Foreign Aid &
Sri Lanka - tamil eelam
[Revised 5 October 2008]
"...Even if peace dawns and no shot is fired thereafter, we
will be paying for our military purchases until 2008..."
Sri Lanka Prime Minister, Ranil Wickremasinghe, July 2002
Sri Lanka's Rising Military Expenditure in Billion Rupees...
1977 to 1986 -
- 1997 -
- 2000 -
- 2005 -
- 2007 - 2008 -
Sri Lanka's structural
dependency on foreign aid
Foreign aid fuels
Sri Lanka's genocidal war
For & Against giving
Sri Lanka economy
driven by military expenditure
Sri Lanka's military expenditure increased from 0.75 billion Sri
Lanka rupees in 1977 to a budgeted 139.6 billion for the year 2007 - an almost
two hundred fold increase. During the same period, foreign aid to Sri Lanka has
kept pace with Sri Lanka's increasing military expenditure. It is
not simply that Sri Lanka's economy is structurally dependent on
foreign aid - it is also that that dependency shows a clear in built increasing
Without foreign aid, Sri Lanka would not have been able to
against the Tamil people - and it may well have found
the need to talk with the people of Tamil Eelam on an equal basis and
structure a polity where the two peoples, the Sinhala people and the Tamil
people, may associate with each other in equality and in freedom. And
foreign aid has been forthcoming because each 'aid donor' is intent on
securing its own strategic interests in the Indian Ocean region - and this
is true, whether the aid donor is the
US, the EU,
With the ending of the armed resistance
by the LTTE in May 2009, Sri Lanka has sought to use the political space
provided by the countervailing strategic interests of the US, India and China in
the Indian region (with supporting roles for Pakistan, European Union and Japan)
to secure continued aid both from the IMF and China
so that it may consolidate its
rule of a conquered Tamil Eelam and pursue its agenda of ethnic cleansing.
Rising Military Expenditure
1977 - 1986
During the nine year period 1977 to 1986, Sri Lanka's military expenditure
increased eight fold. In February 1986,
11 Non Governmental Organisations commented at the UN Commission on Human
"Since 1977, (Sri Lanka's) defence spending has increased by 800 percent ,
that is, from Rs 750 million to Rs 6 billion. Although defence expenditure
for 1985 was estimated at Rs 3.7 billion it rose to Rs 6 billion. The amount
estimated for defence for 1986 is Rs 5.84 billion."
Nine years later, in 1995, Sri Lanka's military expenditure was estimated at
Rs. 24 billion ($444 million). The actual amount spent during the year was Rs.
34 billion. This was more than a five fold
increase on the figure for 1986 and
forty times the figure for 1977.
In the following year,1996, the budget allocation for military expenditure
was increased to a then unprecedented Rs. 38 billion ($707.7 million). However,
the actual expenditure was Rs.46 billion - a 35% increase on 1995.
Sri Lanka's Deputy Secretary of Treasury P.B. Jayasundera, explained in April
"Sri Lanka's defence spending in 1995 was 34 billion rupees, but
rose sharply to nearly 46 billion, or about six percent of gross
domestic product, last year (1996) as the war escalated. Jayasundera
said the big increase was largely because previous
budget forecasts had been made on the assumption that there
would be no escalation in the conflict. "There was
a gross underestimation in terms of events," he said."
(Reuters Report, 2 April 1997)
A study on the Cost of the
War undertaken by the Sri Lanka Marga Institute released at a National Peace
Council convention in Colombo on 5 January 1998 found that the total war cost
in 1996 amounted to Rs 165 billion or 21.3 percent of GDP, and was more than
three times the direct budgetary expenditure on defence.
Sri Lanka's budgeted military expenditure for 1997 saw an increase to
Rs.44 billion ($758.6 million) from the budgeted amount of Rs.34
billion for 1996. This amounted to 6% of GDP and 22% of total government
spending. Reuters reported on 2 April 1997:
" Sri Lanka, waging a protracted war
against Tamil Tiger rebels, does not expect a rise in defence spending
this year, a top finance ministry official said on Wednesday. P.B.
