Weighing Foreign Assistance in a Disaster Prone Country

Sri Lankans have been watching, first with gratitude and appreciation, the wave of foreign assistance coming into Sri Lanka in the wake of the cyclone Ditwah calamity.

- BY DR SARALA FERNANDO

However now, more and more, there is caution being aired on the quality and thrust of the foreign assistance and possible negative impact on the local population at a time when the government appears to be moving from donations to investment.One problem is that the official press releases never clarify that the funds pledged by the multilateral banks (IMF, World Bank, ADB) are usually not new funds but unused credits repurposed and these are in fact loans and not interest free either. Even as the lender of last resort, IMF Rapid Financing Instrument (RFI) responds positively to the Sri Lanka Government request for a new $200 million loan, Verite Research warns that the effective cost of the RFI financing could exceed 6%. Although few may be aware, throughout the period of Sri Lanka's "bankruptcy" this country has continued to pay interest due on loans from multilateral banks, this being a condition of the IMF programme. Bilateral bank to bank swaps and loans have also been paid back upon request, although there is a Chinese currency swap of RMB 10 billion (around US$1.4 billion) which has been supporting our foreign reserves for some time.

It should however be noted that some of the foreign assistance initiatives are just in bad taste at this time - like the current Australian push assisted by naïve local think tanks and academics, for mechanized mining of Sri Lanka's mineral assets in the name of "Growth". Are these local think tanks and academics following the Trump theory that the climate crisis doesn't exist? They should just look around what has happened in this island on account of cyclone Ditwah, the unprecedented rainfall bringing down some 10% of annual rainfall in just 24 hours some calling it a "hydrological red alert" which is shifting the balance in nature and may become more common in the future.