Sri Lanka Government implements Vision 2025, the austerity programme for the next eight years.
Sri Lanka government is devoutly implementing "Vision 2025: A Country Enriched", the government's economic and austerity programme for the next eight years, lunched by President Maithripala Sirisena and Prime Minister Ranil Wickremasinghe, in early last September.
Presenting the monetary and financial sector policies for 2018 and beyond, Sri Lanka Central Bank Governor, Indrajith Coomaraswamy on Wednesday declared the Bank's proposed moves to keep up with government's "Vision 2025", which he said "unveils the future policy direction of the country".
End of December last year, while disclosing the last monetary policy review for the year 2017 he also endeavoured to show that the country's economic stability is reached and would remain so, given the current fiscal consolidation is continued. Early December, Coomaraswamy told the Financial Sector Investment Conference that the Bank is confident in being able to handle the sovereign debt repayments in next two years, "provided the fiscal consolidation measures stays on track".
The Government passed its Budget for 2018 in early December, which is primarily grounded on the policies of Vision 2025. This so called economic vision to "make Sri Lanka a rich country by 2025" is the programme recommended by the World Bank aimed at fiscal consolidation, opening Sri Lanka's resources and labour for international capital and streamlining privatization.
The whole claim of a vision for a "country enriched" is falsehood. In the backdrop of staggering social polarization, poverty and unemployment which have exacerbated after 2008 economic and financial crisis that hit the United States and has had spiralling effects all over the world almost over a decade, this implies the building of a country for the super rich. The budget for 2018 ensures this, in that the indirect taxes paid chiefly by the working people will constitute a 74 percent of the government’s total tax income, while direct taxes paid by the rich will fall to just 17 percent.
Aimed at furthering fiscal consolidation in order to reduce debt-to-GDP ratio by 70%, which currently stands at 79.30% of GDP, the agenda is also a consolidation of the neoliberal policy demands of International Monetary Fund(IMF). Wickremasinghe declared at the launch that, in order to do so, the Unity government has "formulated a forward-looking liability management strategy for domestic and foreign debt under the medium term debt management strategy", and that "the country hopes to repay all its outstanding loans by 2025". So, the whole programme is primarily a debt repayment mechanism.
Wickremasinghe also declared government's moves to further liberalize Sri Lankan market to attract foreign direct investment(FDI), by stating that it has formulated a new trade policy, along with an original "National Export Strategy", aimed at creating a "more liberal, simple, transparent and predictable trade regime".
Some of the significant economic policy goals in the Vision 2025 include the following:
• Strengthening the macroeconomic framework, which has three prongs: fiscal consolidation, ensuring price stability, and maintaining a market-based competitive exchange rate and "prudent" monetary policy. The policy statement plainly exposes that "external debt repayments from 2018 requires strong fiscal consolidation measures for debt sustainability and growth".
• Transforming Sri Lanka into the economic hub of the Indian Ocean, with a export-oriented, highly competitive, social-market economy: It promises citizens "higher incomes" and "better standards of living".
• Enhancing global competitiveness of the economy. This implies further trade liberalization.
• Introducing business-friendly legal reforms. Finance Minister Mangala Samaraweera said archaic laws such as the Agricultural Lands Act and Shop and Office Employees Act would be amended to provide more market flexibility.
• Rationalizing public expenditure and restructuring State Owned Enterproses (SOEs) as commercially viable enterprises.
• Encouraging Public-Private Partnerships (PPPs): the potential areas would include health care, leisure, tourism, education, ports and aviation. This mechanism is intended to release the government of welfare burden and increasingly privatizing essential services.
Sri Lanka is mired in a acute debt crisis, the budget deficit standing at 5.4% of GDP. The GDP for 2017 and for this year is estimated at 1999 billion rupees ($ 13 billion) and 2,326 billion rupees ($US15 billion), respectively, the increase pointing to the tax hikes following the recent drastic tax reforms and 2018 budget, while the total debt repayment for the next three years would be 7,000 billion rupees ($45 billion), as stated by Samaraweera.
Early December last year, granting $ 251.4 million as the fourth tranche of the agreed bailout loan of $1.5 billion, the IMF forced its conditionalities onto the government: continuous fiscal consolidation, building up foreign reserves, maintaining a liberal exchange rate regime, tightening monetary policy and restructuring SOEs. Fiscal consolidation requires government to reduce the budget deficit to 4.5% by 2018 and to 3.5 % by 2020.
It is in this background that the government is forced to cut social welfare, increase taxes and liberalize trade and labour, like many European Union countries including Greece, Ireland, Italy, Portugal and Spain, to reduce budget deficits and sovereign debt. The promises of prosperity and development for the masses is therefore a blatant lie.
Early December last year, granting $ 251.4 million as the fourth tranche of the agreed bailout loan of $1.5 billion, the IMF forced its conditionalities onto the government: continuous fiscal consolidation, building up foreign reserves, maintaining a liberal exchange rate regime, tightening monetary policy and restructuring SOEs. Fiscal consolidation requires government to reduce the budget deficit to 4.5% by 2018 and to 3.5 % by 2020.
It is in this background that the government is forced to cut social welfare, increase taxes and liberalize trade and labour, like many European Union countries including Greece, Ireland, Italy, Portugal and Spain, to reduce budget deficits and sovereign debt. The promises of prosperity and development for the masses is therefore a blatant lie.
During last eight months up to end of November, the government cut funding for the limited social welfare programmes of Samurdhi by 700 million rupees ($ 4.5 million) and the fertilizer subsidy by 3.8 billion rupees ($ 24.8 million), compared to the same period last year.
In a good gesture for foreign direct investment (FDI), government approved early in December a 32 year period of income tax holiday for the China Merchants Port Holdings company, to which the government leased Southern port of Hambabtota for 99 years, amidst much concern by US, India and Japan. Wickremasinghe stated that the money out of this deal would be used for debt repayment. The government is also aiming at privatising Sri Lankan Airlines, the national carrier, on claims of being loss-incurring SOE under a PPP, as also demanded by IMF.
The budget for 2018 was passed with more than two third majority in Parliament in favour, showing the readiness of the whole bourgeoisie establishment to impose severe austerity measures on larger public. Samaraweera declared at a post-budget forum that "the main theme of the budget, 'enterprise Sri Lanka' and liberalizations are non-negotiable. "Non-negotiable" means that the policies are not subject to any compromise with the opposition of the working people.
The Wickremasinghe-led United National Party (UNP) and Sirisena-led Sri Lanka Freedom Party(SLFP) entered into a unity government in 2015 to drive through its pro-market policies and suppress the already-emerging opposition of the working class against social counter-revolution.
Wickremasinghe has a long history of implementing pro-market reforms. In November 2015, he presented an economic policy statement outlining sweeping pro-market reforms that would drastically affect jobs, wages and living conditions of workers and the poor, while offering benefits and concessions for foreign and local businesses. Even before, in 2002, his previous government got approval from the World Bank and IMF for a parallel agenda of economic policies laid down in the Poverty Reduction Strategy Paper(PRSP), which was consolidated in the programme of "Regaining Sri Lanka". Succeeding governments of Chandrika Kumaratunga and Mahinda Rajapakshe continued the same.
The working class should reject these agendas. Under a workers’ and peasants’ government founded on socialist policies sovereign debt would be repudiated. The mass opposition to the implementation of these policies should be guided by a political perspective for socialist restructuring of the economy nationally and globally against international capital.
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