Sri Lanka has launched a ‘fast-track’ legislative process to intensify economic and social reforms, in order to secure new IMF and World Bank loans. A coalition of NGOs and unions in Sri Lanka complain that the 36 new laws passed in August will intensify the sell-off of public assets and hurt small farmers and the poor. Areas covered by the new legislation include land ownership, public utilities, human settlement, water supply and distribution.
The decision to pass the laws was taken in June at the Sri Lanka Development Forum that gathered government officials, IMF and World Bank representatives. On this occasion the government unveiled its Poverty Reduction Strategy, saying it had been prepared after a four-year comprehensive consultation process. Civil society organisations claim that they have not been consulted and there was no public announcement on the existence of such a process. They point out that the Strategy is only available in English and call “all member Governments to ensure that World Bank and the IMF would not be permitted to become agents in increasing the suffering and the unbearable burdens on the poor, using such anti-democratic ways”.
In early September the IMF disbursed the remaining $64m of a stand-by arrangement and its Deputy Managing Director Shigemitsu Sugisaki said “perseverance with [current] measures could pave the way for a Poverty Reduction and Growth Facility arrangement later in 2002”.
The IMF is currently debating the use of ‘prior actions’ to be taken by countries to gain access to IMF loans. This fits in the more general debate on ‘streamlining’ IMF conditionality (see Bretton Woods Updates 23-25). A recent report by Tony Killick for the UK Department for International Development offers an interesting early assessment. It shows that facts might not live up to expectations of enhanced freedom of choice for borrowing countries. The IMF Board was expected to discuss draft guidelines on conditionality early September which will then be made public for comment.
The Bretton Woods Project is preparing a briefing note on IMF conditionality.
“I’m beginning to ask ‘has the credibility of the IMF been so eroded that maybe it’s better to start from scratch? Is the institution so resistant to learning to change, to becoming a more democratic institution, that maybe it is time to think about creating some new institutions that really reflect today’s reality, today’s greater sense of democracy’.”
Joseph Stiglitz, Professor, Columbia University; former Chief Economist, World Bank; and Recipient, Nobel Prize for Economic Science, 2001