As a Sri Lankan, watching international news coverage of my country’s economic and political implosion is like showing up at your own funeral, with everybody speculating on how you died.
The Western media accuse China of luring us into a debt trap. Tucker Carlson says environmental, social and corporate governance programs killed us. Everybody blames the Rajapaksas, the corrupt political dynasty that ruled us until massive protests by angry Sri Lankans chased them out last month.
But from where I’m standing, ultimate blame lies with the Western-dominated neoliberal system that keeps developing countries in a form of debt-fueled colonization. The system is in crisis, its shaky foundations exposed by the tumbling dominoes of the Ukraine war, resulting in food and fuel scarcity, the pandemic, and looming insolvency and hunger rippling across the world.
Former President Gotabaya Rajapaksa deepened our debt problems, but the economy has been structurally unsound across administrations. We simply import too much, export too little and cover the difference with debt. This unsustainable economy was always going to collapse.
Sri Lanka Collapsed First, but It Won’t Be the Last
by Indrajit Samarajiva
https://www.nytimes.com/2022/08/15/opinion/international-world/sri-lanka-economic-collapse.html
As a Sri Lankan, watching international news coverage of my country’s economic and political implosion is like showing up at your own funeral, with everybody speculating on how you died.
The Western media accuse China of luring us into a debt trap. Tucker Carlson says environmental, social and corporate governance programs killed us. Everybody blames the Rajapaksas, the corrupt political dynasty that ruled us until massive protests by angry Sri Lankans chased them out last month.
But from where I’m standing, ultimate blame lies with the Western-dominated neoliberal system that keeps developing countries in a form of debt-fueled colonization. The system is in crisis, its shaky foundations exposed by the tumbling dominoes of the Ukraine war, resulting in food and fuel scarcity, the pandemic, and looming insolvency and hunger rippling across the world.
Sri Lanka is Exhibit A. We were once an economic hope, with an educated population and a median income among the highest in South Asia. But it was an illusion. After 450 years of colonialism, 40 years of neoliberalism, and four years of total failure by our politicians, Sri Lanka and its people have been beggared.
Former President Gotabaya Rajapaksa deepened our debt problems, but the economy has been structurally unsound across administrations. We simply import too much, export too little and cover the difference with debt. This unsustainable economy was always going to collapse.
But we are just the canary in the coal mine. The entire world is plugged into this failing system and the pain will be widespread.
Here’s how the past few months have felt.
I have a car, which has now turned into a giant paperweight. Sri Lanka literally ran out of gas, so my kids asked if they could play inside it. That’s all it is good for. Getting fuel required waiting for days in spirit-crushing queues. I gave up. I got around by bus or bicycle. Most of the economy stopped moving at all. Now fuel has been rationed, but irrationally. Rich people get enough fuel for gas-guzzling S.U.V.s while working taxis don’t get enough and owners of tractors struggle to get anything at all.
The rupee has lost almost half its value since March and many goods are out of stock. You learn to react at the first sign of trouble: When power cuts started a few months ago my wife and I bought an expensive rechargeable fan; days later, they were sold out. When fuel cuts became dire we immediately bought bicycles, and the next day their price went up. Staples like rice, vegetables, fish and chicken have soared in price.
Many Sri Lankans are going on one meal a day; some are starving. Every week brings to my door a new class of people reduced to begging to survive.
I earn in dollars as a writer online so when the rupee depreciated and was devalued, I effectively got a raise. We can afford solar and battery backups to keep the power on. But many others are at the mercy of blackouts. People couldn’t work as factories and other workplaces shut down and children couldn’t sleep in the heat. The first major protests kicked off in March after a full night of this, when it seemed that the entire country was sleep-deprived and furious.
Last month, protesters breached the presidential residence and prime minister’s office, and it was the one thing that felt good. Along with thousands of ordinary Sri Lankans, I got to see inside these colonial-era fortresses for the first time. It was spontaneous, safe and respectful. Couples went on dates there, parents brought their kids. I saw people singing in the president’s house, a mother dancing with her toddler, people swimming in the pool. I walked around a hall lined with plaques bearing the names of British colonizers, which seamlessly became the names of our own presidents.
At the prime minister’s office, someone played the piano and a shirtless man draped in a Sri Lankan flag slept on a couch. Four guys had set up a game of carrom and were flicking the discs around. A child joyfully cartwheeled across the lawn outside, and a community kitchen served rice to anyone that was hungry. It was a beautiful sight in a space where elites had nipped on canapes before, surrounded by armed guards. It felt hopeful.