Jayasundera, deputy secretary of treasury, said military
spending should not top the proposed budget of 44 billion
rupees ($758.6 million) for 1997.
"The 1997 budget is
more a military type of budget, which has
fully accommodated the military requirement," he said. "Each
plane crash does not mean that we have to add something,"
Jayasundera said in reference to the tiny air force, which
has lost six aircraft in operations against the rebels this year.
On 12 October 1997, a lead feature in the Sinhala owned Sri
Lanka Sunday Times was compelled to point out:
"...two long years after the crisis purchases have flooded
the battlefields with both
expensive, sophisticated military hardware as well
as with obsolete, unserviceable items, there are no signs that the
cost of the protracted guerrilla war has receded. To the contrary, it
is showing an upward trend giving a message to every Sri Lankan. To the
tax payer, its a message that they would have to continue to pay to
sustain the war effort. To all others, indirect taxes on goods including
consumer items is a daily reminder.
None other than Justice, Constitutional Affairs, Ethnic
Affairs and National Integration
Minister, Dr. G.L. Peiris, has in his role as Deputy
Minister of Finance, declared that the highest allocation in the
budget for next year, Rs 45 billion, has been made to the Defence Ministry.
The current year's (1997) allocation is Rs 44 billion.
Like the current year's allocation which
exceeded the allocated amount (due
to the mounting cost of procurements), there is no doubt, there will
be a repetition this year too.
Whilst the allocations have been made
on the basis of recurring costs and new procurements, colossal unexpected
losses of military hardware warrant additional expenditure. Events
in the battlefields of Wanni this week underscore this reality."
In the event the actual military expenditure for 1997 was Rs. 46.6 billion.
The budget allocation for military expenditure for 1998 was initially Rs.44
billion. This was later increased by Rs.8 billion.
Reuters reported on 13 August 1998:
"Sri Lanka's defence spending is expected to rise sharply in rupee terms in
1998 as the campaign to wrest control of a key northern highway from the
Tamil Tiger rebels drags on, the deputy finance minister said on Thursday.
"We started by allocating 44 billion rupees ($663.3 million). We would now
need to increase it roughly by eight billion rupees," Gamini Peiris told a
the event, a month later on 24 September 1998, the Sri Lanka government
announced an increase not of 8 billion rupees, but of 12.2 billion rupees
amounting to a 28% increase on the original allocation for 1998.
Associated Press reported:
" The ruling party on Wednesday asked parliament for 12.2 billion rupees
(US$ 184 million) more than the 44 billion rupees (US$ 665 million) which
was budgeted for the military for 1998. Parliament is likely to approve the
increase later this month, officials said. The government did not give a
reason for the increase, which brings the total defense spending to 56.2
billion rupees (US$ 850 million). (Associated Press Report, 24 September
The Sri Lanka Budget deficit in 1998 was expected to be 7.8%, sharply higher
than the previous forecast of 6.5%.
"Sri Lanka Deputy Finance Minister Gamini Peiris said the budget deficit in
1998 was expected to be 7.8 percent of the gross domestic product (GDP),
sharply higher than the previous forecast of 6.5 percent.He blamed rising
defence expenditure as the main cause for the increase" (Reuters Report,
11 November 1998)
On 5 November 1998, Sri Lanka announced yet another '
unprecedented' allocation for military expenditure in 1999 to 47 billion
rupees, up from the originally estimated 44 billion rupees in 1998 (later
extended to 56.2 billion rupees). In contrast, the allocation for health for
1999 at 12.46 billion rupees compared to an actual expenditure of 15.0 billion
rupees in 1997 and an estimate of 11.09 billion rupees for 1998. A Budget
deficit of 7% was forecast.
