Despite its Sinhala nationalist rhetoric and ethos, international pressure continue to bite, compelling President Mahinda Rajapakse’s regime to implement the pro-market economic reforms that it has bitterly opposed.
Concluding its visit, a delegation from the International Monetary Fund (IMF) observed this week:
“The authorities’ structural reform agenda under the program … appears to be broadly on track.”
(See p33-35 of President Rajapaksa's ideological manifesto, 'Mahinda Chintana' to see the policies the IMF seeks to roll back.)
Amongst policies insisted on by the IMF are cutting of subsidies and state interference in the functioning of markets.
Previous Sri Lankan governments have largely adhered to IMF and World Bank blueprints for economic transformation (see criticism in p33 and 34 of 'Mahinda Chintana').
In its assessment this week, the IMF assessment team noted, and shrugged off, one key consequence of structural reforms: soaring food prices.
The Fund instead warned that Sri Lanka’s economic growth is premised on promised tax reforms and other pledges – “if implemented” – and many others yet to come.
A good example of Sri Lanka's resistance to open market competition is Colombo's footdragging on signing the Comprehensive Economic Partnership Agreement (CEPA) with India. (See discussion here).
CEPA will allow Sri Lankan companies to compete in the Indian market, but is being resisted because it will allow Indian firms to compete in Sri Lanka with the country's largely Sinhala-owned businesses.
