- International community hails changes
- Dramatic transformation of economy in two years
- No alternative to current economic reforms
The International Monetary Fund (IMF) has approved the second review of the comprehensive loan program introduced to Sri Lanka and steps have been taken to release the third loan tranche amounting to US$ 336 million.
Following the collapse of Sri Lanka’s economy in 2022, the country reached a stable level due to the economic and financial reforms implemented by the Government led by President Ranil Wickremesinghe, said Minister of State for Finance Shehan Semasinghe in an interview with the Sunday Observer.
Excerpts from the interview
Q: The third loan instalment related to the comprehensive loan program implemented by the IMF for Sri Lanka has also been released. What measures has the Government taken for that?
A: The Government was confident that the third instalment would be released. We received the first instalment of the IMF in March 2023 and the second in December 2023. By 2024, as we expected, this premium was released according to the Staff Level Agreement we reached in March 2023. As we hoped, in the journey of taking Sri Lanka’s economy in a new dimension and transform it into a country that won’t face an economic crisis again, the third instalment of the IMF has been released and the assurance of the success of building our country’s economy both internationally and domestically has been granted.
Q: What are the economic reforms implemented by the Government so far to receive loan instalments from the IMF?
A: One of the accusations levelled at the Government from Opposition groups is that the IMF is running the country today. It was in March 2022 that we as a country requested the support of the IMF. Basically, the IMF has commended measures taken by the President and the Government to build Sri Lanka’s economy and implement the reform program. We believe that the President, the people and the Government had to make a lot of sacrifices to save the country from the collapse of 2022 and move to 2024. At that time, we clearly said that this reform process will be difficult in the short-term but will bring good results in the medium and long-term. After the initial difficult period, we have now reached the stage of getting results.
Q: It is alleged that the IMF is exerting various pressures on Sri Lanka in this program. What is the truth?
A: The IMF has never forced any reforms or programs on Sri Lanka. When we asked for help they showed us the way to rebuild the collapsed economy and move towards an economy that will not collapse again. Action to be taken has been indicated there. Decisions regarding public financial management, structural changes, moving towards a restructuring for debt management, measures to be taken as a Government to eliminate identified weaknesses to create good governance have been pointed out.
Then the Government had to make a decision whether to go on this path and make Sri Lanka a happy country just like the people wanted. Otherwise we would live in a country where inflation would not stop at 70 percent in 2022 and would continue to rise. We made the right decision for the people. Today, it is being proven numerically that the decision taken is correct. In particular, the approval of this instalment will be a great help for us to be more economically stable and strong.
We have nothing to hide. We have indicated the measures we are taking. The IMF has given facts regarding this situation. They have appreciated the progress we have made. This is not a simple task. This is not as easy as making baseless accusations. A large number of people said that this is difficult to do, that it cannot be done, and that this should not be done. The Government faced all those challenges. Look at the threats to the President and the Government. But if those decisions were not taken, we would not be left to talk about the country today. Therefore, we have completed the matters that need to be completed.
Q: Even though the IMF has given approval for the reviews related to the release of loan instalments, some Opposition members are making various accusations?
A: We are currently in the final stages of the debt restructuring program. We have not entered into any adverse agreement with bondholders as alleged by Opposition MPs. The IMF will not allow any adverse agreement. Our creditors have not affected us. Discussions have been held with the bond holders. The first round of negotiations ended without an agreement. Beyond that, our adviser, their adviser and the IMF intervened and worked to support Sri Lanka in finding the best possible solution.
But it is also possible to make an accurate comparison of the economic progress of today. Inflation was 70 percent in 2022. The dollar was worth Rs.420 in the blackmarket. No tourists came to the country. Organised political groups said that foreign exchange should not be sent to Sri Lanka through the banking system saying. We could not import essential goods because foreign exchange was reduced to approximately US$ 20 million.
In April 2022, we decided as a country to temporarily suspend the debt. Then there was a period of queueing, we were in queues for five days and could not buy oil or LP Gas. Several lives were lost. There was no fertiliser, there was no medicine and there was a shortage of food. Prices skyrocketed. The economy was in a serious position.
However, the Government took the right decisions based on the IMF’s guidance and by 2024, the situation has turned around completely and we have moved towards a good economy. The IMF clearly points out the need to take this progress forward and avoid moving into risky situations. In this review, the steps taken to manage public finances, the Government’s commitment to structural changes, especially the commitment to good governance in our country, and the measures taken by the Government to eliminate fraud and corruption have been given special appreciation.
Q: Will the current reforms be maintained in the same way? If not, do you expect a change?
A: Sri Lanka is the first country in Asia to have some assessment of governance diagnostics. Not only has it been published, the Government’s program has also been announced regarding the measures taken for it. Therefore, there are no alternative routes except to travel on this road. Making any changes is a move back to 2022.
We have presented the Government’s program and it has been implemented. It has been said that it will not be changed. We are getting the results. We would like to know the agenda of Opposition groups that criticise this. Tell the country about the program you are doing now. Otherwise, do not work to deceive the people after an election is announced. No political party in the Opposition has yet presented an acceptable alternative program. They have no plan. In the end, they have no choice but to change the wording and publish it in a different form. That is why the leadership of President Ranil Wickremesinghe is the main factor that has influenced the future of the country from 2022 to 2024 and beyond. The direct decisions he took were his persistent efforts and he took decisions in an unwavering manner.
Q: Some survey organisations have presented some indicators about the Government’s program. Is there any truth in those indicators?
A: Some research institutes are strongly criticising the Government. It is important to point out where a country should be right. But going forward, when good measures have been taken, when the international community praises it, it is regrettable that the local survey institutes are working to create the opposite opinion. Even if the survey institutes create wrong news with a serious political purpose, we have proven Sri Lanka’s stable condition within a few hours. If the Opposition also cares about the country, they have to support the President. The opinion held about the bondholders will be proven false in the future. Advantageous situations will come in these programs in the future.
Q: What’s the progress of the Government’s actions regarding domestic and foreign debt restructuring?
A: The IMF has appreciated us in this situation. We may see the end of debt restructuring in a short time. We have worked on a target within a time frame. The danger that existed in the country so far has disappeared. But it will disappear only with the continuation of this program. As soon as it is changed, it crashes again. We have to work to prevent that situation from happening.
Q: Many say that the crisis that Sri Lanka is facing today has arisen due to the wrong economic policies implemented by every Government that came to power in the past. What is the reason for such a crisis?
A: Every Government tried to implement the right policies in the country. But unfortunately, various pressures came to the leaders of the Governments. In many cases, those influences came from within their own Government. Also, many Governments acted with the judgment that the action they took was correct, leaving aside the opinion of the international community and international organisations. If we had made those changes 20 years ago, we would not have reached the situation in 2022. When we collapsed economically, the country fell to its worst. But apart from the Government, the Opposition political parties have not learned a lesson from there.
The most important thing in this program is that Sri Lanka has been recognised by the international community as a country that has made drastic changes. The Opposition is still trying to make promises that they will govern with failed methods. They can’t proceed on this promise.
You can’t move forward on promises but you can move forward on action. If the Government can learn a lesson from this, then it is the responsibility of the Opposition to ensure that these mistakes do not happen again, even if they do not agree with the Government’s opinion. It reflects the lack of planning. Both the main political currents of the Opposition have no program or vision at all.
Translated by Jonathan Frank
