Frying pan of shortages at post-IMF fire
The scorching heat of April and May will fry our workers as food and medicine become scarce, oil shortages lead to transport disruptions and power cuts close workshops. What about the mismanagement of an economy with import peaks in 2021 of $21 billion – including, for example, $1.3 billion for non-food consumables and $1.6 billion for substitutable foods ( vegetables, seafood, confectionery, beverages) – and then unable to pay for the next delivery of oil? How brazen are our political elite and leaders, who have acted without care
The concept of “care work” refers to a set of material and psychological practices intended to provide a concrete response to the needs of others and of a community (including ecosystems). We prefer the concept of care to that of “domestic” or “reproduction” work because it integrates the emotional and psychological dimensions (mental load, affection, support), and it is not limited to the “private” and free aspects by including also paid activities necessary for the reproduction of human life.
on the needs of the populations then go with the begging bowl to the international actors for the supplies of the following month?
Given the democratic sensitivities of our people, the Rajapaksas are likely to be banned from politics. Well, they may be spared a seat in parliament, as with the big old party, the UNP, in the last election. Unlike former Prime Minister Wickremesinghe, who having undermined the country’s political prospects and his party was privileged to choose the single seat for himself, the Rajapaksa family may find it difficult to choose who is to blame and who can sit in parliament.
Major economic crises lead to major political changes. But first we need to understand the trajectory of the economic crisis and what lies ahead for people beyond the day-to-day challenges of supply. Devaka Gunawardena and I recently wrote about the dangers to workers’ rights with the impending IMF
International Monetary Fund
Together with the World Bank, the IMF was founded on the day the Bretton Woods agreements were signed. Its first mission was to support the new standard exchange rate system.
When the Bretton Woods fixed rate system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman of world capital: it acts as policeman when it applies its structural adjustment policies and as a firefighter when he intervenes. to help governments at risk of not repaying their debt.
As with the World Bank, a weighted voting system works: according to the amount paid as contribution by each member state. 85% of the votes are needed to modify the IMF Charter (meaning that the USA with 17.68% of the votes has a de facto right of veto on any change).
The institution is dominated by five countries: the United States (16.74%), Japan (6.23%), Germany (5.81%), France (4.29%) and the Kingdom United (4.29%) .
The other 183 member countries are divided into country-led groups. The most important (6.57% of the vote) is led by Belgium. The smallest group of countries (1.55% of the vote) is led by Gabon and includes African countries.
http://imf.org agreement. While I see the current conjuncture and outcome as far more important than the consequences of an IMF deal, in this column I further articulate the post-IMF crisis that will hit us later this year. The recommendations of the IMF, long prepared and some of which are already being implemented, are a decisive moment in this historic crisis that workers must face. Ultimately, it is the resistance that will decide what is saved and what is destroyed from the social foundations we have acquired over decades.
What’s worrying about an agreement with the IMF? After all, Sri Lanka has gone through 16 IMF agreements. Most recently, in June 2016, Sri Lanka, under the leadership of Wickremesinghe, sealed an IMF Extended Financing Facility of US$1.5 billion, and before that, the government of Mahinda Rajapaksa signed a stand-by agreement from the IMF of US$2.6 billion in July 2009. These agreements had the same objectives of promoting the interests of capital and the market at the expense of the well-being of people. So, one wonders what is so significant about the agreement with the IMF that is currently being negotiated? The difference today is that, just like the economic situation in Sri Lanka in 1977-78, the present conjuncture can lead to enormous changes. In particular, with our desperate economic situation, we have no bargaining power and are much more vulnerable, and likely to be forced to implement harsh conditionalities.
The IMF recommendation according to its Staff Report published at the end of March 2022 explicitly mentions the following five points:
1.”Substantial revenue-based fiscal consolidation. Reforms should focus on strengthening VAT and income tax, through rate increases and base-broadening measures. Fiscal adjustment should be accompanied by energy price reforms to reduce fiscal risks from loss-making public enterprises.”
This means that the economic burdens of the population will increase with the increase in taxes, including the regressive VAT, which is levied on everyone, including essential goods. And more worryingly, it’s going to reduce all energy-related subsidies, whether it’s electricity or fuel costs, and the market, with its huge swings, is going to determine what workers pay in terms of electricity and fuel; transport for ordinary people and subsistence inputs such as kerosene and diesel for fishing boats and farmers’ tractors.
2.”Develop a comprehensive strategy to restore debt sustainability.”
The IMF does not prevent us from borrowing very expensive loans on the international capital markets, such as the sovereign bonds which are at the origin of our current debt crisis. Rather, it will decide when and how the government will borrow. The state will not be allowed to make much-needed investments to create jobs or provide crisis relief. State assets can be sold to pay off debts, costing the population dearly by reducing state services.
3.”Short-term tightening of monetary policy to ensure that the recent break in the inflation
The cumulative rise in prices as a whole (for example a rise in the price of oil, leading eventually to a rise in wages, then to a rise in other prices, etc.). Inflation involves a fall in the value of money because, over time, larger sums are needed to purchase particular items. This is why business-oriented policies seek to contain inflation.
the target band is only temporary.”
Lower inflation targeting is in the interest
Amount paid as remuneration for an investment or received by a lender. Interest is calculated on the amount of capital invested or borrowed, the duration of the operation and the rate that has been set.
of capital, because the value of capital will not decrease due to inflation. But if we want workers to earn higher incomes and if jobs are to be created, then there should be policies that allow the state to intervene to raise wages, create jobs through public investment, etc., which will be refused for the sole purpose of keeping inflation low.
4.”Gradually restore a flexible, market-determined exchange rate. To avoid disorderly exchange rate movements, the transition should be carefully sequenced and implemented as part of an overall macroeconomic adjustment program.”
This recommendation is an oxymoron because the markets are actually messy as they lead to big swings. Moreover, these instabilities, such as increases in the price of milk powder, must now be absorbed by the workers.
5.”Social safety nets need to be strengthened, by increasing spending, expanding coverage and improving targeting, to mitigate the negative effects of macroeconomic adjustment on vulnerable groups.”
The key word here is targeting. They’re going to decide who’s vulnerable and who’s not, and if they lower the bar enough, no one will need a safety net. This feel-good recommendation is there, so that our comprador or elite can sell the IMF deal itself to the people.
Marketing our future
The recommendations do not stop at this five-point plan. There is an important paragraph at the end of the recommendations:
“Renewed efforts are needed on growth-enhancing structural reforms, including increasing women’s participation in the labor market, reducing youth unemployment, liberalizing trade, developing a far-reaching investment promotion strategy and consistent and by reforming price controls and public enterprises..”
There is no recognition of women’s role in social reproduction to support household provisioning through informal production and indeed their work in the home. Second, the IMF pushes for further trade liberalization regardless of its role in the current conjuncture. balance of payments
Balance of payments
A country’s current balance of payments is the result of its commercial transactions (ie goods and services imported and exported) and its financial exchanges with foreign countries. The balance of payments is a measure of a country’s financial position vis-à-vis the rest of the world. A country with a current account surplus is a lending country to the rest of the world. On the other hand, if a country’s balance is in the red, this country will have to turn to international donors to meet its financing needs.
problems. Finally, he wants the lifting of price controls and the reduction or privatization of public services.
Should Sri Lanka’s future be determined by the market in the interests of capital? Those who control the global system and their local comprador partners have much to gain. The workers of our country, on the other hand, will be squeezed by the market. This time around, the post-IMF months and years will not go as usual. Workers will be thrown into the fire unless they extinguish the post-IMF crisis with radical resistance.