In a recent press conference MP Harsha de Silva outlined several critical points regarding the IMF Program and expressed general agreement with the stabilization program but stressed the need for specific amendments to focus the program towards medium-term growth.
De Silva questioned the four-year plan outlined in the IMF Program. He pointed out that while the plan focuses on stabilizing the economy, it fails to adequately address the post-stabilization phase, which is crucial for advancing the standard of living for the people.
He expressed disappointment with the projected GDP growth rate of only 3.0 percent by 2027, emphasizing the need for a much higher growth rate, ideally between 6-9%, to create sufficient job opportunities and effectively alleviate people’s suffering.
He said a future SJB government would amend the agreement upon mutual consent with the IMF to shift the focus from stabilization (and debt sustainability via debt restructuring) to growth.
Highlighting the IMF’s acknowledgment of the reform program’s dependence on popular support, de Silva quoted IMF Director Krishna Srinivasan’s statement from an official press release, where Srinivasan emphasized the importance of “strong ownership by the authorities and the Sri Lankan people, more broadly”.
He said that while the IMF cannot and will not express views on domestic democratic processes the underlying message is that broad public support for the program can only be obtained via a mandate from the people. He argued that various political parties could propose their plans for medium term growth and their stance with regard to the IMF and obtain such a mandate at an election.
However, before any elections take place, de Silva emphasized the need to address several crucial matters. He highlighted the different treatment of foreign debt through debt restructuring where the loss would be to foreigners and domestic debt through ‘debt-optimization,’ which would entail losses for domestic creditors.
While the IMF did not provide specific guidance on debt restructuring, de Silva referred to the organization’s debt sustainability analysis (DSA), which emphasized the importance of reducing Sri Lanka’s gross financing need from more than 30 percent of GDP to 13 percent for sustainable debt management.
Thus, the responsibility of designing an effective debt-restructuring plan lies with the government, necessitating a strong strategy and skilled negotiators to represent Sri Lanka’s interests.De Silva echoed the IMF’s call for finalizing the domestic debt-restructuring strategy promptly. He raised concerns about rumors suggesting the entire ‘optimization’ burden be placed on the Employees’ Provident Fund (EPF).
MP de Silva called for transparent discussions to formulate an effective strategy, warning that failure to do so could result in further adverse outcomes to the 2.4 million members of the EPF who received an unprecedented negative 47 percent return for 2022.