Committee for the Abolition of Illegitimate Debt

We, the undersigned civil society organisations, trade unions and think tanks condemn 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 ’s engagement in Sri Lanka and the uncritical engagement of some civil society actors with the IMF, despite evidence of the detrimental consequences of the joint GoSL-IMF austerity programme on the socio-economic wellbeing of the majority of our people and their future generations. The grave inequalities in society are widening and more people are trapped in poverty with little hope of recovery. In the face of this, the government selectively applies its austerity measures ensuring that its sacred cows remain untouched and unaffected. Despite the austerity there are wage increases and the preservation of perks for some sectors and not the others.

The IMF has met with local civil society organisations several times before. Similarly, civil society, trade unions, and activists have expressed their concerns regarding the design and conditionalities of the current 17^th agreement with Sri Lanka on several occasions and they have expressed reservations that the concerns they voice are not taken into account. The Trade Unions and CSOs have consistently pointed out that much of Sri Lanka’s debt is odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. and, therefore, illegitimate. There has been no willingness by the IMF to seriously consider this and the other critical issues raised by civil society thus far. The IMF pleads that they must operate within their boundaries. Thus, these consultations with civil society are merely cosmetic, box-checking exercises. 

Hence, we refuse to legitimise the implementation of a plan that is an unrelenting attack on the social and economic lives of the people of Sri Lanka through participation in consultations with the IMF, until we see a genuine effort by the IMF to address the concerns of the Sri Lankan people as listed below.

1. 1. There must be a transparent and democratic decision-making process regarding reforms, by providing relevant information, including the unredacted technical assistance report and the methodology and parameters used to prepare the Debt Sustainability Assessment. The IMF has blatantly disregarded its responsibility to ensure that its policies and their implementation in Sri Lanka are respectful of the democratic rights of Sri Lankans. These include the right to full information and meaningful participation in the decision-making process, and to the peaceful expression of dissent and protest.
2. We demand a reduction of the debt stock Debt stock The total amount of debt to sustainable levels in Sri Lanka through a transparent and just debt restructuring process. This should include the cancellation of all odious and illegitimate debt identified by a public audit process as per internationally accepted norms, a haircut that is much larger than the currently established haircut of 30% and a longer-term debt moratorium that enables the sustainable recovery of the economy.
3. There must be recognition that conditionalities such as market pricing of energy, cuts to subsidies, rise in indirect taxes, and cuts to social welfare are having a devastating impact on the lives and livelihoods of the working people, children and women. A government that lacks popular legitimacy since 2021-2022, led by a President who is neither elected by the people nor commands their trust and support, is suppressing public dissent of the reforms, using brute police and military force, trade union busting and other violent and non-democratic means. Furthermore, the government is introducing a range of repressive legal reforms to create a firewall for itself. We further condemn how the IMF continues to endorse and even encourage the undemocratic manner in which an illegitimate government is pushing these reforms.
4. While the IMF is encouraging the current reforms which increase the burden of the poor, it continues to allow continuous pillage and plunder of wealth by a few through the illicit capital flows together with tax evasion and tax holidays for corporations. The appropriation of pension funds Pension Fund
   Pension Funds Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets. in domestic debt restructuring while excluding corporate bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. holdings in this process is manifestly unfair and deplorable.
5. Having to bear high-interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…
   
   The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. , including surcharges, will only increase Sri Lanka’s indebtedness to the IMF and external creditors. The IMF programme undermines growth, recovery, and even revenue generation for the following reasons:
   a) The primary surplus conditionality reduces public investment,
   b) 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. targeting and the creation of higher 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. rates undermine production and growth, and even leads to the collapse of livelihoods and small businesses,
   c) The further contraction of the economy restricts the ability for revenue flow via taxation, and,
   d) Structural reforms blunt the productive capacity of the Sri Lankan economy.

In light of this situation where there are no clear initiatives undertaken by the Government and the IMF to consider the impact of the current conditions, on the public of Sri Lanka, we the undersigned, are unable to consider the IMF consultation with civil society as leading to substantive changes to positive outcomes. The priority should be on safeguarding the best interests of our people and on their socio-economic recovery and advancement.

Signatories
Trade Unions

1. All Island Progressive Samurdhi Development Officers Society
2. Ceylon Teachers Union (CTU)
3. Commercial and Industrial Workers Union (CIWU)
4. Dabindu Collective Union
5. Federation of Media Employees Trade Unions
6. Free Trade Union Center
7. Free Trade Union Development Centre
8. Information and Telecommunication Employees Union
9. Insurance General Employees Union
10. Joint Development Officers Centre
11. Joint Health Workers’ Union
12. Joint Nursing Service Union
13. Joint Railway Employees Union
14. Joint State Engineering Corporation Employees Union
15. Joint Teachers Service Union
16. Joint Water Supply Workers Union
17. Lanka Progressive Teachers Union
18. Plantation Workers Centre
19. Private Employees Centre
20. Protect Union
21. Sri Lanka All Telecommunication Employees Union
22. Sri Lanka Working Journalists Association
23. Stand Up Workers Union
24. United Federation of Labour (UFL)
25. United General Employees Union
26. Workers Struggle Centre

Organisations/Movements

1. Aalumai Womens’ Team
2. Affected Women’s Forum (AWF)
3. Ampara District Alliance for Land Rights (ADALR)
4. Best of Young Social Service Organization Sri Lanka, Nintavur
5. Climate Action Now Sri Lanka (#cansrilanka)
6. Dabindu Collective
7. Free Women
8. Human Elevation Organization (HEO)
9. Human Rights Office (HRO), Kandy
10. Institute for People Engagement and Networking (iPEN)
11. Institute for Political Economy (IPE)
12. Institute of Social Development (ISD)
13. International Centre for Ethnic Studies (ICES)
14. Islamic Women’s Association For Research And Empowerment (IWARE)
15. Janawaboda Kendraya
16. Law & Society Trust (LST)
17. Mannar Women’s Development Federation (MWDF)
18. Mass Movement for Social Justice (MMSJ)
19. Mass Movement for Social Justice - Hill Country
20. Movement for Land and Agricultural Reform (MONLAR)
21. Movement for Plantation Peoples’ Land Rights (MPPLR)
22. Movement for the Defence of Democratic Rights (MDDR)
23. National Fisheries Solidarity Movement (NAFSO)
24. NGO National Action Front
25. North South Solidarity
26. People’s Alliance for Right to Land (PARL)
27. Praja Abhilasha Network
28. Revolutionary Existence for Human Development Union (RED)
29. Ruhunu Lanka
30. Savisthri National Women’s Movement
31. Shramabhimaani Kendraya
32. Social Institute for Development of Plantation Sector (SIDPS)
33. Social Welfare Mandram, Norwood
34. Stand Up Movement Lanka
35. Suriya Women’s Development Centre, Batticaloa
36. Vallamai Movement for Social Change, Jaffna
37. Voice of the Plantation People Organisation (VOPP)
38. Women’s Action for Social Justice
39. Women’s Action Network (WAN)
40. Women’s Liberation Thought Organization
41. Women for Justice and Peace in Sri Lanka
42. Young Lawyers’ Association (YLA)