Columns - Political Column

Public groan likely after loan

  • Officials continue to give different interpretations to economic deal with IMF
  • UPFA nominations for general elections hinge on president poll performance
By Our Political Editor

News makers of the week: Mahinda Rajapaksa, Nivard Cabraal, Ranil Wickremesinghe and Mangala Samaraweera

Folklore has it that the five blind men who touched an elephant had five different descriptions of what the animal looked like. One who felt the leg was to say that the pachyderm resembled a tree whilst another who touched the stomach thought it was like a wall. The story goes on with the rest describing it differently.

The tale had some resemblance to last week's approval of a 20-month-long US $ 2.6 billion Standby Arrangement by the International Monetary Fund (IMF) to Sri Lanka. During a conference call for the media last Monday from the IMF headquarters in Washington D.C, the Fund's Asia Pacific Director and Sri Lanka Mission Chief Brian Aitken, had this to say: "In Sri Lanka's case, it has been hit by the global crisis, and the IMF's mandate is to address and ward off balance of payments crises. Now, the balance of payments crisis sounds rather dry, but it really would have a devastating impact on the economy and the people, particularly the most vulnerable as we've seen in other countries. So our job, our mandate is to prevent such a crisis."

Aitken appeared to be voicing a sigh of relief that the IMF had averted a "devastating" economic disaster in Sri Lanka. He underscored this when he declared, "we're aware of the human rights issues and the humanitarian situation. As a mission chief, and as any mission chief would, it's my job to talk to a wide range of people and institutions beyond just the government. So I'm in regular contact with humanitarian organisations, embassies etc."

Those remarks made clear that the IMF withstood pressure from various quarters and helped to avert economic chaos in Sri Lanka. Central Bank Governor Nivard Cabraal was ecstatic about the loan. If he had said earlier that such an IMF facility was no longer a matter of urgency, he expressed a different view at a news conference on Monday, the same day Aitken had his conference call.

Cabraal claimed that the IMF "approval was an endorsement of the country's economic policies as all macroeconomic policies and targets under the 20-month programme were in line with policies already implemented and announced by the authorities."

He conceded that "with the global economic crisis there was unfavourable pressure on the country's balance of payments and this led to a substantial decline in external reserves. We thought it right to go for the IMF facility to support the country's balance of payments and strengthen the foreign reserves."
The public postures of top officials of the IMF and the Government, like the proverbial description of the elephant by five blind men, differed. That is not to say the remarks by Aitken were off the mark. To the contrary, they were to the point but only reflected a situation which was the tip of the iceberg. There was indeed an urgency necessitated by dire circumstances.

There is no gainsaying the loan is a major achievement for the government. As Cabraal declared, the IMF approval of the loan would boost investor confidence in Sri Lanka and enhance the country's ability to attract local and foreign investment. This is both from bi-lateral and multi-lateral agencies. The fact that the good news had set a mood of confidence in the country's economic sector was reflected at the stock market on Monday. Shares hit a one-year high of 1.31 per cent.

It is now clear that one of the main reasons for the delay of the facility was the intense pressure mounted by rights groups. Among them were the New York-based Human Rights Watch and the London-based Amnesty International which had lobbied several Governments, and through them, the IMF. Added to that was also the delay on the part of the Government to provide a Letter of Intent (LoI) setting out the promises it would fulfil to qualify for the loan.

In the interim, the IMF soft-pedalled probing questions from the media while officials in Colombo, perhaps quite understandably, put on a bold front that the urgency for the loan had receded. Any comments to the contrary, with the uncertainty then of the stalemate of the loan, would have led to confusion and a crisis in the economic sector.

Now that the loan has been given, it is oxygen for the economic sector but hardships lie ahead. President Rajapaksa has appointed a ten-member commission on taxation to study the tax system, assess why revenue has declined and make proposals to remedy the situation. An official announcement said, "The commission will study various taxes operational at different levels of Government and propose way and means to rationalize such taxes at national, provincial and local authority level with the view to maximising revenue objectives at each level. It will also look at the Value Added Tax (VAT) and Customs tariffs. "
The move is a prelude to the budget proposals in November when many of the promises given to the IMF will take effect.

A process of demilitarisation has also got under way. The latest in this regard is the honourable discharge of soldiers who deserted ranks before May 31 this year. More than 1,100 soldiers who were jailed after military tribunals held they had deserted, were released last week from the Welikada jail. At least the Government will be spared the cost of feeding them.

President to MPs: Show your colours
Like the economic sector, the IMF facility has invigorated the Government's political firmament. With the annual sessions of the Sri Lanka Freedom Party (SLFP) due this month, President Rajapaksa and his advisors are busy on a number of fronts. He is set to make a policy statement to the party with the idea of gearing the members for the upcoming Presidential elections. Party insiders say the keynote would be to call upon the party regular members to step up their campaign in their respective electorates on the Government's victory over Tiger guerrilla terrorism and to call upon the people to support his development goals.

In a bid to regain fuller UPFA control of both provincial and local bodies before the Presidential polls, Rajapaksa has already set in motion mini polls. Elections to the Uva Provincial Council, the Jaffna Municipal Council and the Vavuniya Urban Council will be held on Saturday. This week, the Southern Provincial Council will be dissolved.

