Monday, August 15, 2022

The CEDSL Group of Academics and Activists Demands Debt Cancellation to Save Sri Lanka – Veterans Today

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I’m honored to receive and publish an appeal signed by distinguished Sri Lankan academics, also signed by our correspondent from Indo-Pacific Darini Rajasingham-Senanayake. In it, he highlights the very serious situation of the country and suggests some solutions to protect it from the economic disaster favored by the West.

Dr. Darini Rajasingham-Senanayake, is a Social and Medical Anthropologist, based in Colombo, Sri Lanka.


The Coalition for Economic Democracy in Sri Lanka (CEDSL) is a group of concerned academics, activists, agricultural, fisheries and industrial workers, students, business persons, trade unionists, and professionals based ‘in country’ and overseas, including the diaspora, who uphold the values of economic rights and justice in public policy making.

In the wake of two years of economically-devastating Covid-19 lockdowns, quantitative easing, and money printing globally, we call on international actors to heed the people’s demands for a DEBT JUBILEE and CANCELLATION as a priority.

We wish to draw your attention to key issues regarding the current debt crisis and its social, political and economic impacts which are not adequately represented in public discussion, yet crucial to the well-being and security of Sri Lanka’s citizenry.

A CALL FOR DEBT JUSTICE

International support is welcome to ease the economic burden on the people of Sri Lanka which includes shortages of fuel, food and medicines that impact livelihoods and health, increasing poverty and inequality. However, due to an International Sovereign Bond (ISB), debt trap and depreciation of the Sri Lankan rupee against the US dollar, sustainable solutions are needed rather than the short term sale of strategic assets that benefits ISB holders and hedge funds that sustain dependent development.

In May/June 2022 Sri Lanka’s debt was estimated to be US$51 billion with current debts of US$5 billion to be paid to ISB holders and hedge funds like BlackRock. They secured huge United States (US) government ‘Covid-19 bailout’ funds to asset-strip and impoverish countries around the world during the economically-devastating Covid-19 lockdowns.

Contrary to widespread media disinformation about the sources of debt and the causes of default, this is the first time that Sri Lanka, in April of this year, defaulted as an independent state. It is the debt owed to ISBs that amounts to almost 50% that has caused the default at this time.

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The Asian Development Bank and World Bank have indicated willingness to roll over its multilateral debt, so too the bi-lateral debt holding Asian countries including Japan, China and India. Along with debt cancellation there is need for de-dollarization and trading in a basket of currencies. The loss of such autonomy and sovereignty due to the ISB debt tap and the International Monetary Fund (IMF) stepping in to devalue the currency is at the root of the current shortage of food, fuel, meds, fertilizer, gas, etc. The purported shortage of ‘exorbitantly privileged’ dollars is the most devastating impact of the entire “staged” default.

While the return of stolen assets by the Rajapaksa family, some who are US citizens, is vital, we believe that there is an even greater need for DEBT JUSTICE, a DEBT JUBILEE, and DEBT CANCELLATION as the current international financial architecture is not fit for purpose, particularly, the IMF which works for the global 1 percent and imposes austerity on the rest.

SRI LANKA-IMF NEGOTIATIONS INHERENTLY UNEQUAL

The gross lack of transparency in on-going negotiations between the IMF and a government that lacks legitimacy but purports to represent the citizens, is a consequence of an inherently unequal relationship between Sri Lanka and the IMF, where the US and former European colonial powers have overwhelming decision-making power. While the IMF demands ‘transparency’ and that all creditors be treated ‘equally’, the names of the ISB holders behind Sri Lanka’s default are a closely guarded secret!

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In 2019, Sri Lanka was classified by the World Bank as an Upper Middle Income Country (MIC), making it ineligible for concessionary development loans, and forcing it to borrow from private capital markets at high interest rates. The new government that came to power cut taxes causing a significant loss of government revenue. The 2019 Easter bombings and policies undertaken during two years of militarized Covid-19 lockdowns and mass injections have triggered the current debt crisis leading to the staged default.

