SRI LANKA'S LOST DECADES AND FLAWED WORLD BANK PROJECTS

Last week, the World Bank released two documents on Sri Lanka: A report titled, 'Sri Lanka Public Finance Review' addressing Sri Lanka's painful fiscal adjustment over the last few years, and an appraisal document for a USD 100 million loan for its new 'Integrated Rurban Development and Climate Resilience Project'. These two documents highlight the failed vision of the World Bank for the development of our country, and a wake-up call for a different people-centred economic trajectory.

- By Ahilan Kadirgamar

Over the last five decades, the IMF and the World Bank have worked hand in glove to restructure countries in the Global South towards vast extraction of wealth and resources for global capital. This was enabled through Structural Adjustment Programmes, and eventually with a consolidated vision called the Washington Consensus towards creating free market economies. This included the push for commercialised debt to restructure our food systems solely for the export market. These loans for development come with high interest costs that lead to further indebtedness of countries like ours. In this column, I draw on the World Bank documents to illustrate that this Washington-centred economic “recovery” path has led to lost decades for Sri Lanka and that its disastrous agricultural projects will undermine our food system.

Contraction and poverty

While Sri Lanka's debt crisis was caused by a current account deficit, where we ran out of dollars to repay our debt and pay for imports, the multilateral agencies framed it as a problem to be solved by creating a budget surplus. The World Bank report congratulates Sri Lanka for globally unprecedented levels of fiscal consolidation, particularly in terms of the net primary budget deficit and surplus (revenues minus expenditure excluding debt payments). Since the IMF program in 2023, the net change is 6% of GDP, and since 2021 just before Sri Lanka began implementing the preconditions of the IMF programme, it is 8% of GDP. If we include the cuts to subsidies of electricity and other services with the market pricing of energy required by the IMF programme, we can probably look at an additional 2% of GDP. This supposedly best performance by Sri Lanka compared to other countries since the 1980s, is one of really extreme austerity which the Wickremesinghe-Rajapakse regime imposed on the citizenry in overzealously following the IMF and World Bank.