On 5 October 1999, the Budget Estimates tabled by the Sri Lanka
Finance Minister estimated a 11.5 percent increase on defence over that
for 1999. The government estimated that defence spending will reach 52.43
billion rupees (728 million dollars), compared to the estimated 47 billion
rupees in 1999 and 44 billion rupees in 1998. However, in the past, defence
spending has overshot original budget estimates by 20 to 25 percent. The
recurrent defence expenditure for the calendar year 2000 would total 41.5
billion rupees while 10.9 billion rupees has been earmarked for capital
expenditure. The Appropriation Bill presented in the Sri Lanka Parliament
showed that the Government's total expenditure next year will be 291 billion
The London based Financial Times reported on 30 May 2000:
"As a peace initiative brokered by Norway got under
way in February, R.A. Jayatissa, the bank's research director, estimated
that an end to the war could raise Sri Lanka's trend growth rate by 2
percentage points a year and more than double per capita income over the
coming decade. But as the
Tigers continue to inflict defeat after defeat on the demoralised army,
this peaceful vision has been lost in the scramble to find more money for
In nominal terms, declared defence spending has risen from Rs1.3bn
in 1983 to Rs53bn ($709m) in 1999. In this year's budget, the
government of President Chandrika Kumaratunga emphasised that, as a
proportion of gross domestic product, planned outlays of Rs52.4bn had
dropped from 5 per cent to 4.7 per cent. P.B. Jayasundara, finance secretary
to the treasury, said in February the defence budget was designed to
underpin the peace process and "will sustain the status quo rather than
intensified military activity".
But now the government has sanctioned an extra Rs12bn military
spending in a desperate attempt to hold back the Tigers' latest offensive in
the north. This will raise the declared defence budget to around 6
per cent of GDP and, in total, dwarf projected spending on education and
health - respectively Rs29.3bn and Rs15.7bn. It will also deepen the
distortions in the economy and further blight Sri Lankans' hopes of rapid
The extra sum, mostly for heavy guns and Israeli jet fighters, is being
raised by increased taxes on alcohol and tobacco and a rise in the National
Security Levy. This war tax, introduced as an interim measure in
1991 at a rate of 1 per cent, is now 6.5 per cent and levied on almost all
goods and services. The revenue it raises exceeds all income tax receipts,
and, along with other extraordinary levies, such as the Save the Nation
Contribution, a surcharge on income tax, has had the effect of postponing
urgently needed tax reform.
The war has sabotaged much else besides. A declining fiscal deficit, down
from an average 10 per cent of GDP to just under 8 per cent last year, is
spiralling again. This has a scatter-gun effect, ranging from the
uncertainty it creates about investment conditions to the postponement of
financial sector reforms. The war makes politically sensitive changes, such
as labour market reform, all but impossible. And, of course, it scares off
all but the hardiest foreign investors."
The British Refugee Council, Sri Lanka Monitor reported in December
2000:"..The international institutions and foreign nations
participating in the Sri Lanka Development Forum (Paris Aid Group) on 18
December 2000, declared that ‘social exclusion driven by ethnicity, language
and religion had resulted in reduced opportunities over decades and created
the extreme tensions which drove the conflict’ in the island.
The delegates noted that there was a “disconnect” between policy and the
experience of the people despite the Sri Lankan government’s assertion of
commitment to improve judicial, legislative and administrative systems. The
World Bank’s South Asia Vice President Meiko Nishimizu emphasized the need
for efficient institutions and good governance. She made clear that economic
growth without equity and social harmony among citizens could become a
‘destabiliser’ in the region.
Ms Nishimizu pointed out that war expenditure had risen to 6% of the GDP.
Ahead of the Forum sessions, the International Working Group on Sri Lanka
(IWG), a consortium of NGOs, had pointed out that while 25% of government
expenditure is needed to fund the war effort, defence outlays rose by more
than 50% in 2000 to around $1 billion. The IWG had urged governments to
develop an explicit strategy for peace building within donor programmes and
a coherence throughout all elements of foreign policy in relation to Sri
Times of India reported on 9 February 2001
"On 8 February 2001, Sri Lanka announced an unprecedented Rs 63.39
billion defence allocation for the current year in the provisional budgetary
estimates presented to Parliament. The appropriation bill, revealing the
government's balance sheet for 2001, showed that its borrowing limits had
been expanded to Rs 247 billion, a huge 67 per cent of its projected
expenditure of Rs 364 billion... Last year, Sri Lanka's budget was derailed
by the protracted war against Tamil separatists, with massive defence
spending inflating original estimates by almost two-thirds. An interim
budget presented in December showed that increased outlay on weapons
purchases pushed defence spending in 2000 up to Rs 83 billion, compared to
the estimates of Rs 52.43 billion made earlier in the year... Saddled with
steadily depleting foreign reserves, which stood at $900 million at the end
of last year - down 45 percent compared to a year earlier - the government
moved on January 23 to avert a financial crunch by freeing the rupee from a
managed float. The latest tally sees the local currency having depreciated
by a huge 27.5 per cent against the dollar in the last 12 months."
