By Sanath Nanayakkare
Dr. Ganeshan Wignaraja, a non-resident senior fellow at the Institute of South Asia Studies at the National University of Singapore recently gave three reasons why monetary support is not forthcoming from many countries that can extend support to Sri Lanka.
He gave these reasons at a recent webinar titled’ Confronting the Current Foreign Exchange Crisis in Sri Lanka –Lessons from Global Experience’, hosted by the Central Bank of Sri Lanka.
” It could be due to several reasons. First, something like 60% of the poorest countries in the world is under debt distress although they have not quite defaulted.”
“Second, we are at a recession risk globally and the countries we might want support from, are at some sort of risk. So they are naturally concerned about providing assistance to others as they are preoccupied and looking inward. Multilateralism is also under stress in this context.”
“The third reason is; there is an argument made in the eyes of some countries that Sri Lanka’s debt default is seen as a home-grown crisis due to poor macroeconomic management and governance. We hear a lot about why other countries’ taxpayer dollars should be used to support a failed economy like Sri Lanka’s. This is a query thrown at me by people from other countries,” he said.
The following are some select remarks made by him during the webinar.
“Sri Lanka would need US$ 20-25 billion over the next three years from the IMF, multilateral agencies and other friendly countries to put its economy on a decent footing and get growth going, “And remember, that’s about a quarter of Sri Lanka’s GDP. The country needs that kind of money if it really is going to go forward.”
“Along with the assistance from the IMF, bridging finance is also needed urgently from India, China and Western countries not only to provide basic needs for the people such as fuel, food and medicine but also to help stabilise the economy. In this context, Sri Lanka needs to do four things.”
“First, we need to show that we are serious about fixing our economy and convince these countries that we are worthy to gain their confidence. It is important that the IMF programme is implemented in a transparent and credible manner. Sri Lanka has had 16 IMF programmes. I believe that something like half of them was not either properly implemented or perhaps abandoned. I think this time around we will be under the microscope, so we need to implement the programme properly.”
“Second, we need to build a consensus on this IMF programme.There are still people out there that go around saying,” Forget the IMF; we can eat ‘Bathalakola’. That’s something which is not going to cut the mustard for Sri Lanka in the current circumstances. I think that sort of people have to be called out and we have to publicize the implementation of the IMF programme.”
“Third; we have to ensure that any foreign aid we get is fairly distributed to all Sri Lankans in all provinces equitably. It will also have to be ensured that there will be crackdown on any corruption in allocating this aid. We will have to be ‘on the money’; therefore, anti-corruption measures will need to be very strong.”
“Fourth; we need to be serious on our foreign policy without dillydallying. We have to pursue a very strict non-aligned economic and foreign policy. If Sri Lanka does these four, it will have a fair sporting chance to get a decent score on the board and turn Sri Lanka around with trade, investment and foreign assistance,” Dr. Wignaraja said.
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