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Foreign Aid &
Sri Lanka - tamil eelam
conflict
IMF, Sri Lanka reach $2.5 billion loan accord
20 - 25 July 2009
Reuter Report
Sino-Indian factor moves US to help Sri Lanka
- P.K.Balachandran
"... some analysts feel
that the US may be influenced by a Sino-Indian factor
too. Sunday Island noted that the Indian member on the
IMF board, who represents a group of countries including
Sri Lanka, had been strongly advocating Sri Lanka�s
case.Then there is China�s increasing economic clout and a growing
strategic interest in Sri Lanka, which has made Washington sit
up. Like India, the US may be veering round to the view that the
only way to prevent Sri Lanka from going wholly under Chinese
influence is to meet Sri Lanka�s demands."
The Chinese
Dimension - Sinhala owned Sri Lanka Island
 [see
also two years ago -
International Dimensions of Conflict in Sri Lanka - Nadesan
Satyendra, 2 October 2007 - "...the
denial by international actors of their conflicting strategic interests in
Sri Lanka draws a veil over the real issues that any meaningful conflict
resolution process in the island will need to address. We cannot ostrich
like bury our collective heads in the sand - and, to mix the metaphor,
ignore the elephant in the room.
Whilst the goal of securing peace
through justice is loudly proclaimed by the international actors, real
politick leads them to deny the
justice
of the Tamil Eelam struggle for freedom from alien Sinhala rule.
The harsh reality is that on the one hand international
actors are concerned to use the opportunity of the conflict in the island to
advance each of their own strategic interests in the Indian
Ocean region
- and on the other hand, Sri
Lanka seeks to use the
political space created by the geo strategic triangle of US-India-China in
the Indian Ocean region, to buy the support of all three for
the continued rule of the people of Tamil Eelam by a permanent Sinhala
majority within the confines of one state. The record shows that
Sinhala Sri Lanka seeks to engage in a 'balance of power' exercise of its
own.."]
IMF grants Sri Lanka $2.6bn loan BBC Report , 25 July 2009
"The first $322m tranche
of the 20-month loan is available immediately, with the
rest subject to quarterly reviews. Britain and the US
abstained from the vote, citing humanitarian concerns
during the government's recent fighting against Tamil
Tiger rebels... British Financial Secretary Stephen
Timms said it was "not the right time for the
programme". In a letter to a special parliamentary
group, Mr Timms said the UK wanted to "secure long-term
peace and prosperity" for Sri Lanka through
reconciliation between its communities. Now that the
loan has passed, Mr Timms said the UK would turn its
attention to monitoring developments on the ground. "We
expect the government of Sri Lanka's commitment to
reduce defence spending whilst safeguarding spending on
humanitarian assistance and [the resettlement of
displaced people] to be implemented in full," he told
the PA news agency."
Reuter
Report ,
20 July 2009 WASHINGTON, July 20 (Reuters) - The International Monetary Fund
said on Monday it reached a $2.5 billion loan accord with Sri Lanka,
which will be presented to the IMF board for approval on July 24.The
IMF said a disbursement of $313 million will immediately be
available to the country once the loan is approved. The end of Sri
Lanka's 25-year civil war posed a unique opportunity to undertake
economic reforms and rebuild areas damaged by the conflict, the IMF
said. "The government has formulated an ambitious program aimed at
restoring fiscal and external viability and addressing the
significant reconstruction needs of the conflict-affected areas,"
the IMF said in a statement. The country has relied on borrowing
from international markets to fund its large budget deficit, but the
government was forced to tap its foreign exchange reserves as global
credit markets dried up. Rebuilding the country will require
significant spending, the IMF said, adding that the program will
provide a framework for donors to help fund reconstruction. "The
IMF staff supports this program, specifically the government's goals
of rebuilding reserves, reducing the fiscal deficit to a sustainable
level, and strengthening the financial sector," the IMF added.
(Reporting by Lesley Wroughton; Editing by Padraic Cassidy)
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The Chinese Dimension
- Sinhala
owned Sri Lanka Island, 19 July 2009
Even though there were reports in the newspapers
last week that the IMF stand by facility would be passed after the
20th of July, there were no signs up to yesterday when we had some
good news. While this was being written, Sri Lanka has not yet been
included in the agenda of the IMF executive board and at the
bi-weekly press conference held on Thursday, at the IMF
headquarters, the spokesperson had once again been vague, saying
that there had been a mission to Sri Lanka recently following up on
the previous discussions. The spokesperson says that they had �good
discussions� with the authorities, and that they would make the
announcement once there was something to announce. The spokesperson
had further explained that the first thing that happens is a staff
level agreement. Then the executive board would consider the views
of the international community. Does this mention of �good
discussions� indicate that Sri Lanka is finally out of the woods?
