In an address to the nation on October 19, Sri Lankan President Ranil Wickremesinghe said his government would implement the International Monetary Fund (IMF) austerity program until the last letter.

Ranil Wickremesinghe [Photo: United National Party Facebook]

“If we pull out of this program,” he said, “we won’t receive IMF assistance.” Moreover, without IMF certification, he added, the government would not be able to get further assistance from institutions such as the World Bank, Asian Development Bank and various countries.

“If this happens, the country will return to the era of queues,” he warned, pointing to acute shortages of essential food, medicine, fuel and gas in recent months. In the same breath, the president insisted that “more difficult times are inevitable”.

Echoing the president in an October 22 interview, Central Bank Governor Nandalal Weerasinghe said that, as far as he could see, the IMF was “the only way out” to achieve economic recovery.

Wickremesinghe’s speech and Weerasinghe’s remarks came amid an uproar from big business lobbies over new government tax hikes announced in early October.

The government has accepted the IMF’s target of raising government revenue collection to between 14.5 and 15 percent of gross domestic product (GDP) by 2026, through massive tax increases. In 2022, revenues are estimated at only around 9% of GDP.

Wickremesinghe sought to console big business by referring to the massive tax breaks of up to 50% granted by the previous government. Sri Lankan companies have reaped unprecedented record profits over the past two years.

The government has proposed that the corporate tax rate be increased to 30%, which is still lower than some South Asian corporate tax rates. Most big business investors take advantage of decades of tax exemptions and concessions.

However, the hardest hit by the new taxes will not be large companies but workers, the liberal professions, the self-employed, small and micro-enterprises. The government lowered the monthly taxable threshold from 300,000 (US$820) to 100,000 rupees. Some workers receive monthly salaries and allowances of 100,000 rupees.

Wickremesinghe’s claim to have eased the burden on workers that has led to months of strikes and mass protests since April is a lie. The government has increased the supply of some goods in a limited way, but doubling and tripling the prices of all basic necessities has made the cost unbearable for ordinary people.

New tax burdens come as workers and the poor have been battered by hyperinflation. According to government figures, the annualized inflation rate rose to 70% in September nationwide, while food inflation rose to over 80%. The food inflation rate jumped to 102% from 2020, which means that the real value of wages fell by about 50%.

Sri Lanka announced a temporary default on foreign loans in April, due to an acute shortage of foreign exchange. The IMF requires the country to negotiate with creditors to restructure defaulted loans to ensure repayment. To meet this demand, the government must implement the IMF’s austerity program and force workers and the poor to repay the sharks of international finance capital.

In addition to direct price increases and tax hikes, the government must privatize or commercialize state-owned enterprises, cut hundreds of thousands of public sector jobs, and further reduce social subsidies.

Sri Lanka’s economic turmoil is the most acute expression of the worsening global economic crisis exacerbated by the COVID-19 pandemic and the “let it go” policy of governments around the world, as well as the war between United States and NATO against Russia in Ukraine.

The World Bank report on Sri Lanka released on October 12 notes: “The current crisis has doubled the poverty rate from 13.1 to 25.6% ($3.65 per capita, 2017) between 2021 and 2022, increasing the number of poor by 2.7 million.

The poverty rate in urban areas has tripled from 5% to 15% over the same period. “Half the population in state-owned areas now lives below the poverty line. Across all districts, Mullaithivu continues to be the poorest (57% poverty in 2022), followed by Kilinochchi and Nuwara Eliya,” the report states.

Young family from Deeside Estate in Maskeliya, Nuwara Eliya district, Sri Lanka, September 12, 2022. [Photo: WSWS]

However, a recent survey by the Department of Economic Statistics of the University of Peradeniya puts the number below the poverty line at 9.6 million, or 45% of the population.

According to the World Bank, the GDP growth rate will be negative 9.2% for this year and the decline will continue next year. The industrial and service sectors are expected to decline by 11% and 8%, destroying half a million jobs.

Moreover, there is no economic recovery as claimed by Wickremesinghe and the head of the Central Bank. Growing recessionary conditions internationally will only worsen with the US Federal Reserve and other central banks raising interest rates.

The IMF program is supported by all opposition parties in the country. Iran Wickremaratne, a senior lawmaker from the main opposition Samagi Jana Balavegaya (SJB), said “targets set by the IMF must be reasonable and achievable.”

A Janatha Vimukthi Peramuna (JVP) leader told a TV show on Hiru last week that the implementation of the IMF program was inevitable after the country was declared bankrupt. He added that people will have to endure hardships for several years, saying the JVP is ready to form a government through general elections to carry out this agenda.

The unions also accept the IMF program. On Saturday, Pradeep Basnayake, national organizer of the Sri Lanka Government Officers’ Trade Union Association which claims 500,000 members, told the Morning news: “If the government cannot raise the salaries of its employees, it should pay them a temporary allowance until the economy recovers.”

This is the position of all unions. They agree with the capitalist class that the working class should bear the burden and simply appeal to the government for limited concessions. Unions have helped to derail, divide and suppress the mass popular opposition that has erupted. All of these unions are controlled or supported by the political parties – government and opposition – that support the IMF program.

The Socialist Equality Party (SEP) calls on the working class and rural masses to oppose the IMF’s austerity program and mobilize its independent force to fight government attacks.

As a first step, the SEP calls for the formation of democratically elected workers’ action committees, independent of unions and capitalist parties, in workplaces, plantations and neighborhoods across the country. The SEP is ready to provide political assistance in the construction of such organizations of struggle of the working class and the rural poor.

The working class must come up with its own solution to the economic crisis based on its class interests. The SEP calls for the nationalization of banks, big business and plantations and to place production and distribution under the democratic control of the working class. Not a rupee more to the vultures of international finance capital, repudiate all foreign loans!

To fight for this program, the SEP calls for the construction of a democratic and socialist Congress of the workers and the rural masses based on representatives of the action committees to discuss a socialist program responding to the needs of the majority, and not for the benefit of the rich. Such a congress will pave the way for a workers’ and peasants’ government to restructure society from the top down along socialist lines.

Sri Lankan workers must appeal to their international class brothers and sisters for help and join them in building the International Alliance of Grassroots Committee Workers to fight the deepening social catastrophe on a global scale and the growing threats of world war.