Committee for the Abolition of Illegitimate Debt

Instead of empowering the Government to upgrade the hardware and strengthen the structural power of the economy – boost industries, restore developmental infrastructure, and elevate skills and technology, the IMF IMF
International Monetary Fund Along 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 system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto 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 UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org program limits planning and action to the bare minimum and vulnerable sectors like tourism. The Appropriation Bill and, subsequently, the Budget 2025 are early warning signs of the harms of the IMF program. The earliest exit would mean the best for Sri Lanka.

Debtors’ prison – the fiscal squeeze

In accordance with the IMF guidelines, the NPP Government is striving to meet a 2.3% primary account balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. in 2025. Increasing the Government’s revenue to 15.1% of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. from 11% in 2024 is one initiative to meet the primary Budget surplus. However, the IMF debt sustainability guidelines ensure that the enhancements in Government revenue will not be used for developmental activities and economic recovery but to meet debt servicing obligations. Accordingly, debt sustainability targets that the IMF imposes on the Government’s fiscal planning only ensure the sustainability of the creditors.

The Government has capped spending at Rs. 4,290 billion. Interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rate payments will amount to around Rs. 3,000 billion. According to the Governor of the Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx , Sri Lanka has to service between $ 4 to 5 billion of debt in 2025. As a result, debt servicing as a share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of Government revenue exceeds expenses on social security, public services and investments in the productive economy. A study comparing the debt service Debt service The sum of the interests and the amortization of the capital borrowed. obligations of 145 countries in 2024 ranked Sri Lanka 2^nd in terms of countries with the highest debt service to revenue ratios in the world (Resolving the Worst Ever Global Debt Crisis: Time for a Nordic Initiative? 2024).

Total debt service as a share of Government revenue in Sri Lanka is 202%. This is not new, either. According to Nicholas and Nicholas (2024), interest payments as a ratio to total government expenditure have risen since 1990. They point out that high-interest payments have played a significant role in increasing the budget deficit.

Countries like Sri Lanka, repaying debts under frameworks facilitated by the IMF, return to the open market when they fall short of funds. Open market debt disbursed at usurious rates – International Sovereign Bonds (ISBs) are not new to Sri Lanka. ISBs are at the heart of Sri Lanka’s debt crisis.

Not a bitter pill, but …

Departing from the usual trend, the Budget 2025 will not prescribe bitter pills or tightening belts to the ordinary masses. In contrast to numerous Budgets in the past, Government spending on health, education, agriculture, fisheries, rural development, and plantations has increased.

The Ministry of Health and Mass Media has received the second-highest allocation after the Ministry of Finance, Planning and Economic Development. Compared to the 2024 Budget, there is an increase of Rs. 73 billion for both the health and mass media sectors. Even though the appropriation bill does not reveal how the improved funding would result in infrastructure and capacity development of the public health services to provide better services specifically, it indicates a direction towards improving services.

The increase in spending on education is reflected in the development activities of the Ministry of Education, examination departments, Technical Education and Training, and the University Grant Commission. Budgetary allocation for the Department of Educational Publication remains unchanged, indicating an adjustment between the recurrent and capital expenditures.

The allocation of Rs. 30 billion for the Ministry of Rural Development, Social Security, and Social Empowerment is also substantial. A subject previously annexed with women and child affairs was separated into two distinct ministries under the NPP Government. The issue of rural development and social empowerment, which heavily involved the state apparatus in the 1980s and 90s, was gradually outsourced to NGOs and microfinance companies in the subsequent years. The outcome has been the Microfinance crisis – excessive wealth extraction by the microfinance companies and the proliferation of debt among low-income women. The villages rendered bankrupt and underdeveloped with microfinance need extra support to recuperate. The new ministry could be vital in village regeneration and resolving the microfinance crisis.

Same old road to agriculture modernisation?

The newly amalgamated Ministry of Agriculture, Livestock, Land and Irrigation ranks 8^th in terms of the highest allocations of funds. In 2024, the Ministries of Agriculture, Irrigation and Land stood as different ministerial portfolios and received close to Rs. 193 billion. Likewise, the approximate increase in 2025 is Rs. 15.7 billion. Even though it appears insignificant compared to the rise of over Rs. 100 billion, the allocation of funds in a more coordinated and streamlined setting that the current amalgamation offers would lead to more efficient and productive use of funds. In terms of single-department allocation, the Department of Export Agriculture has seen the most noteworthy increase in the capital expenditure provisions.

