The Crisis and Where We Go From Here

Photo courtesy of Financial Times

UDITHA DEVAPRIYA-03/19/2022

Much more lucid than in his disastrous last address to the nation, President Gotabaya Rajapaksa was noticeably sombre and sober on Wednesday night. Perhaps mindful of the critiques that followed his earlier speech, set in front of a giant stupa or rather a hologram of one, he got to the point straight away. Accepting responsibility for the country and its people, he said that the present crisis wasn’t his making. After quoting some statistics relating to exports and trade and budget deficits, he admitted that his administration would go ahead with an IMF programme following an assessment of its pros and cons.

As a friend of mine put it, it was essentially a speech for the IMF, meant to soothe investors and financial analysts more than the people on the ground. The latter, for their part, reacted to the address rather coolly. They have reason to do so. Hemmed in from every side by gas, fuel, power, and commodity shortages, even the most supportive of the regime have turned the other way. Even TV channels and media agencies that once tilted to its side are milking the rising discontent and the eight o’clock news telecasts and recycles videos of people at gas and diesel queues cursing the men at the top. While those who voted for the Opposition are spiting those who elected this government, those who helped President Rajapaksa come to power are regretting their decision, live, in front of the cameras.

It’s hard to find anyone who voted for this administration. Not surprisingly, the few brave enough to voice their opinions are being silenced quickly. Thus, in response to the hash-tag #GotaGoHome, the Rajapaksas’ PR stuntmen tweet #WeAreWithGota, only to get incensed social media users tweet back #WearyWithGota. As Harini Amarasuriya put it last Saturday, President Rajapaksa has become more unpopular than the yahapalanists. Under yahapalana rule the joint opposition targeted fifty cent rises in petrol prices. Today, with prices hiking from Rs. 177 to Rs. 254 a litre, the regime’s detractors are digging into Twitter and sharing what SLPP MPs shared back then, using their own rhetoric against them.

There are many problems with this administration. To start off, there’s a mismatch between what the president and his men are saying, how they say it and what they eventually do. Almost everyone, from those at the top to local government councillors, work as though we aren’t going through an economic crunch, adorning every event, like the construction of a temporary bridge at Matara, with festooned military parades. Given that the president’s men spend half their time reminding us that there’s a pandemic that has impacted the economy uncontrollably, such displays confound and confuse.

Those in charge of power and energy say one thing one day and another thing another day. Fuel queues haven’t dropped down and power cuts still continue. Government agencies are following a policy of not announcing a crisis until it happens, which is why those in charge of Litro refrain from saying anything until gas stocks run absolutely dry. It’s become so dreary that we aren’t rationing commodities, we are rationing crises. Meanwhile, the government chooses not to ban imports, but to restrict them, an act which, in the eyes of neoliberal and radical commentators alike, may well entrench ruling party allied mafias.

It’s against this sorry backdrop that the president says they will go to the IMF. As a radical commentator put to me the other day, where else can they go? We can’t be going to India all the time, relations with China have cooled down and the Russia-Ukraine crisis is clearly going to worsen things. The government has appointed very few economists and very many businessmen to its Economic Advisory Council, a body that calls for expertise rather than moneyed interests. But then the whole idea of a Council of experts comes to a halt once you realise that they’ll be reporting to – wait for it – ruling party MPs.

Clearly, the government isn’t aware of the calibre such institutions need. But this being a regime that kicked people like Anil Jasinghe and Lasantha Wickramasinghe, the latter who turned MILCO into a profit-earning entity, what more can you expect?

The president’s decision to go to the IMF has appeased his neoliberal critics. Most of them worry over why the administration didn’t consult the IMF earlier. Some of them believe that it’s too late, others that it’s not. The SJB’s Harsha de Silva, Eran Wickramaratne, and Kabir Hashim are busy putting together an economic blueprint. They say they want to revive the social market economic model they tried to summon under yahapalanaya. They promise it will deliver social justice within the framework of a competitive market.

