IMF policy and the poor

The IMF has said it will have to look at the budget for 2026 before it could release the next tranche of aid to Sri Lanka. This means the government has to act according to IMF policy and advice and abide by its conditions which so far have been bitter for the poor as could be seen from poverty statistics and voices of protest emanating from some sectors.

- BY N. A. DE S. AMARATUNGA

The poverty level, which was 14% in 2022, rose to 24% during the economic crisis and since has not shown any signs of improving despite claims of economic recovery and IMF endorsement of economic management. Health services available to the poor people are woefully inadequate. The proposed education reforms, which probably are being planned under the advice of the IMF appear to be inimical to poor rural children, particularly the intended closure of state schools and the extension of school hours.

The development of a country must, by definition, means the equitable distribution of wealth that is created mainly by the poor people. Under the present economic system, based on neo-liberal policies that uphold the maxim of market forces, the bulk of the wealth created by the poor people in the estates, garment factories and expatriate workers in West Asia, are siphoned off by the rich, under the nose of the government as well as the IMF. A larger budget allocation for health and education is antithetical to IMF policy.

Sri Lanka's 2026 national budget has allocated Rs. 654 billion for the health sector and Rs. 704 billion for the education sector which is approximately 1.25% and 0.68% of the GDP respectively. Whereas 5-6% for each of these two sectors is the desirable amount for developing countries if meaningful long-term benefits are to be achieved. Investment in these sectors must be considered the best investment a developing country could make. Countries like Mauritius and the Seychelles have benefited from investments in health and education, leading to higher quality of life and human development. Other countries such as South Africa, Tunisia, Botswana, Algeria, and Kenya have also shown progress due to their focus on these sectors.