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Sat, 19 April 2014 03:12:38
Sri Lanka keeps back IMF technical MOU
27 Jul, 2009 06:43:16
July 27, 2009 (LBO) - Sri Lanka has not released the technical memorandum of understanding between the government and the International Monetary Fund, taking a step back from the level of transparency established earlier.
Sri Lanka's central bank has published a letter of intent (LOI) and a memorandum of economic and financial policies (MEFP) relating to a 2.6 billion US dollar stand by arrangement with the IMF but not the technical memorandum of understanding (TMU).

The TMU of Sri Lanka's last standby agreement in 2001, as well as the TMU of a poverty reduction strategy facility (PRGF) along with country reports had been released to the public.

International trade minister G L Pieris said last week that all documentation relating to the agreement would be released to the people of Sri Lanka.

"The government of Sri Lanka has authorized the IMF to put in to the public domain all documentation in this regard," Pieris told reporters Thursday.

"So from tomorrow onwards it will be apparent to everybody that there is no conditionality which is anyway harmful to the country and that it provides a very strong impetus to the development of the nation."

IMF programs generally do not contain conditions that are 'harmful to the country' but simply lay a framework to balance the budget (by raising taxes and cutting expenses) so that money printing is avoided and inflation is stable and foreign reserves go up.

Such programs also contain measures to fix losses in state enterprises usually caused by mis-use of the enterprises to gain political popularity, and fix weaknesses in the banking sector, especially in state banks.

"In keeping with its policy of transparency, the Government has authorized release of the attached MEFP," the Sri Lanka LOI released to the public on the Central Bank's website said.

But Sri Lanka's standard of transparency fell short of neighbors like Pakistan and countries ranging from Seychelles to Armenia as well as the level of transparency displayed by Sri Lankan governments in the recent past.

Pakistan for example has published a series of documents relating to its original request for a stand by arrangement in 2008 and staff report as well as subsequent supplements. Pakistan's updated letter of intent for a stand by in March this year said: "We also consent to the publication of this letter, the attached SMEFP, the addendum to the Technical Memorandum of Understanding, and the related staff report."

Sri Lanka has also come under fire for not even releasing the staff report relating to the 2008 annual 'Article IV' consultations with the IMF.

Muttukrishna Sarvananthan, from Point Pedro Institute of Development, a private research body, has said the 2008 IMF staff report was suppressed at the request of Sri Lankan authorities.

Kabir Hashim, an opposition lawmaker, also raised the issue last week and warned that documents relating to the new agreement IMF may also be hidden.

IMF staff reports provide valuable independent insights into the working of the economy for policymakers to devise corrective action and useful analysis for financial analysts.

Such analysis also provides a background for the public to understand why a government takes corrective action, and that seemingly 'politically difficult' short term decisions - are taken for the long term benefit of the country.

In 2004, the government started to subsidize fuel in a big way, and printed money to make up for revenue shortfalls after jettisoning an IMF backed reform plan.

Though fuel prices stayed put for a few months, inflation shot up to 20 percent in a few months. Later not only food but even stationery objects such as house prices move up, and the rupee fell as printed money hit the balance of payments.

Now Sri Lanka has come a full circle and taxes fuel heavily, particularly petrol, though diesel which is used by business, is taxed lightly. The central bank has also tightened monetary policy and inflation and house prices have fallen.

Analysts say Sri Lanka's politicians, both in government as well as in the opposition need to grow up and display some maturity in macro-economic management and debating the economic affairs of the country.

Economic debate is rarely evidence based, and is largely driven by political ideology, which makes for sub-standard policy formulation, bad economic decision-making, which eventually backfires on the poor.

IMF staff reports provide a sound basis for evidence based debate.

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READER COMMENT(S)
2. Seneviratne BY Jul 28
Let the politicians make known the facts and outcome of the IMF loan as it will be the burden on the public to re-pay it.This is a must as people will talk anything but not the truth therefore the governing party will have to guide the masses with facts.
1. Jehan Jul 27
For such a big "Loan", there is always a collateral involved, besides the question is weather this particular loan is going to be used for Development, or to set off current debt, what ever it maybe we still end up back to square one.

The people or the population suffers terribly,the political structure will end up sponging off the 200,000 tax payers by imposing more and more taxes. This is very clear proof that we Sri Lankans are extremely weak in fiscal management. It is about time that all Sri Lankans pay tax,very specially politicians, government services,and the public sector,such excuses about their "minor", salaries, is and should not be not discussed, as these Individuals have so many perks.

Such as "allowances" and "duty free" facilities and many other facilities and privileges including "pensions".

This is not good, why should all these people have incredible and unbelievable privileges,whilst the private sector suffers immensely to unbearable proportions.

It is a fact that now the Private sector has the right to demand, justice and fairness. The government and ,ilitary have won the war, a gig thank you to them, we are very grateful.

"But" Where is the gratitude for those who worked hard, and paid their taxes so that the Government could have enough money to puchase arms to win the war. We 200,000 tax payers do a tedious and thankless job and to top it all we are squeezed dry. This is very unfair.