The impact of enhanced funding will depend more on how the increased funding will restore the capabilities of the small farmers to produce the food people need in Sri Lanka. According to the Monthly Trade Bulletin of the Central Bank, between January and November 2024, Sri Lanka spent $ 397.4 million on importing vegetables. Data from January and February of the same year indicate $ 62.8 million in vegetable import expenses. Import dependence for domestic food needs is harmful not only because it leaks foreign exchange but because it is a source of vulnerability. The breakdown of the supply chains during the Covid-19 pandemic, disruption of food supply, and price inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. of food grains in the backdrop of the Ukraine war underscore the importance of reducing dependence on external markets for domestic food needs. While promoting agri-business-based food production for exports sounds enticing in terms of foreign exchange generation, ensuring food sovereignty domestically to provide healthy food for people has greater development linkages in terms of health, nourishment, and livelihood developments.

According to the World Food Programme’s Household Food Security Overview 2023, 24% of households in Sri Lanka are food insecure. Incidents of food insecurity are more prevalent among female-headed households and in the estate sector. According to the same report, people are transforming their cultivation towards food-oriented agriculture to tackle household-level food scarcity. It’s the responsibility of the state to identify such trends and support grassroots initiatives.

Security breeds insecurity

Neither the worst economic crisis in Sri Lankan history nor the efforts to recover have posed austerity on either the Budgets of the Ministry of Defence or the Public Security. Both Budgets have grown beyond the budgetary allocations in 2024. While the defence Budget has expanded by Rs. 19 billion, the Ministry of Public Security and Parliamentary Affairs budget has grown by Rs. 35 billion. Department of Police has received the highest allocations. In the Defence Budget, the Army has received the biggest chunk. Even though the defence Budget’s prominence has decreased as a share of the net budget compared to 2024, it still represents bloated areas in the public sector.

Interestingly, the advocates of public sector reforms in terms of wage freezing and worker reduction to drive efficiency and reduce the burden on public coffers have refrained from discussing wasteful expenditure, wage bills and unproductive investments within the defence sector. Nor have they prescribed decommissioning and retrenching of the armed forces or defence sector reforms. The bloated defence budget is a burden as it diverts funds from much-needed investments in industries, manufacturing, agriculture, and fisheries, which could drive the economy forward. Also, it diminishes provisions for public goods and social security, factoring in more extensive human security. The public, particularly the working people, has borne a disproportionate burden of economic stabilisation in the form of increased taxes, cuts in social security provisions and public goods.

Diversification within the military into agriculture, tourism, and leisure has created unequal landscapes. It has affected the livelihoods of peasant farmers and small and medium-scale businesses making a living from farming and tourism. Likewise, the armed forces, with steady wages and job security, have created a sense of insecurity for ordinary people. Developments around Aragalaya and other protests of workers, students and distressed people, like in the case of Rathupaswala, point out that the armed forces prioritise preserving the status quo over justice. As a Budget scraping the bottom for funds, expenses on defence should have been rationalised.

Since the war’s end and the restoration of stability, defence sector reforms have not been discussed. For subsequent Governments, sustaining a large corpse of armed forces contributed to their own security and enrichment. As the people desire to deviate from that trajectory, it’s time to start discussing decommissioning excess military personnel and reorienting them towards civil livelihoods.

A fragile backbone

As explained earlier, the main causalities of IMF’s fiscal squeeze are science and technology, industry and entrepreneurship development and trade, commerce, food security and cooperative development. Altogether, these three ministries have only received Rs. 20.9 billion. While the budgetary allocations of the Ministry of Industry and Entrepreneurship Development see an increase of Rs. 4.3 billion, the increase in provisions for the Ministry of Trade, Commerce, Food Security, and Cooperative Development is only Rs. 0.2 billion. The Ministry of Science and Technology’s budget has been slashed by Rs. 0.4 billion. Three ministries that could have laid a firmer foundation towards economic recovery, restored market control, propelled value addition, innovation, and driven industrialisation have not received the necessary funding.

Appropriation Bill 2025 signals that the economy’s trajectory would be more or less the same – relying on tourism and services rather than industries. Time after time, Sri Lanka has experienced the dangers of relying on low-end exports, tourism and remittances for foreign exchange. A mere travel advisory can bring Sri Lanka’s tourism industry down. Easter attacks and the Covid-19 pandemic also illustrated the vulnerabilities stemming from the weak structures of the economy. The debtors’ prison that the IMF superintends only permits adaptation and adjustment. Not radical transformation and freedom.

The way forward towards the robust and prosperous economy that people dream of hinges on stronger economic structures and breaking free from the IMF prison.