Yet again military expenditure took a lion’s share of Sri
Lanka's 2006 budget
"Sri Lanka’s has substantially increased its
defence budget for next year to almost US$700 million, the Sunday Times said
this week. The rise of over 20% comes amid a stepping up of violence in the
island’s east between Army-backed paramilitaries and the Liberation Tigers.
In a report titled “Defence takes lion’s share of 2006 budget,” the Sunday
Times said the proposed budget raises expenditure on the military next year
to Rs. 69,470 million (US$690 million), a rise of nearly Rs. 13,000 from
this year’s Rs. 56,300 million (US$ 554 million). Defence is among several
areas that have been allocated increased funding in the government estimates
for the coming year, the paper said.
The total government expenditure
for 2006 was estimated at Rs. 568 billion, up from 438 billion in 2005, in
the Appropriation Bill for next year to be presented by Finance Minister Dr.
Sarath Amunugama in Parliament on Tuesday, the paper said. Some analysts
argue Sri Lanka has developed a domestic ‘war economy’ where the defence
budget is one of the largest injections of state funds into the market.
"Army recruitment and compensation have become the primary source of
resources transferred into the economy of the rural poor in the
Sinhalese-majority regions of the South," says Prof. Kenneth Bush in his
book "Learning to read between the lines: the intra-group dimensions of
ethnic conflict in Sri Lanka."
The rural economy of the rural poor in
the South is “three times more dependent on 'military remittances' than
official poverty alleviation programmes (Janasaviya and Samuradhi); and more
dependent on Army recruitment and compensation than on overseas
remittances," he says. "In effect, successive governments [have] been using
military employment as a grand youth employment cum poverty alleviation
programme," Prof. Bush argues." (TamilNet report 2 October 2005)
And on 9 November 2006,
TamilNet reported -
"Sri Lanka's defence expenditure for fiscal year 2006 is expected
to increase by more than 30% of the 2005 levels to Rs 61b, budgetary
estimates submitted to the legislative body Tuesday revealed. Breakdown of
the expenditure forecast by Sri Lanka's Ministry of Defence estimate for the
"formulation, co-ordination and execution of policies with regard to defence
and safeguarding the territorial integrity and sovereignty of Sri Lanka,"
Ministry of Defence
Sri Lanka Army
Sri Lanka Navy
Sri Lanka Air Force
Ministry of Defence
Sri Lanka Army
Sri Lanka Navy
Sri Lanka Air Force
Source: Sri Lanka Budget Estimates Vol-1 Page 549
While the recurrent expenditures for Sri Lanka Army (SLA) and Sri Lanka
Navy (SLN) account for the biggest increases, the capital expenditure for
the SLN decreased from Rs 4.6b in 2005 to Rs 1.8b for 2006."
And, for 2007, Sri
Lanka doubled military spending.
"Sri Lanka plans to double defence spending next year, Reuters reported
Thursday 5 October 2006. Defence spending will rise 100 percent next year to
139.6 billion rupees from 69.5 billion budgeted for 2006, the appropriation
bill seen by Reuters ahead of its presentation to parliament showed. Overall
spending goes up 40% to 804.6 billion rupees ($7.7 billion) in 2007 from
that budgeted for this year.
Analysts said the increase in spending
was higher than anticipated, expecting the budget deficit to widen due to
increased defence expenditure, and wondering where the government will find
"It looks as though they might be planning to upgrade
their defence hardware, which means they will have to raise foreign money,"
Dushyanth Wijayasinghe, head of research at Asia Securities in Colombo told
Reuters. "They could do that partly from dollar bond issues and partly from
long-term credit lines from (arms) suppliers," he added. "They need to get
public sector spending under control ... and improve tax collection. There's
no other way."