When the IMF spokesperson said that what comes first is a staff
level agreement, does this mean that the staff level agreement has
finally been reached, prior to submission to the executive board?
The word yesterday was this is what had happened.
Strangled by the west
The IMF executive board will be in recess from the 10th of next
month for two weeks, and Sri Lanka will have to make it to the
agenda before that if this money is to materialize anytime soon. A
loan delayed, is in fact a loan denied. In normal circumstances, the
IMF loan should have been passed by the end of April. The IMF�s self
professed goal is to bail out member countries in distress, but this
did not happen in the case of Sri Lanka although some propitious
signs were visible yesterday.
The IMF says of its mission in the world: "Any member country,
whether rich, middle-income, or poor, can turn to the IMF for
financing if it has a balance of payments need�that is, if it cannot
find sufficient financing on affordable terms in the capital markets
to make its international payments and maintain a safe level of
reserves. IMF loans are meant to help member countries tackle
balance of payments problems, stabilize their economies, and restore
sustainable economic growth."
Sri Lanka was in distress, due to the world economic recession � a
classic case for IMF assistance. Sri Lanka is in fact a financial
miracle. Despite a raging war, which was fought with unprecedented
intensity by both sides, Sri Lanka had managed to accumulate
financial reserves of 3.6 billion US Dollars by mid 2008. This went
down rapidly as the global recession worsened, but it lasted just
long enough to fight Prabhakaran to a finish. The western powers
delayed the IMF loan with the hope of getting the government to stop
its war on terror, but the strategy failed. Now that Prabhakaran is
dead and the government badly needs money for reconstructing the
north, the IMF loan must not be further delayed. The entire western
world knows that the Sri Lankan government needs every penny it can
get for the rehabilitation for the north and it must not be delayed
to please the Tamil Diaspora.
.It is in the context of this slow strangulation of Sri Lanka by the
west that the Chinese government signed an agreement for a 1.2
billion US Dollar soft loan for housing and township construction.
The project is applicable to the whole country and a good part of it
will be used to rehabilitate the north as well. The loan from the
China Shenyang International Economic and Technical Cooperation
Corporation, carries 2% interest with further concessions in the
form of an interest free construction period, and a five year grace
period in which only the interest on the loan can be paid. Then
there is a further period of 20 years, during which the loan can be
paid off.
To get such a concessionary loan at a time like this when
reconstruction is the government�s biggest headache is a major boon
for the government. It is also a feather in the cap of Minister
Rajitha Senaratne, who negotiated the loan. Senaratne has been a
prominent member of the China-Sri Lanka Friendship Society for the
past decade and these contacts no doubt helped in the process.
There�s no question about the fact that this represents a high point
in Senaratne�s career. To him, this is the equivalent of what the
Mahaweli was to Gamini Dissanayake. Where this project had actually
been conceived was when President Rajapakse had lamented in a
conversation with Senaratne that he had been able to start so many
large scale projects but did not have a housing project.
Saved by China
In addition to this, mega housing project, the Exim Bank of China
has also issued a letter of interest in financing the
Matara-Kataragama railway, and that too is on the cards. About a
decade ago, a Matara-Kataragama railway would have seemed useless
because the population density in the Hambantota district was very
low. But now, with the Hambantota harbour nearing completion, a
railway line from Matara to Hambantota and beyond, seems not just
feasible but necessary. China has been a good fried to Sri Lanka
throughout this country�s most difficult period in post independence
history. It was China and Russia that blocked the discussion of our
recent problems at the UN Security Council, and China, India and
other countries supported Sri Lankan in the UN Human Rights
Commission where a group of European nations tried to pass a
resolution calling for a human rights probe on Sri Lanka, following
the death of Prabhakaran.
There was an interesting article by Ye Hailin, a researcher at the
Institute of Asia-Pacific Studies of the Chinese Academy of Social
Sciences, in the Beijing Review, which argued that as China relies
more and more on the ocean, trade and maritime security has become
that much more important. This writer identified three main areas of
China�s ocean interests � the East China Sea, the South China Sea
and the Indian Ocean. China�s interests in the East China and South
China Seas relates mainly to resource exploitation and the tension
with Japan in the east and the Philippines and Vietnam in the south.