But the greater focus is the Presidential Elections which Rajapaksa has said would be in January next year. Presidential aides have explained that the reasons for this poll, ahead of a Parliamentary general election, were two fold. One was the peak of Rajapaksa's popularity after the military defeat of the Tiger guerrillas in May, this year. They say that all aspirants for UPFA nominations for a Parliamentary poll would have to prove themselves by ensuring a larger volume of votes for Rajapaksa. In other words, their political future, they say, would hinge on how hard they campaign for his re-election.

For the main opposition United National Party (UNP), preparations for a Presidential poll has focused on forming a grand alliance with like-minded parties. It is almost certain that Ranil Wickremesinghe will be its candidate though sections speculate he was not averse to another 'common candidate'. This is on the basis that he would be like Sonia Gandhi in India who plays the role of patron of the Congress Party whilst the Premiership is held by Manmohan Singh. However, the problem in such an event is who would be that 'common candidate'.

Ranil and Indian strategies
Earlier this week, Wickremesinghe was at the centre of India media attention. He had taken wing on an unannounced visit to New Delhi via Bengalaru (Bangalore). In a security flap at Bengaluru International Airport on Sunday, airport officials attempted to stop Wickremesinghe, who arrived in the city on a flight from Colombo at noon on Sunday, from entering the airport's VVIP lounge.

Indian airport officials said they informed Wickremesinghe that he was not on the VVIP list given to them by the Ministry of External Affairs or the list of VVIPs drawn up by the state's department of public administration and reforms. However, Wickremesinghe made his way into the lounge after his aides, who were travelling with him, assured airport staff that they would get permission from officials in New Delhi.
"We allowed the Customs and Immigration officials to process Mr. Wickremesinghe's documents in the lounge," the official said.

Sources said the gaffe occurred because the official protocol officers arrived at the airport late and airport officials had not been informed that Wickremesinghe would be flying to the city. Officials also claimed that Wickremesinghe who was in the city to meet a 'godman' - had "skipped" the mandatory screening for swine flu at the airport.

However, when contacted, Dr Cheluvaraj, joint director, communicable diseases, department of health and family welfare, had rubbished the claims of the airport officials and said Wickremesinghe had been checked for symptoms of H1N1 infection at the security section in the VVIP lounge.

Wickremesinghe left Bengaluru later in the day. Did India do to Wickremesinghe what Continental Airlines did to former Indian President APJ Abdul Kalam, asked the Bengalaru-based Deccan Herald newspaper which reported the incident. Former Indian President Kalam, a respected nuclear scientist was bound for the US in a Continental Airlines flight from New Delhi and had been frisked before entering the aircraft. The Government of Indian protested on the grounds that it was a violation of an arrangement with the airline which had been provided with a list of VIPs who did not require security checks.

It is not clear whether the High Commission of India in Colombo was in the loop over Wickremasinghe's visit to India. The mission has been in the news after the High Commissioner, Alok Prasad, a staunch backer of the Rajapaksa administration, was transferred as India's envoy to South Africa. The posting to Pretoria, diplomats said, was unusual for an Indian head of mission serving in Colombo. "They usually end up as Foreign Secretary or in a top slot before that top job in New Delhi's South Block (Ministry of External Affairs). Though having a lot of political clout, he has not been successful so far in having his transfer deferred or obtain a senior position in the Indian capital," a diplomatic source said yesterday.
Prasad's unflinching support for the Rajapaksa administration angered moderate Tamil parties as well as those in the Opposition in no small measure. It is necessary for any Indian Foreign Secretary to have served terms as a diplomat in Colombo and Islamabad, considered two key stations.

Ashok Kant currently India's High Commissioner in Kuala Lumpur is replacing Prasad in Colombo. A career diplomat, he is the son-in-law of BJP's Yashwant Sinha, a one-time official in the Indian Ministry of External Affairs and later Minister of External Affairs. The move, if it happens, gives a glimpse to the pedestal on which the Indian Foreign Service is kept.

Just this week, it was Sinha who was the Opposition BJP's spokesman during a heated debate in the Lok Sabha (Indian Parliament) on Indian Prime Minister Manmohan Singh's joint statement with Pakistan Prime Minister Yusuf Raza Gilani on the sidelines of the Non-Aligned Movement summit in Sharm-el-Sheik in Egypt. The BJP called it the "the shame of Sharm-el-Sheik" and Sinha accused the Indian Prime Minister of capitulating to the Pakistanis. But this does not seem to have any impact when they choose a career diplomat to serve in an important station as Colombo for the Manmohan Singh government. One would think that this might be some food for thought to the Sri Lankan Foreign Ministry and the manner in which Rajapaksa manages his diplomats.

During this week's visit to New Delhi, Opposition Leader Wickremesinghe had a lengthy meeting with Sinha. Among others he met were Foreign Minister S.M. Krishna, National Security Advisor M.K. Narayanan, Finance Minister Pranab Mukherjee, Foreign Secretary Shiv Shanker Menon and Nirupama Rao, who became the new Foreign Secretary yesterday.

Media reports that Sri Lanka Freedom Party (M) leader Mangala Samaraweera was initiating moves to persuade Chief of Defence Staff (CDS) General Sarath Fonseka to contest the Presidential elections had its sequel. After reports appeared in the print media and web sites, Samaraweera, his close aides said, received a call from a friend holding a top position in a company in West Asia. He was asked whether such reports were true. "What nonsense. The reports are not true. For me, Mahinda Rajapaksa is slightly better than Fonseka. If that is the case, I would back Mahinda Rajapaksa," Samaraweera had retorted jocularly. As for General Fonseka, he has declared publicly that he had no intention of entering politics now.


 
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