Political restructuring as important as IMF-driven economic restructuring

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While the country struggles with the multiple challenges to be faced to rescue the economy from the doldrums, there are clear signs that political reforms required in the medium and long term are not receiving the priority they deserve from both the polity and civil society.

After the approval of the US$ 2.9 billion dollar Extended Fund Facility to Sri Lanka, International Monetary Fund (IMF) officials also announced that the world body would release a governance diagnostic report on Sri Lanka in September 2023.

Sri Lanka has the dubious distinction of becoming the first country in Asia to undergo an IMF Governance diagnosis analysis under the global lender’s key structural reforms to address corruption vulnerabilities and enhance growth.

It is safe to assume that the IMF has arrived at this decision only because it has come to the conclusion that Sri Lanka’s current economic plight is due to poor governance.

“Anti-corruption and governance reforms are imperative to ensure the hard-won gains from the reforms benefit the Sri Lankan people,” Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, told a media briefing in Colombo, soon after concluding a four-day visit in May. During this visit, his team met with key officials of Sri Lanka.

He said the governance diagnostic exercise will identify key governance weaknesses and corruption vulnerabilities that are macro economically critical in six key areas: Fiscal governance, financial sector oversight, central bank governance, market regulations, rule of law, and AML (Anti Money Laundering) safety.

One area the IMF is placing great emphasis is what they describe as “corruption vulnerabilities” as evident from their focus on asset recovery provisions.

The political restructuring that the country requires to implement economic reforms in the short run and to develop the country in the long term, has long been identified by all sections of Sri Lankan society. However in the discussions revolving around what the IMF has prescribed, this critical factor in governance has long been forgotten.

While there is near unanimity that the individual centric Executive Presidency should be abolished and that Electoral Reforms are essential to pre-empt corruption that is intertwined with the proportionate system of elections, this seems to have been completely forgotten by all sections across the political spectrum.

Instead there is discussion going on as to who will be the possible candidates for the next Presidential election when the discussion should rather be about which political party has the best policies for the country.

President Ranil Wickremesinghe himself will find it difficult to address the corruption vulnerabilities that the IMF wishes him to address because he is dependent on people who are corrupt, according to public perception.

Thus even to address this segment of the IMF’s programme, a ‘blood transfusion’ has to be induced into the legislature to transform it to a body that has the capacity to address this and other critical issues. For this, Parliamentary elections are a must but will have to be preceded by comprehensive electoral reforms that will facilitate people who are not tainted with allegations of corruption from entering Parliament.

According to IMF spokespersons, the governance diagnostic assessment analytical report will be produced by the IMF governance mission. It is a diagnostic exercise with the Government and strong coordinated engagement with stakeholders including civil society. The objective is to examine the severity of corruption in Sri Lanka and identify key governance weaknesses and corruption vulnerabilities. It will also assess the adequacy of the anti-corruption framework, and policies that are needed to address corruption vulnerabilities.

It is not clear whom the IMF Mission working on the governance diagnostic analysis has met with. However one hopes that the civil society representatives who engaged with the IMF Mission would have pointed out that the Executive Presidential system was the governance structure that facilitated wrong decision making or what the IMF euphemistically calls ‘missteps’ that led to the collapse of the economy.

Will it be too much to hope that the governance diagnosis that the IMF makes will include a recommendation that the Executive Presidency be abolished? This could be justified on the basis that the economic situation that the country is facing has been facilitated by this centralised form of governance.

It could also be justified on the basis that the rule of law, which is another area within the purview of the IMF’s governance diagnostic analysis, has been greatly endangered by the institution of the Executive Presidency.

On June 14, the IMF published a report on the Governance diagnosis analysis done by it in Mali (Africa). A description of the situation in Mali when it embarked on its assistance programme resembles Sri Lanka in many ways.

“Many years of domestic armed conflict, terrorist insurgencies, political instability, and economic turmoil have had a significant toll on the country and impeded reform progress. Strengthening governance and stepping up the fight against corruption are instrumental to restoring peace and security in Mali.”

One of the key recommendations for Mali too, is strengthening the rule of law, through increased judicial and legal transparency and exemplarity in managing the State.




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