Development & Aid, Economy & Trade, Headlines, North America

DEVELOPMENT: Sri Lankan Activist Fails to Sway IMF, Bank

Emad Mekay

WASHINGTON, Apr 21 2003 (IPS) - When Sri Lankan Sarath Fernando failed to stop his government from presenting a controversial economic roadmap to the World Bank and International Monetary (IMF) that would further "liberalise" the economy in return for loans, he decided to take his case to the two institutions themselves here last week.

It did not help.

After a week of extensive lobbying and meetings, Fernando, 61, who heads the Movement for National Land and Agricultural Reform (MONLAR), boarded his plane home late Friday as the Bank and the IMF were approving the plan with almost no input from people like himself.

Although not unexpected, the move brought sharp rebukes from Fernando and other activists because of what they call the institutions’ almost complete failure to consult civil society groups.

On Friday, the global finance bodies approved a 567-million-dollar, three-year loan to Sri Lanka, its largest-ever to that country, to support the government’s economic programme for 2003¡06.

To qualify for the loans, the South Asian nation had to vow in its Poverty Strategy Reduction Paper (PRSP), an economic plan, to accept further budget cuts, open up its financial sector to foreign investors, move towards selling public enterprises and reduce protection of its labour force.

Other standard items imposed on borrowing nations by the Bank and IMF include trade liberalisation and the creation of institutions that would help foreign companies operate more freely.

IMF officials said the loan is designed to help the South Asian island of 19.5 million fight its spiralling poverty rates and beef up its foreign currency reserves.

"Sri Lanka’s PRSP is a satisfactory policy framework to increase growth and reduce poverty," said Shigemitsu Sugisaki, IMF deputy managing director.

”The programme’s focus on fiscal consolidation is appropriate in light of the public debt burden. It is also necessary to ensure that adequate resources are available to meet priority spending needs and to free resources for private sector expansion."

The IMF and Bank’s decision to release funds for Sri Lanka is also likely to act as a green light for other international donors, private investors and creditors.

The IMF says that its new loan is based on "country-owned poverty reduction strategies" adopted in a "participatory process involving civil society and development partners".

Not so, said Fernando in an interview with IPS. "The poverty reduction papers weren’t prepared with sufficient consultations with the people they will affect," he said. "The list of names of organisations that the World Bank official showed us is just a fig leaf."

Fernando, who also represents Sri Lankan human rights and environmental groups, says that stakeholders such as labour unions were not consulted at all.. Those who might be displaced by the construction of some projects were also ignored, he added.

Since Prime Minister Ranil Wickremesinghe’s United National Party (UNP) swept to power in parliamentary polls in December 2001, the ruling party and international financial institutions (IFIs) have pledged to dismantle what they call "archaic labour laws and rules" that scare off foreign investment.

Among many measures taken to satisfy requirements by the Fund and the Bank, was the sale of a 12 percent stake in Sri Lanka Telecom (SLT) in December 2002, while the privatisation of the Sri Lanka Insurance Corporation (SLIC) was completed earlier this month.

But Fernando and other activists who support the labour movement in Sri Lanka, say the run-up to the loan announcement was a completely non-democratic and exclusive process that threatens to further impoverish the poor.

While the Bank and IMF stress the need for high-quality participation by civil society groups in the PRSP process, those groups, which have long opposed the neo-liberal policies of the two institutions, say those words are misleading.

"In this case, there was no meetings with civil society that was knowingly called to discuss PRSPs," said Soren Ambrose of the Washington-based anti-poverty group 50 Years Is Enough.

"This is the most blatant in a series of relatively blatant omissions of civil society in terms of the PRSPs. This is the most egregious example of democracy being asked to submit itself to World Bank and IMF dictates.”

"But in light of the lack of consultations they (civil society groups) were hoping for at least a postponement," Ambrose added.

Fernando says only government-funded civil society groups were consulted during the PRSP process. And he accuses his government of rushing legislation to parliament at the behest of the IMF and World Bank as soon as the PRSP plan was floated in the country.

Thirty-six new bills, backed by the Fund and the Bank, were introduced in parliament in August alone, says the activist, covering "reforms" to indebted state owned banks and loss making state enterprises; public utilities; land ownership; water supply and distribution.

Many of the proposed laws were blocked as a result of lobbying by labour unions, including the government’s attempt in January to force through adjustments to the Termination of Employment Act and the Industrial Disputes Act, both of which would have benefited employers more than workers, says Fernando.

The PRSP threatens to further eat away at workers’ rights by encouraging elastic labour laws that could displace farmers who work small, uneconomic plots, leaving the land free for multinationals, he adds.

The IMF, the Bank and the government should recognise that the poor could devise effective ways of overcoming their poverty if they were given the chance to participate, according to Fernando.

"Our poor people know what’s best for them," he says. "The least that could have happened is that they would have gotten a debate about their future. It’s a big disaster it didn’t happen but I will still fight these policies because I believe better things are very possible."