In 2019, Sri Lanka was classified by the World Bank as an Upper Middle Income Country (MIC), but just three year later in 2022 certain international actors want this strategic island to be re-classified a ‘Least Developed Country’ (LDC), to join the world’s poorest of the poor[1] – in Washington Consensus parlance, a “Highly Indebted Poor Country” (HIPC).

LDC status will mean a significant loss of economic and foreign policy autonomy and sovereignty at a time when it is vital that Sri Lanka and other developing countries act in their own self-interest rather than be forced to join geostrategic blocs that are being formed in the Indian Ocean region such as the Quadrilateral Group (QUAD) at this time of Cold War 2.0.

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We consider that the people’s sovereignty and national policy autonomy is being undermined through non-transparent deals with politicians who are not democratically elected and have a history of amassing ‘odious debt’, the burden of which citizens are being forced to bear. Particularly notable on the accumulation of odious debt are the current odious, newly appointed Prime Minister, implicated in the country’s biggest financial fraud over the Central Bank bond scam, and the President, a US citizen until 2019, whose family wallows in nepotism. They are now negotiating with the IMF to sell national assets?!

There is a clear pattern of disinformation, exaggeration and fear-generation regarding Sri Lanka’s debt in local and global media messaging. This understates the intrinsic Wealth of the Nation, its strategic assets, and the strengths of this country given the failure to differentiate between illiquidity and insolvency in the context of a proposed IMF fire sale of assets and State Owned Enterprises (SOEs).

The IMF’s traditional approach to debt restructuring though privatization of SOEs, austerity measures, and fire sale of assets of countries merely causes more problems and places the burden on the poor as is evident from Argentina, to Greece and Lebanon. However, odious debt is an outcome of speculative and reckless ISB lending sans due diligence to governments that lack legitimacy and are known to be corrupt. In fact, the IMF which works for the Global One percent is a part of the problem and not the solution. So too are processes of datafication, manipulation of matrices, indices and algorithms to ensure ‘pumping and dumping’ of countries into the MIC debt trap based on dubious ratings, LDC or HIPC status and Paris Club ‘solutions’ of asset stripping of countries.

SOUTHERN PEOPLE’S VOICES TO BE HEEDED

The bail out of the country should not lead to bailing out of the corrupt political and bureaucratic elites and related oligarchs whose policies, corrupt governance and deals have caused the present crisis of unprecedented scale in our country. The international institutions and people in Sri Lanka should work together to ensure that these elites are held accountable and appropriately dealt with. 

There is an urgent need for Southern voices and perspectives in development, debt cancellation and debt justice in the International Aid Architecture as many countries in the Global South face a similar situation of odious debt as an outcome of speculative and reckless lending by ISB traders who must be also held accountable.[i][2]

The demand of many Sri Lankans is for debt cancellation and de-dollarization and trading in a basket of currencies, not IMF re-structuring; for example, to enable the purchase of discounted oil and gas from sanction-hit Russia perhaps in exchange for tea. Sri Lanka should have the economic and foreign policy sovereignty to source its needs from any country that offers good value for money. Sri Lanka, strategically located on major sea lanes of communication (SLOC) in the Indian Ocean Region has long been in the cross-hairs of big power rivalry, and of those seeking to re-colonize the island at this time.

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A firm “No” to a IMF fire sale of strategic assets and asset stripping: A list has already been prepared of strategic lands, airports, ports, transport, telecom frequencies and energy infrastructure to be privatized. The dastardly sale of the Yugadhanavi power plant to US-based New Fortress has already further compromised national energy security and policy sovereignty and autonomy.

Today the interests of Sri Lanka are being represented by foreign law firms, Lazard and Clifford Chance in so-called IMF negotiations with ISB traders. On numerous occasions, Lazard, which has been involved in both advising on privatisation and then profiting from its advice, has undervalued the price of state companies, enabling its asset management branch to purchase the stock at low prices and re-sell it for considerable profit.[3]

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