Meanwhile, many investors have either cancelled or
held back investments in Sri Lanka’s $23 billion economy amid serious
clashes between the armed forces and the Liberation Tigers, especially since
late July when the military launched a major onslaught against the LTTE.
"The peace process will be key," Wijayasinghe said. "If they can take it
forward, that will relieve a lot of pressure on the inflationary front and
enable the corporate sector to take a longer view." (Tamilnet, 5 October
The Sinhala owned Sri
Lanka Sunday Leader reported on 4 October 2008 -
"The Appropriation Bill for the 2009 budget is to be presented to
Parliament on October 9 for its first reading...Fund allocations for defence
expenditure that stood at Rs. 166.4 billion in 2008 has been increased to
Rs. 177.1 billion for 2009....
The bulk of funds allocated for defence expenditure is for the army,
which stands at Rs. 78.3 billion for recurrent expenditure and Rs. 5.6
billion for capital spending. The Defence Ministry is to receive Rs. 18.7
billion as capital expenditure and Rs. 158.4 billion as recurrent
expenditure in 2009. The navy has been allocated Rs. 22.6 billion for
recurrent expenditure and Rs. 4.9 billion for capital spending. The air
force has been allocated Rs. 16 billion for recurrent expenditure and Rs.
4.5 billion for capital expenditure. The police force has been allocated Rs.
32.8 billion for recurrent expenditure and Rs. 2.8 billion for capital
The fact is that the actual defence expenditure for next year would be
far greater than that printed in black and white... Since 2006, it has been
observed that there has been a significant difference with regard to the
estimated sum and the actual expenditure on defence. In 2006, while the
government initially budgeted a sum of Rs. 96 billion on defence expenditure
the actual amount spent amounted to Rs.111 billion. In 2007, the initial
estimate of Rs. 139 billion for defence funding reached Rs. 156 billion by
end November. In 2008, the government allocated a sum of Rs. 166
billion, which is Rs. 456 million (US$ 4 million) per day on defence and
public security.. However, according to analysts, the figure of Rs.
456 million on expenditure for defence per day is an underestimation, as
most military procurements are made on hire purchase (instalment) basis and
therefore the payments are spread over a number of years into the future,
and come with accrued interest."
Structural Dependency on Foreign Aid
The comparison of Sri Lanka's military expenditure with the foreign aid
received by Sri Lanka during the same period is instructive.
1977 to 1987
During the period 1977 to 1986, the aid commitment to Sri Lanka averaged
around $500 million, which was a five fold increase compared to the average
for 1960-77. In 1987, the aid committed was US$593 million
International Alert commented in 1987:
"The amount of aid committed to Sri
Lanka for 1987 is US $593 million. Aid commitment has averaged approximately
$500 million per annum since the present government came to power in 1977,
a five-fold increase compared to the average for 1960-77. .. Aid
has become Sri Lanka's largest source of foreign exchange. The Sri Lanka
economy has become structurally dependent on foreign aid. ...
The Sri Lankan government's defence expenditure has roughly quadrupled in
little over two years, to reach approximately 8% of GNP this year."
In April 1995, the Paris Aid
Consortium pledged $850 million as aid to Sri Lanka - a 43% percent
increase on the aid committed for 1987. Again,
in November 1996, the Paris Aid Consortium pledged $860 million as aid to Sri
Lanka for 1997.
The Paris Aid Consortium, at its meeting held on 27 May 1998, pledged 780
million dollars of aid to Sri Lanka. The World Bank made what has now
become almost a ritualistic statement about the ongoing conflict. The Bank
expressed "deep concern that the prospects for a quick end to the war were
not more encouraging", "deplored the growing tragic impact of the war on the
entire nation" and called upon " all Sri Lanka's political leaders to rise
above partisan politics and unite in the cause of peace and prosperity".
The award was lower than the $850 million pledged in 1997 because members of
the Aid consortium had generally trimmed their contributions by 10% for
the current year. But Japan did not reduce its contribution. Though Sri
Lanka sought to explain the Japanese decision as an expression of "profound
satisfaction with the success that the Sri Lankan government had been able to
achieve in dealing with the variety of very difficult and complex problems", the
economic and political reality may be that given the crisis in the Japanese
economy and in the Asia Pacific region, Japan had a compelling need to
increase (and not reduce) overseas aid and in this way ensure that
Japanese exports have a ready market.
