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Sri Lanka Government Implements Vision 2025, The Austerity Programme For The Next Eight Years.
Sri Lanka Government Implements Vision 2025, The Austerity Programme For The Next Eight Years.
eight years.
Sri Lanka government is devoutly implementing "Vision 2025: A Country Enriched", the
government's economic and austerity programme for the next eight years, lunched by
President Maithripala Sirisena and Prime Minister Ranil Wickremasinghe, in early last
September.
Presenting the monetary and financial sector policies for 2018 and beyond, Sri Lanka Central
Bank Governor, Indrajith Coomaraswamy on Wednesday declared the Bank's proposed
moves to keep up with government's "Vision 2025", which he said "unveils the future policy
direction of the country".
End of December last year, while disclosing the last monetary policy review for the year
2017 he also endeavoured to show that the country's economic stability is reached and would
remain so, given the current fiscal consolidation is continued. Early December,
Coomaraswamy told the Financial Sector Investment Conference that the Bank is confident
in being able to handle the sovereign debt repayments in next two years, "provided the fiscal
consolidation measures stays on track".
The Government passed its Budget for 2018 in early December, which is primarily grounded
on the policies of Vision 2025. This so called economic vision to "make Sri Lanka a rich
country by 2025" is the programme recommended by the World Bank aimed at fiscal
consolidation, opening Sri Lanka's resources and labour for international capital and
streamlining privatization.
The whole claim of a vision for a "country enriched" is falsehood. In the backdrop of
staggering social polarization, poverty and unemployment which have exacerbated after
2008 economic and financial crisis that hit the United States and has had spiralling effects all
over the world almost over a decade, this implies the building of a country for the super rich.
The budget for 2018 ensures this, in that the indirect taxes paid chiefly by the working
people will constitute a 74 percent of the government’s total tax income, while direct taxes
paid by the rich will fall to just 17 percent.
Aimed at furthering fiscal consolidation in order to reduce debttoGDP ratio by 70%, which
currently stands at 79.30% of GDP, the agenda is also a consolidation of the neoliberal policy
demands of International Monetary Fund(IMF). Wickremasinghe declared at the launch that,
in order to do so, the Unity government has "formulated a forwardlooking liability
management strategy for domestic and foreign debt under the medium term debt
management strategy", and that "the country hopes to repay all its outstanding loans by
2025". So, the whole programme is primarily a debt repayment mechanism.
Wickremasinghe also declared government's moves to further liberalize Sri Lankan market
to attract foreign direct investment(FDI), by stating that it has formulated a new trade policy,
along with an original "National Export Strategy", aimed at creating a "more liberal, simple,
transparent and predictable trade regime".
Some of the significant economic policy goals in the Vision 2025 include the following:
Transforming Sri Lanka into the economic hub of the Indian Ocean, with a
exportoriented, highly competitive, socialmarket economy: It promises citizens "higher
incomes" and "better standards of living".
Enhancing global competitiveness of the economy. This implies further trade
liberalization.
Introducing businessfriendly legal reforms. Finance Minister Mangala Samaraweera said
archaic laws such as the Agricultural Lands Act and Shop and Office Employees Act
would be amended to provide more market flexibility.
Rationalizing public expenditure and restructuring State Owned Enterproses (SOEs) as
commercially viable enterprises.
Encouraging PublicPrivate Partnerships (PPPs): the potential areas would include health
care, leisure, tourism, education, ports and aviation. This mechanism is intended to
release the government of welfare burden and increasingly privatizing essential services.
Sri Lanka is mired in a acute debt crisis, the budget deficit standing at 5.4% of GDP. The
GDP for 2017 and for this year is estimated at 1999 billion rupees ($ 13 billion) and 2,326
billion rupees ($US15 billion), respectively, the increase pointing to the tax hikes following
the recent drastic tax reforms and 2018 budget, while the total debt repayment for the next
three years would be 7,000 billion rupees ($45 billion), as stated by Samaraweera.
Early December last year, granting $ 251.4 million as the fourth tranche of the agreed bailout
loan of $1.5 billion, the IMF forced its conditionalities onto the government: continuous
fiscal consolidation, building up foreign reserves, maintaining a liberal exchange rate
regime, tightening monetary policy and restructuring SOEs. Fiscal consolidation requires
government to reduce the budget deficit to 4.5% by 2018 and to 3.5 % by 2020.
It is in this background that the government is forced to cut social welfare, increase taxes and
liberalize trade and labour, like many European Union countries including Greece, Ireland,
Italy, Portugal and Spain, to reduce budget deficits and sovereign debt. The promises of
prosperity and development for the masses is therefore a blatant lie.
During last eight months up to end of November, the government cut funding for the limited
social welfare programmes of Samurdhi by 700 million rupees ($ 4.5 million) and the
fertilizer subsidy by 3.8 billion rupees ($ 24.8 million), compared to the same period last
year.
In a good gesture for foreign direct investment (FDI), government approved early in
December a 32 year period of income tax holiday for the China Merchants Port Holdings
company, to which the government leased Southern port of Hambabtota for 99 years, amidst
much concern by US, India and Japan. Wickremasinghe stated that the money out of this
deal would be used for debt repayment. The government is also aiming at privatising Sri
Lankan Airlines, the national carrier, on claims of being lossincurring SOE under a PPP, as
also demanded by IMF.
The budget for 2018 was passed with more than two third majority in Parliament in favour,
showing the readiness of the whole bourgeoisie establishment to impose severe austerity
measures on larger public. Samaraweera declared at a postbudget forum that "the main
theme of the budget, 'enterprise Sri Lanka' and liberalizations are nonnegotiable.
"Nonnegotiable" means that the policies are not subject to any compromise with the
opposition of the working people.
The Wickremasingheled United National Party (UNP) and Sirisenaled Sri Lanka Freedom
Party(SLFP) entered into a unity government in 2015 to drive through its promarket policies
and suppress the alreadyemerging opposition of the working class against social
counterrevolution.
Wickremasinghe has a long history of implementing promarket reforms. In November 2015,
he presented an economic policy statement outlining sweeping promarket reforms that
would drastically affect jobs, wages and living conditions of workers and the poor, while
offering benefits and concessions for foreign and local businesses. Even before, in 2002, his
previous government got approval from the World Bank and IMF for a parallel agenda of
economic policies laid down in the Poverty Reduction Strategy Paper(PRSP), which was
consolidated in the programme of "Regaining Sri Lanka". Succeeding governments of
Chandrika Kumaratunga and Mahinda Rajapakshe continued the same.
The working class should reject these agendas. Under a workers’ and peasants’ government
founded on socialist policies sovereign debt would be repudiated. The mass opposition to the
implementation of these policies should be guided by a political perspective for socialist
restructuring of the economy nationally and globally against international capital.