Will the IMF sort things out for us? Even the staunchest defenders of the regime who earlier opposed the option think so. This is only to be expected: President Rajapaksa was elected by a lower and upper middle class who are as rooted in a neoliberal framework as most of those who voted for the UNP. Many of them have by now left the government but the few who so far haven’t believe that the government can save itself only by appealing to Western institutions. To realise how divisive these debates have become, consider that even Udaya Gammanpila once advocated the IMF line as a minister.

The IMF is not in the business of constructing walking paths for the poor. It is in the business of minimising balance of payments deficits. This is the only variable it is concerned with. It relegates all other variables, including public sector spending, to that one figure. It is not a democratic institution in the way the UN General Assembly is; one country does not equal one vote. Joseph Stiglitz has written books and journal articles against the way it operates in the Global South. Though some think its role has changed; others, like Kenneth Rogoff, think it should retain its mandate and get tougher with developing countries.

The IMF recommends certain policies and recommends that we enact certain policies before we go to it. President Rajapaksa’s government has enforced many of these. The exchange rate is floating, fuel prices are more cost reflexive and other public utility tariffs are set to rise, or rather hike, in the coming days. The IMF will probably get the government to reduce import restrictions, although this can happen only after it releases a tranche of money to us. Basically, we have gone to the IMF even before going to the IMF. Austerity is not going to be a fact of life, it already is a fact of life. And the government is okay with that.

Consider the recommendations the IMF may prescribe for us. These include cutting down government expenditures and subsidies, privatising SOEs, stopping money printing, floating the exchange rate and laying off public sector workers. Does the middle class that’s grown so exultant about the IMF realise the implications of these reforms? Have the likes of Harsha de Silva clarified enough on their consequences to the public? As representatives of the SJB and the opposition, they need to. That they have not should tell us something.

Ironically, the middle class supported protesting students, teachers and other state workers not too long ago. Now it’s pushing for their possible retrenchment. The middle class also has conveniently ignored that subsidies affect not just the working class, but those higher up in the social scale. We are already suffering despite getting such lifelines from the State. What would life be for the suffering many without them? This is why Opposition MPs hellbent on drawing up blueprints for economic reform need to be less ambivalent about the impacts of their proposals on the less well off, the needy and the marginalised.

What’s worrying is that there’s no political group which can bring to light the disruptions to public life that will certainly accompany these measures. The SJB’s right wing opposes the government because of it going to the IMF now, not because it is going there at all. The JVP-NPP is sending mixed signals about its stand on the IMF, symptomatic of how confused it is, while one of its MPs has gone on record defending credit rating agencies. Commentators like Ahilan Kadirgamar, Sumanasiri Liyanage and Devaka Gunawardena have outlined the dangers of pegging ourselves to such institutions but their voices remain muted. The FSP is making some noises, but again, no one is listening to them.

It’s sad to realise that none of the think tanks that urged the government to default and restructure our debts, which published and shared one infographic after another about the pitfalls of controlling prices and imports, have done the same regarding the conditions we will have to meet before we can restructure ISBs. It’s a testament to how quick we are to embrace dogmatic theories about how to escape these crises that only one such think tank, Econsult Asia, has estimated the knock on effects these measures will have on the economy. So far, their predictions about currency devaluation have come true.

We are reaching the peak of the crisis. The import restrictions, we are told, will last for some months. The IMF may not agree to such a timeframe. So, to release the money the country needs to finance its imports, we will need to inflict austerity on ourselves perhaps before Avurudu. We’ll probably see more infighting in the government, more rioting in the streets and more resistance. But we won’t be seeing any opposition outfit capable of leading the resistance, largely because the opposition has already acquiesced to the conditions which will intensify our despair. We are a nation reeling in misery and every party I see before me has allowed us to reel in even more misery. This cannot end well.