But what had briefly felt like true democracy didn’t last. Parliament merely replaced President Rajapaksa with one of his cronies, Ranil Wickremesinghe, who has been prime minister a handful of times but lost his parliamentary seat in 2020. He has turned the military on demonstrators and arrested protesters and trade unionists. It’s all been “constitutional,” eroding faith in the whole liberal democratic system.
Sri Lanka — like so many other countries struggling for solvency — remains a colony with administration outsourced to the International Monetary Fund. We still export cheap labor and resources, and import expensive finished goods — the basic colonial model. The country is still divided and conquered by local elites, while real economic control is held abroad. The I.M.F. has extended loans to Sri Lanka 16 times, always with stringent conditions. They just keep restructuring us for further exploitation by creditors.
And as much as the West blames Chinese predatory lending, only around 10 to 20 percent of Sri Lanka’s foreign debt is owed to China. The majority is owed to U.S. and European financial institutions, or Western allies like Japan. We died in a largely Western debt trap.
Other countries face the same peril. Around 60 percent of low-income nations and 30 percent of middle-income ones are in debt distress or at high risk of it. Pakistan, Bangladesh, Tunisia, Ghana, South Africa, Brazil, Argentina, Sudan — the list of those in trouble is growing rapidly. An estimated 60 percent of the world’s workforce has lower real incomes than before the pandemic, and the rich countries offer little to no help.
But big economies are suffering too. Europe faces energy uncertainty, Americans are struggling to fill their tanks, the United States may already be in recession, its asset bubble threatens to pop and British families face food worries.
It’s going to get worse: The I.M.F. just warned that the likelihood of a global recession is mounting. As economies collapse, Western loans simply won’t get repaid and poor nations will crash out of the dollar system that props up Western lifestyles. Then, even Americans won’t be able to money-print their way out of trouble. It’s already begun. Sri Lanka has started settling loans in Indian rupees while India is buying Russian oil in rubles. China may buy Saudi oil with yuan.
The Sri Lankan uprising that threw out our leaders is called the Aragalaya. It means “struggle.” It’s going to be a long one, and it’s spreading across the world.
Sri Lanka and the Neocolonialism of the IMF
Sri Lanka has few options other than an IMF bailout. But engagement with neocolonial international financial institutions is actually one of the causes of Sri Lanka’s economic woes.
by Thamil Venthan Ananthavinayagan
https://thediplomat.com/2022/03/sri-lanka-and-the-neocolonialism-of-the-imf/
Sri Lanka needs cash again and is in a downward spiral. Since the beginning of March 2022, the Sri Lankan rupee has fallen by almost 45 percent compared to the U.S. dollar. Its foreign exchange reserves are nearly dry, having dropped below $1 billion. Meanwhile, the island nation has to repay debt of about $4 billion in the rest of this year, including a $1 billion international sovereign bond that matures in July 2022. Sri Lanka faces imminent default.
In Sri Lanka, the weak economic recovery amid the pandemic has been even further slowed down due to mismanaged government finances and ill-timed tax cuts, making it impossible to pay back the country’s debts to the international financial institutions. As a consequence, Sri Lanka will have to take yet another loan with more conditions – meaning that the country’s sovereignty and the people’s welfare will be, once more, gambled away by a power-intoxicated and corrupt elite.
Sri Lanka’s main exports of tea, rubber, and garments suffered amid the sharp decline of global commodity prices. In addition to this, even before the pandemic, the tourism sector of Sri Lanka had faced losses as tourists stayed away from the country in light of the Easter bombings of 2019. The pandemic further added fuel to the fire. Moreover, controversial tax cuts lowered government revenue. Finally, the Rajapaksa clan‘s government suddenly pivoted to organic farming, ushering in a disaster for food production and food sovereignty.
All of these factors contributed to an overall fatal situation for the country’s economic resilience. Sri Lankans are facing food and fuel shortages, power cuts, and inadequate supply of medicines, among other items.
Sri Lanka and the International Financial Organizations
The vulnerabilities of Sri Lanka have long made it the perfect prey for international financial organizations.
The elites of post-colonial Sri Lanka intoxicated the people with money borrowed from international financial organizations and political allies. In fact, Sri Lanka was the first country in South Asia to embrace neoliberalism. Yet the opening of its economy to the International Monetary Fund (IMF) came with the vilification of minorities and a violent onslaught on trade unions.
