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SRI LANKA: Trade Partners Considering Economic Pressure
By Nuwan Perera
COLOMBO, May 16 (IPS) - The United States, joined by the UK, France and other EU states, are stepping up
economic pressure on Sri Lanka to stop killing of civilians during ongoing
battles with Tamil guerrillas in the North. The countries are planning on using a
proposed IMF bailout package and trade concessions as bargaining tools.
"I think the international community is putting economic pressure on the
government as nothing else has worked [in relation to international appeals
to stop fighting and avoid civilian casualties]," said Jehan Perera, political
commentator and executive director at the National Peace Council (NPC) here.
Earlier this week, British Foreign Secretary David Miliband and French Foreign
Minister Bernard Kouchner told reporters at the UN that the IMF’s proposed
1.9 billion dollar bailout package to shore up Sri Lanka’s depleted foreign
exchange reserves was under review. They also referred to the ‘GSP+’ tax
concessions for export products into the EU that Colombo has reapplied for -
these are also now under review.
On Wednesday, for the first time, U.S. President Barack Obama joined the war
of words between Sri Lankan leaders and the world over the plight of
thousands of minority Tamil civilians trapped in a ‘no-fire’ zone. Speaking to
reporters at the White House, he urged the government and the separatist
Liberation Tigers of Tamil Eelam (LTTE) to take steps to avert a humanitarian
crisis.
"Without urgent action this humanitarian crisis could turn into a catastrophe,"
Obama said. Miliband and Kouchner are among several leaders who have
visited Colombo in recent weeks to persuade President Mahinda Rajapaksa to
consider humanitarian issues. Colombo has rejected all calls.
On Thursday, U.S. Secretary of State Hillary Clinton told reporters in
Washington that her government has "also raised questions about the IMF
loan at this time. We think that it is not an appropriate time to consider that
[loan] until there is a resolution of the conflict," she was quoted as saying.
Government troops are close to ejecting Tamil rebels from a small stretch of
land in northern Sri Lanka where they are holed up along with thousands of
civilians.
World leaders, quoting reports from human rights groups like Human Rights
Watch (HRW) and Amnesty International (AI), are urging both the government
and the LTTE to stop using heavy weapons and shelling as thousands of
people are dying in the combat zone.
Sri Lanka has repeatedly denied the use of heavy weapons, saying only small
arms fire is being deployed, and has accused NGOs of relying on pro-LTTE
website reports which provide a ‘distorted’ version of the war.
News agencies and human rights groups - themselves banned from the
conflict zone - have been quoting doctors and injured civilians in the combat
zone on the extent of the destruction to life and property.
Concern over the delay in approving the IMF standby facility, which is being
provided to many countries affected by the global crisis, is topmost on the
minds of Rajapaksa and Central Bank Governor Ajith Nivard Cabraal.
When Rajapaksa met local and foreign bankers at a noon meeting on
Tuesday, he was reported to have said that even if the IMF loan doesn’t come
through, there are other ways of tackling the foreign exchange crisis.
Cabraal, who has been leading the negotiations on the Sri Lanka side, told a
meeting later on the same day that Sri Lanka was working on a back-up plan
to boost foreign reserves in addition to the IMF loan.
In the past, Cabraal has said that the IMF facility is the best way to tackle the
foreign exchange crisis - reserves fell to just six weeks of imports last month
against 12 weeks a year ago.
Efforts by the Central Bank to raise 500 million dollars from the Sri Lanka
diaspora over the past year have not worked. Now the Central Bank is
working on currency swap arrangements with other central banks in the
region. Already a swap arrangement for 200 million dollars was agreed with
Malaysia’s Central Bank.
Negotiations are also underway to secure a 500 million dollar loan from Libya.
Rajapaksa recently visited Libya. He has been developing contacts with mostly
non-western powers - asking countries like India, Iran, Jordan and Pakistan
for financial support. He is currently in Jordan attending an economic
summit.
At Tuesday’s meeting, Rajapaksa said the government was also able to secure
a year’s postponement of an oil import bill. Last year Iran - a major supplier
of oil to Sri Lanka - granted a 1 billion dollar loan to be set off against oil
purchases.
Economists in Colombo however believe the IMF is unlikely to suspend the
loan request. "From what I gathered from Washington, the loan will come
through - maybe with some conditions," a retired economist here who has
worked with the international lending agency said.
A senior official at the Central Bank, who declined to be named, also agreed
that the IMF is unlikely to be swayed by ‘political pressure.’
Perera believes that the government won’t change its strategy of defeating
the LTTE at any cost. "However once the war ends, the government would be
[more] receptive to economic and other issues raised by the international
community," he added. Most military analysts believe government troops will
oust the LTTE from their remaining strongholds by next month.
(END/2009)
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