IMF standby: A loan not a gift

After an agonising wait, one of the Washington-based Siamese twins, the International Monetary Fund (IMF), the other the World Bank, has ‘deigned’ to grant Sri Lanka a loan it has asked for.

The Government must have had substantive information that the United States and the European Union nations were blocking the loan. Thus President Mahinda Rajapaksa adopted the same strategy when he was asked to stop the fighting with the LTTE – he named and shamed these countries for what they were doing, arguing that what he was doing was the right thing.

Many financial commentators have said the IMF, like any bank has to loan money to stay in business. It does not go into the good character of a nation or its leaders, like a bank does not care about the character of a depositor as long as it can get the money back on the due date or thereabouts, pocketing the interest in-between. Unfortunately, in this case, there could not have been an undue delay unless there was political pressure applied by a powerful member state, or states, that can influence the IMF at the ‘highest levels’.

It was the fear of the loan being eventually turned down, in a bid to spite the Rajapaksa administration that there was also a delay on the part of the Government signing the all-important Letter of Intent (LoI), or the promissory note from the Government to the IMF saying by what conditions Sri Lanka would abide by to obtain the next instalment of the loan. The fact that Sri Lanka is getting only US$ 313 million as a first instalment of a US$ 2.5 billion loan is, arguably, a minor slight on the country.

There is wide speculation that a powerful country intervened on behalf of Sri Lanka, but in this game of power-politics there is nothing for nothing and promises to fully implement the 13th Amendment have reportedly been made. These will never be admitted, even if they be so.

The fact that the Government applied for, and obtained the IMF loan, clearly shows that despite the anti-West rhetoric, this country just cannot afford to ask it ‘to go to hell’. The economy is so deep in the pits that the new foreign policy initiative in search of new friends is not enough to pull Sri Lanka out of the mire. On the other hand, at least an international lending institution will help to monitor irresponsible Government expenditure, wastage and corruption.

The media have been replete with details of this Government’s in-action on the Auditor General’s report and on the disclosures made by the parliamentary Committee On Public Enterprises (COPE) and the Public Accounts Committee (PAC). On Wednesday, Parliament was told that Rs. 3,000 million (Rs. 3 billion) of public money was busted up on Mihin Lanka since its re-start just this year.

This newspaper’s Financial section, and ‘The Economist’ in this section of the newspaper write on the IMF loan and analyse it extensively. Suffice to say, that this is a loan – it is not a gift. However, reasonable the interest rate maybe, the loan has to be re-paid – and it has to be re-paid by future, even unborn generations of this country. This loan is not for any development work – it is merely to ease our dismal record of balance of payments.

This is not a victory for the Government as is made out to be in some quarters. It is a mere reminder that the Government has taken a loan on behalf of the children, and grandchildren of Sri Lanka.

The race for carbon space

The 40th anniversary of the moon landing was celebrated last Monday, and many asked why they could not wait for the 50th year.

Many defended this by saying that it was because the people who were involved in the historic event of 1969 are still around, and eager to launch the faltering space programme to new frontiers. Others argued that the earth’s current problems especially of global warming cannot be tackled by Earth alone, and that it requires the entire solar-system to be taken into consideration. Still others, cynically said, the Earth might not be there to celebrate the 50th year of the moon landing in 2019.
An Inter-governmental Panel on Climate Change (IPCC) that came about after the Kyoto Protocol on Climate Change, has already given a worst-case scenario that should the massive chunk of ice known as Greenland melt in the next decade, coastal cities including Colombo, Galle, New York, Los Angeles – and the entire Maldives, parts of Bangladesh and other places would be submerged.

The Kyoto Protocol was not the success it was expected to be because the US, Australia and other countries did not sign it and economically poorer countries like India and China were left out of grand reforms because they were not major carbon polluters of the world.Since Kyoto, India and China – and also Indonesia and Brazil etc., have become industrialized giants emitting carbon dioxide in plumes to the atmosphere. These countries say the West occupies much of the ‘carbon space’ of Earth, and they too want a share of that ‘space’. They want the same per-person pollution enjoyed by citizens of developed countries. They will not agree to cut down on economic development because the needs of the millions of poor in their countries have to be attended to first. While there is an understandable argument to this viewpoint, some say that it is like demanding a Business class upgrade in a plane that is going to crash.

Sri Lanka is a small player in the geo-politics of the ‘Climate Change’ debate due to its insignificant size and in the carbon emission field due to its lackluster economic development even though by establishing 3300 Mw Coal Power Plants etc, the country’s annual carbon emission has gone up by 230% in the last 20 years.

However, and because of that very reason, there is a strategic way in which this country can take advantage of the ‘carbon space’ concept.

One way is to invite investment in projects where foreign players engage in lowering their carbon footprints through the Clean Development Mechanism (CDM) projects in developing countries like Sri Lanka. This will bring about transfer of technology, jobs and bring in foreign exchange. Carbon Management will be a significant issue for a future Sri Lanka in a world that is going to be increasingly concerned about Global Warming. We must exploit the Carbon Credit Bank that is already operational, trading our otherwise available ‘carbon space’.

A close corollary to carbon emissions is the issue of water. Futurists predict that wars would be fought over water – like in the past, as we burn up the Earth’s resources. Three successive Governments have had to abandon their water management policy due to present-day political factors. Few politicians think of the future. Their vision extends only up to the next election.

It is unfortunate that the Government has still to appoint a negotiating team for the Copenhagen conference in December this year, to discuss Climate Change, despite the importance of the issue and the subject already being on the agenda of summits from the G8 to the Non-Aligned Conference. Officials are relying on foreign funding to send at least two persons for the conference of such importance. None has yet been identified to go for the technical sessions.

It is time Sri Lanka put together a think-tank on the subject that will be of paramount importance, much sooner than we would probably imagine.

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