Economy on a steady climb :

Sri Lanka leads where Europe lags

It was in interesting concurrence that the IMF announced its satisfaction with the state of the Sri Lankan economy almost the same day that the Government presented its budget for 2010.

The statement by the Acting Chair of the IMF Naouki Shinohara that “overall economic conditions in Sri Lanka are improving and the economy is likely to show strong growth this year,” flew in the face of many who were chanting Jeremiads about Sri Lanka not getting their next tranche from the IMF, as the economy was in deep trouble.

The IMF certainly had a different view of economic growth and the progress of fiscal and budgetary reform in the country. “Inflation remains subdued and average inflation for the year as a whole is expected to remain in the single digits. External balances are strong, remittance inflows continue at a high rate, tourism prospects are strengthening rapidly and gross reserves are at comfortable levels,” was how the Executive Board of the IMF saw Sri Lanka. This was to the obvious consternation of so-called economic pundits in the Opposition determined to show that the constant reports of progress of the economy coming from different sources were only the result of spin carried out by the Central Bank.

Humanitarian needs

The chorus of baseless criticism about alleged manipulation of facts and figures by the Central Bank was such that when the Acting Finance Minister Dr Sarath Amunugama was making the Budget Speech, there were some who were shouting from the opposite benches that all he was doing was read a Central Bank report. The IMF was also of the view that: ‘Monetary conditions are stable. Interest rates have declined and credit growth has shown signs of recovering. The Central Bank’s policy stance remains appropriate, although there may be need to tighten it if credit and inflationary pressures pick up sharply and it has intervened in the foreign exchange market to rebuild reserves, allowed the exchange rate to trade within a recently widened, although still narrow band’.

It was also the IMF’s view that the 2010 budget would allow for much needed reconstruction-related infrastructure investment, while protecting society’s most vulnerable and addressing the humanitarian needs of those adversely affected by the conflict. Such a report of good economic health from the IMF on the management of their economies is hardly likely to come today to many of the ‘developed’ countries of Europe, struggling with major crises of debt and default.

The situation is worsened in those parts by the failure of the G8 and G20, at their summit meetings in Canada earlier this week, to agree on a formula to get over the tide of distress that has struck their economies.

On the one hand there was the US supported by India, calling for greater public spending to overcome the current crisis, while Germany and France took the lead in Europe urging greater curbs in expenditure.

Most surprisingly, the UNP was protesting about the Government working out its economic policies in keeping with the dictates of the IMF.

The charge seemed so ridiculous when the Leader of the UNP Ranil Wickremesinghe, who raised objections to the absence of Minister Amunugama from the Chamber during a part of the second day of the Budget Debate, did not accept that he was following the proceedings elsewhere on CCTV, but insisted that he was in contact with the IMF on the next steps to be carried out. This is hardly the stuff to come from a political party that has been known throughout its past to bend more than backwards to please the World Bank, IMF and Western powers in the formulation and carrying out of economic policy.

GSP+ facility

It is hardly the criticism expected from a party so much dictated to by the IMF and World Bank in its brief period in office from December 2001 to April 2004. The period that saw a complete freeze on employment in the pubic service, as well as the stopping of all wage increases.

This was also the time when under tutelage of Norway, the UNP led Government signed the infamous Ceasefire Agreement with the LTTE, bringing the country to the verge of separation and the most dangerous period in the post-independence history of Sri Lanka.

This was resolved by President Rajapaksa’s determined pursuit of the military defeat of the LTTE. An operation which the UNP remained steadfastly opposed to, even after its proven success.

The allegations of a sell-out to the IMF made by the UNP and JVP, with Sarath Fonseka now thinking of his own brand of politics falling in line, was best answered by National Economic Development Minister Basil Rajapaksa. He reminded the House that the government had not agreed to any of the conditions laid down by the European Union for extension of the GSP+ facility.

It was a strong statement of defense of the sovereignty of Sri Lanka and its refusal to bow down to any foreign pressures and influences, even from donors, on matters that are of vital interest to the people of Sri Lanka and their inalienable rights.

The Government’s firm refusal to agree to the conditions laid down by the EU to continue GSP + has upheld the sovereignty of the people and refused to allow political manipulation by certain Western powers to impose political conditions on what is clearly a trade and commerce agreement. This has also placed the Opposition in a quandary, by their inability to be equally firm on behalf of the rights and self-respect of the Sri Lankan nation.

Envious hollering at the recognition of good economic performance by the IMF is of little consequence, when the results of this performance are clearly seen.

For those in the UNP to whom the rise in the Stock Market is Holy Grail of economic success, there are the daily rising indices of the Colombo Stock Exchange to put their fears of subservience to the IMF to rest.