In the Indian Ocean which lies further away from China, her
interests lie only in sea lane security. But the writer argues the
Indian Ocean is no less important to the Chinese than the East China
or South China Seas as the Indian Ocean is her lifeline to Europe,
Africa and the Middle East. The writer argues that the Chinese
cannot guarantee the safety of its commodity ships in the Indian
Ocean because its fleet has no logistics base and cannot sail for a
long time. China has entered the fight against Somali pirates off
the Gulf of Aden to protect its commodity shipping.
Referring to this intervention by China in the Indian Ocean to
protect its shipping, Ye says, "No matter how much China desires a
harmonious world and harmonious oceans, it cannot possibly rely on
other nation�s naval forces to guard the safety of its sea lanes of
communication. A big country that builds its prosperity on foreign
trade cannot put the safety of its ocean fleet in the hands of other
countries. Doing so would be the equivalent of placing its throat
under another�s dagger and marking its blood vessels in red ink."
Will this attempt to ensure the security of its sea lanes in the
Indian Ocean bring China into conflict with India, the major power
in the Indian Ocean? And will Sri Lanka be drawn into the conflict
because of the Hambantota harbour and other Chinese aid?
Ye, quotes the theory of maritime security expounded by the 19th
century naval historian Alfred Thayer Mahan, where the lowest level
of sea power is maintaining control over one�s territorial waters (A
task that Sri Lanka was unable to fulfill until a matter of weeks
ago!) The next level is guaranteeing the safety of sea lanes of
communication. The level above that, is obtaining free movement at
sea. The highest level is maritime supremacy. Ye states that of
these levels, only the US Navy has got even up to the third level
and that China�s interest in the Indian Ocean would not go beyond
the second level which is to simply guarantee the safety of its sea
lanes of communication. He implies that because this objective will
be shared by other countries in the region, there would be plenty of
scope for international cooperation. The writer does not mention
cooperation with India, but it�s obvious that India was what he had
in mind.
The friendly whales
By lecturing the USA, that universal lecturer, at the Boao Forum,
and afterwards, China overturned the world order that had been in
place since the end of world war II. So rattled was the western
world by this, that a Newsweek columnist, Chri-stian Caryl in an
article aptly titled Why bow to China?, felt compelled to theorize,
that even though the world had now got used to accepting China as
the first country of Asia, modern Asia is a multi polar region that
does not easily lend itself to hierarchies. Caryl insists that Asia
today has multiple leaders in different fields and that while China
excels in producing huge volumes of low cost goods, Japan and South
Korea lead in innovation and high tech products. It should be noted
that western columnists have an interest in seeing a multi polar
Asia, just as we want to see a multi polar world with multiple
leaders. Quoting a Princeton University academic, this columnist
compares, modern Asia to 19th century Europe with great powers still
jockeying for power, and concludes that just as no single power was
able to dominate 19th century Europe, no one country would be able
to dominate Asia. "There are ways to promote an Asia of many powers"
says this columnist and cities the example of Hillary Clinton
visiting Japan first, then South Korea, followed by Indonesia and
finally China, during her recent tour of Asia.
Chinese premier Wen Jiabao concluded his keynote address at the Boao
Forum, held in Boao, Hainan province, which was attended by more
than 1,600 businesspeople, political leaders and academics from all
over Asia, with the words that China will continue to work with
other Asian countries to actively tackle challenges and advance
all-round cooperation. He had stated further that "We should advance
reform of the international financial system, increase the
representation and voice of emerging markets and developing
countries, strengthen surveillance of the macroeconomic policies of
major reserve currency issuing economies, and develop a more
diversified international monetary system,"
China was in effect trying to organize Asian countries to dislodge
US supremacy in the financial field and even establishing a kind of
international policing of the US economy itself! The US has never
had its snout rubbed on the ground like this ever before. It is said
that the South Koreans regard themselves as a shrimp between two
whales (China and Japan). By the same token, Sri Lanka too is a
shrimp between two whales - India and China. But where South Korea
and Sri Lanka differ is that South Korea is an anxious shrimp,
stressed out by the presence of Japan and China; but Sri Lanka is
probably the most grateful shrimp ever to find itself between two
whales. Sri Lanka has managed to survive western bullying mainly
because of India and China. India does not have the enormous
financial clout of China, and may not have the means to support Sri
Lanka financially, but its political support in international fora
has been unstinting. Even within the IMF, the Indian director who
represents the group of nations which includes Sri Lanka had been
pushing very strongly for Sri Lanka�s loan.
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