Sri Lanka’s new PM vows to implement brutal IMF program

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Sri Lankan President Gotabhaya Rajapakse on Thursday swore in Ranil Wickremesinghe as prime minister to enforce the International Monetary Fund (IMF) austerity dictates. Wickremesinghe took office after weeks of anti-government protests and strikes fueled by soaring inflation, severe shortages of essential food, fuel and medicine and long daily power cuts.

Sri Lankans demonstrate to demand the resignation of President Gotabaya Rajakasa and denounce the appointment of Prime Minister Ranil Wickeremesinghe in Colombo, Sri Lanka, Friday, May 13, 2022. [AP Photo/Eranga Jayawardena]

Wickremesinghe is now desperately trying to appoint a cabinet and muster enough MPs to form a parliamentary majority. He is the only parliamentarian from the United National Party (UNP). His appointment faced opposition from protest leaders and the largest opposition party, the Samagi Jana Balawegaya (SJB), which split from the UNP in 2020.

Wickremesinghe told the media that to return to a nation that enjoys three meals a day, we “need help from other countries and institutions such as the IMF”. The following day, he met with foreign envoys from India, the United States, China and Japan. Wickremesinghe, who previously served as prime minister, is known for his implementation of IMF austerity and his pro-American orientation.

Faced with a severe shortage of foreign currency, the Central Bank last month declared a temporary default on its huge external debt. The previous government, led by the president’s brother Mahinda Rajapakse, had already started talks with the IMF to secure an emergency rescue loan.

A second round of technical-level discussions with the IMF began on Monday. The IMF had earlier insisted that due to the lack of “debt sustainability” in Sri Lanka, its immediate policy initiatives were crucial to securing a bailout deal.

Wickremesinghe will have to continue these talks and implement the austerity program outlined by the IMF to obtain possible financing. This program includes:

  • A sharp reduction in the budget deficit, which fell to 12% of gross domestic product last year.
  • Further privatization or large-scale commercialization of public enterprises.
  • Increase in value added tax (VAT) and direct taxes and widening of the tax net. The objective is to double the proposed state revenues, from the current 8% to 14% of GDP.
  • Set fuel prices to reflect the market price of oil and increase water tariffs as a step towards transforming relevant public bodies into for-profit corporations for commercialization and privatization.

These measures will result in deep cuts in public sector jobs, wages and pensions, a further increase in the prices of basic necessities and the reduction of public services, including education and health care.

Underscoring the draconian nature of the IMF’s demands, former finance minister Ali Sabry told parliament on May 4 that “the country’s economy is at a critical level” and warned that “painful reforms lie ahead, regardless of be the power”.

Sabry said it will take two to three years for Sri Lanka to recover from the economic turmoil. What is happening in Sri Lanka, however, is only a stark expression of the deepening global crisis of capitalism intensified by the COVID-19 pandemic and now dramatically aggravated by the proxy war between the United States. United and NATO against Russia in Ukraine.

Sabry said the country’s usable foreign exchange reserves are less than $50 million, which is not even enough for daily imports. He further indicated that the government’s economic measures and austerity budget must follow “the new realities on the ground”.

Wickremesinghe’s statement that he wanted to create the conditions for people to eat three meals a day reflects the depth of the social crisis in Sri Lanka. Many workers are unable to provide food for themselves and their families, cannot afford to use public transport and cannot obtain the medicines they need.

The imposition of IMF measures will not alleviate this immense social disaster but will only intensify it.

A Guardian May 9 commentary, titled “Sri Lanka is the first domino to fall in the face of a global debt crisis,” quoted World Bank President David Malpass, who spoke of the deep crisis facing countries. in development. “They face sudden increases in energy, fertilizer and food prices, and the likelihood of interest rate increases. Everyone hits them hard.

Wickremesinghe has been insisting for months that Sri Lanka has no alternative but to beg for help from the IMF. Speaking to university students in early March, he said: ‘When the economy collapsed in 1977, we went to the International Monetary Fund and asked for their help in creating an open economy. It’s only after [IMF] help was received that other countries helped.

The reference to 1977 is significant. The UNP government of President JR Jayawardene was one of the first in the world to turn to the ruthless market-opening policies adopted by the IMF and international finance capital. He opened the door for foreign investors to exploit cheap Sri Lankan labor and started the process of corporatization and privatization of state-owned enterprises. He presided over the destruction of tens of thousands of jobs and the reduction of social subsidies.

These policies generated widespread opposition in the working class which the Jayawardene government ruthlessly suppressed. In 1980, he crushed a public sector general strike by laying off 100,000 employees. As class tensions grew, the UNP used anti-Tamil chauvinism to divide the working class, sparking the protracted communal war against the Tamil minority that killed hundreds of thousands and devastated the island before its bloody conclusion in 2009.

Wickremesinghe was a minister in the Jayawardene government and fully supported his reactionary policies. Forty years later, he was appointed Prime Minister to trigger the IMF program that will devastate the lives of working people in order to defend the profits of big business, foreign investors and creditors. He will not hesitate to use police state measures against any opposition.

Whether or not Wickremesinghe is able to form a government, the entire political establishment, including the opposition Samagi Jana Balawegaya (SJB) and the Janatha Vimukthi Peramuna (JVP), is committed to this anti-worker agenda.

The SJB, like the UNP, has repeatedly called on President Rajapakse to engage in talks with the IMF. The JVP entered the coalition of President Chandrika Kumaratunga in 2004 and its ministers helped implement the IMF program. Both parties have offered to form an interim government, pending early elections.

In opposition to the IMF’s austerity program, the Socialist Equality Party (SEP) has proposed a socialist alternative that puts workers’ basic social needs ahead of big business profits. We have requested the following urgent measures:

  • Repudiate all foreign borrowings! Reject the austerity demands of the IMF and World Bank representing international banks and financial institutions!
  • Put the production and distribution of all essential goods and other critical resources under the democratic control of the working class! Nationalize the banks, the big companies, the big domains and other big economic centers under workers’ control!

Measures must be taken to defend the standard of living of workers and the poor by indexing salaries monthly to the cost of living and by canceling all the debts of poor farmers and self-employed people.

To fight for this perspective, the SEP urges workers to create action committees, independent of unions and capitalist parties, in factories, workplaces, plantations and neighborhoods across the island. These action committees can form the basis of the political struggle of a workers’ and peasants’ government to implement a socialist program.

The SEP is ready to provide political assistance to workers who wish to set up such action committees.

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