Mass Organisation For Social Justice

18. Human and Democratic Rights in Sri Lanka

19.Human Elevation Organisation (HEO)

20. Human Rights Office (HRO)

21. Institute of Social Development (ISD)

22. Insurance General Employees Union

23. Islamic Women’s Association for Research and Empowerment (IWARE)

24. Janawaboda Kendraya

25. Joint Development Officers Centre

26. Joint Engineering Corporation Employees Union

27. Joint Health Workers’ Union

28. Joint Port Workers Union

29. Joint Railway Employees Union

30. Joint Teachers Service Union

31. Joint Unemployed Graduates Association

32. Joint Water Supply Workers Union

33. Journalists for Democracy in Sri Lanka (JDS)

34. Lanka Independent Teacher Services Union

35. Law & Society Trust (LST)

36.Lawyers Collective Sri Lanka

37.Liberation Movement

38.Mannar Women’s Development Federation (MWDT)

39.Mass Movement for Social Justice (MMSJ), Colombo

40.Medical Professionals for System Change

41.Movement for Land and Agricultural Reform (MONLAR)

42.Movement for Plantation Peoples’ Land Rights (MPPLR)

43.Muslim Women Development Trust (MWDT)

44.National Fisheries Solidarity Movement (NAFSO)

45.Neo-Liberal Training Initiative (NLTI)

46.Northern Province Development Officers Union

47.Northern Province Government Drivers Union

48.Northern Province Livestock Instructors’ Union

49.Northern Province Rural Development Officers Union

50.Northern Province Social Service Officers Union

51.North South Solidarity

52.People’s Alliance for Right to Land (PARL)

53.Praja Abhilasha Network

54.Private Worker Centre

55.Public Management Assistant Service Union

56.Revolutionary Existence for Human Development Union

57.Rural Development Foundation

58.Shramabhimaani Kendraya

59.SLT Administration Officers Union

60.SLT Information and Communication Technology Professionals Union

61.Social Institute for Development of Plantation Sector (SIDPS)

62.Sri Lanka All Telecommunication Employees Union

63.Sri Lanka Postal Services and Telecom Union

64.Sri Lanka Telecom Drivers Union

65.Sri Lanka Telecom Employees’ Union

66.Stand Up Workers Union

67.Suriya Women Development Centre, Batticaloa

68.Telecommunication Engineering Diplomats’ Association

69.Textile, Garment and Clothing Workers Union (TGCWU)

70.The Grassrooted Trust

71.United Federation of Labor (UFL)

72.University Employees Union, University of Jaffna

73.Upcountry Civil Society Collective (UCSC)

74.Vallamai Movement for Social Change, Jaffna

75.Viluthu Organisation

76.Women’s Action Network (WAN)

77.Women’s Committee of UNI Sri Lanka Affiliates Council

78.Women’s Liberation Thought Organisation

79.Women for Justice and Peace in Sri Lanka

80.Workers Struggle Centre

81.Young Journalists’ Association (YJA)

82.Young Lawyers Association (YLA) Sri Lanka

 

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