Meanwhile, in order to grab any lifeline possible in the current circumstances, Sri Lanka further complicated its problematic financial situation by resorting to regional superpowers in a bid to keep economic collapse at bay (and, not least, to keep the ruling elite in power). To this end the regional rivals, India and China, came to Sri Lanka’s rescue and have granted $4.5 billion in emergency aid. But the great powers are certainly not acting out of altruistic motives. Sri Lanka is a battleground for power rivalry in the region, thanks to its strategic location along major sea lanes in the Indian Ocean.
Sri Lanka has also turned to the World Bank for help.
The IMF and World Bank, part of the Bretton Woods heritage, are the West’s main international financial institutions (IFI). Since 1944, the IMF and World Bank have been the crucial twin intergovernmental institutions shaping the world’s development and financial order. Sri Lanka has frequently engaged with these international financial organizations. The country joined the IMF on August 29, 1950 and has a voting share of 0.1417 percent on the IMF’s Board of Governors, sharing a common director on the Executive Board with Bangladesh, Bhutan, and India. Since joining, Sri Lanka has been the recipient of 16 IMF loans.
These loans, however, come at a steep cost: implementing the IMF‘s economic policies. Here is a sample from the IMF Executive Board’s 2021 Article IV Consultation Statement:
In effect, the IFIs are the harbingers of neoliberalization. They are also undemocratic, imposing conditions on foreign governments. The IMF and World Bank are multilateral institutions, and in theory there is the possibility to review the hierarchy of the international economic architecture through institutional reforms. But in practice that is not happening: The Western hegemony of the IFIs continues to represent the U.S. imperial project of global neoliberalism.
As W.D. Lakshman wrote all the way back in 1985:
The reality, however, has often proved that assumption wrong.
A Critical Analysis From the TWAIL Perspective
TWAIL stands for “Third World Approaches to International Law.” The philosophical foundation of TWAIL is that international law, as it exists today, is a product of a colonial heritage. Its current international institutions, such as the Eurocentric Bretton Woods Institutions, namely the International Monetary Fund and World Bank, perpetuate the same colonial-origin hierarchy that places the Global North over the Global South, by manipulating the Global South’s dependency upon on money and the language of human rights.
TWAIL scholarship has been hostile toward IFIs, as these institutions serve to maintain Western hegemony. IFIs are vital instruments for maintaining the imbalance of powers and protecting the interests of the First World at the expense of the Third World. B.S. Chimni has written that IFIs are part and parcel of the growing infrastructure of international institutions aiding the nascent global state, which serves the interests of transnational capital and powerful states at the expense of Third World states and peoples. Furthering this thought, Makau Mutua explains that the manipulation of the international legal principle of sovereign equality ushers in the perpetuation of existing structural inequality, while enhancing the interests of the First World.
The United Nations’ independent expert on foreign debt wrote in a 2019 report:
In theory both, the IMF and the World Bank are explicitly prohibited from engaging in the political affairs of member states. But in practice they have metamorphosed from apolitical institutions to political actors with wide-ranging powers to impact the economies of the Third World. The anti-democratic nature of neoliberalism is the point of resistance for political struggle. IFIs are outside political and legal control. Internationally there is a lack of even elementary accountability, let alone democratic control over institutions such as the IMF, the World Trade Organization, and the World Bank. The overwhelming power of financial institutions makes a mockery of any serious effort for democratization and addressing the deteriorating socioeconomic living conditions of the people in Sri Lanka and elsewhere in the Global South.
Conclusion
Sri Lanka is a prime example of a Third World country led by a post-colonial elite that is using people as collateral for their power considerations. The island nation has been surrendered to international financial organizations and regional superpowers as a battleground for neoliberal destruction and as a vessel for geopolitical power considerations. The idea of human rights of empowering people (in the Global South at least) is futile when the very international organizations ostensibly promoting human rights are also imposing their own political agenda on the country. In this context, human rights are easily sacrificed for financial power.
An United Nations assessment of World Bank policies provocatively concluded that the organization is “a human rights-free zone… It treats human rights more like an infectious disease than universal values and obligations.” IFIs have chosen, willingly and deliberately, to engage in neocolonialism.
As Balakrishnan Rajagopal writes:
The ones who suffer the most are the people of the Global South. Returning to the example of Sri Lanka, its people will have to bear the brunt of skyrocketing prices and shortages of essential products for a long time to come.