Committee for the Abolition of Illegitimate Debt

According to the spirit of the video conference [1], we must radically challenge the capitalist export model. It is the root cause of the Sri Lankan crisis.

With the support of 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 , the dominant political elites with links to national and international big business have abandoned in the last fifty years the welfare state model and the timid, half-hearted attempts to diversify the economy. The agreement with the IMF has created conditions for the abandonment of support for the peasants who produced rice to feed the population, which was sold on the local market in favour of rice imports from abroad, and concentrated even more on tea production and exports.

The country relies on exporting workers to the Gulf countries to generate foreign currency. To raise dollars, the country further indebted itself by financing investments in the tourism sector. China has financed major infrastructure projects, such as a deep-water port. This generated a credit bubble in the sector of infrastructure between 2010 and 2015.

This model seemed to work. Tourism flourished, and the Sri Lankan workers who left for the Gulf and elsewhere returned money to the country.

The major central banks in the North’s countries injected huge sums of money into the financial markets for the benefit of investment funds Investment fund
Investment funds Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity. and banks, while the latter bought Sri Lankan debt securities. At the same time, corruption increased, and the capitalist elites grew richer without diversifying the country’s economy or industrialising it.

Then came external shocks that brought the house of cards crashing down. The COVID pandemic in 2020-2021 brought tourism to a halt.

As a result, the Russian invasion-induced war in Ukraine significantly increased Sri Lanka’s fuel and food import costs. This series of events accelerated the IMF-recommended model’s crisis, which directly affected Sri Lanka and other nations seen as success stories of the neo-liberal capitalism the IMF and big business promoted.

Other examples include Ghana, Tunisia, Egypt, and Kenya, as well as Pakistan and Bangladesh. More than 100 countries have called on the IMF.

If we had had a government that served the people, what actions should we have taken in Sri Lanka?

• The government should have suspended debt payments in 2020, explaining that there was an external shock and a fundamental change in circumstances.
• The government should have launched a debt audit with popular participation in order to identify the legitimate or odious part of the debt and repudiate it.

The government in power preferred to try to continue paying the debt, but when the price of imported oil and food exploded, it was no longer possible to continue the payments.

And now there is a new agreement with the IMF with very harsh anti-people conditionalities. Anura Kumara Dissanayake, the presidential candidate from National People’s Power, supported by the JVP, said in his campaign that the will renegotiate with the IMF: we must have no illusion on the possibility to really change the IMF agreement. He can try, but it would be vital to stop immediately if the IMF doesn’t accept to modify the conditionalities and eliminate all the anti-people policies.