In recent years, Japan has emerged as the largest single aid donor to Sri
Lanka. The Japanese government allocated 52.63 million US dollars to be given to
Sri Lanka as a grant for the 1997, and in addition, Japan also agreed to provide
26.32 million US dollars for technical co-operation and other projects. The
Japanese government had provided 1.25 billion US dollars as grants from 1969 up
to March 1997, 3.5 billion US dollars as loans from 1965 to 1996 and 2.85
billion US dollars in technical co-operation during the past two decades. (see
generally - Japan's Cheque Book
Sri Lanka secured $2,370 million in foreign aid
Sri Lanka has
secured US$2,370 million in foreign aid from its
donor countries and multilateral lending agencies,
including a $310 million commitment from Japan for
new development projects in the country, Industrial
Development Minister G.L. Peiris said Wednesday.
Peiris told parliament that Japan, the largest aid
donor to Sri Lanka, has also pledged $1,420 million
for ongoing aid projects in the country, after a
series of multilateral aid negotiations in Paris
with donor countries.
Asian Economic News, Jan
And in 2002 Sri Lanka registered a balance of payments surplus
despite large trade deficit because of aid inflows.
"...The real difference to the balance of payments
appears to have come from the much higher official inflows last year. In
the first ten months of last year official inflows raised the official
component of the reserves by 19 per cent....capital inflows are
contingent liabilities. The monies that come in have to be repaid or
would be taken out in future years..."
Sri Lanka Sunday Times,
Colombo, January 19, 2003
fuels Sri Lanka's Genocidal War
Though foreign aid pledged by the Paris Aid
Consortium and others does not go directly to the Sri Lanka military, such aid
has enabled Sri Lanka to release its own funds to fuel its war against Tamil
resistance to alien Sinhala
rule. International Alert commented
....Almost none of the aid (Sri Lanka) receives is
defence-related, and indeed project aid (unlike commodity or food aid) is
closely tied to particular items of non-defence expenditure. But to the
extent that it frees resources that would otherwise be spent upon these
projects, it enables the government to run a larger defence budget than
would otherwise be possible, though this effect is hard to quantify...
....More indirectly but no less importantly, aid
enables a given defence budget to be sustained at less cost to the overall
economy in terms of inflation and consumer shortages, and may thus diminish
the political unattractiveness of pursuing a military solution to the
In recent years, the Sri Lanka navy has acquired water jet-propelled attack
craft from Israel and patrol boats from France, while China has sold an
anti-submarine warfare vessel and gunboats and landing craft. China was a major
supplier of arms to Sri Lanka - and this brought with it corruption as
well. Reuters reported on 27 April 1997:
" The Sri Lankan navy will partly pay the Chinese supplier involved in a
controversial $63 million arms deal that will leave the country with a huge
stockpile of ammunition, a newspaper reported on Sunday. Naval chief
Vice-Admiral Cecil Tissera told the Sunday Leader newspaper in an interview
that the navy, which is investigating the deal, would only pay for what it
used. The remaining ammunition would be kept in a bonded warehouse for the
Chinese company in Sri Lanka, he said. Tissera said the Chinese company had
sent 150,000 rounds of 25 mm and 35 mm shells, whereas the annual
consumption of these shells by the Sri Lankan navy was only 3,000. "
John Zubrzycki, reported in a Special to
The Christian Science Monitor on 12 August 1998:
"Uncovering evidence of corruption within the military can be risky for
journalists who are already subjected to
strict censorship when reporting on the war. When Iqbal Attas, an
investigative reporter for Colombo's Sunday Times, began closing in on
evidence of massive kickbacks in a combat-aircraft deal, armed men broke
into his house, pointed a gun at his head while his terrified wife and
daughter looked on, and then fled. Mr. Attas later identified one of the
assailants as the personal bodyguard of a former Air Force commander
implicated in the deal. The war has become a very big industry," says Attas.
"Look at the sophistication of the Army and the Air Force ... and yet they
claim that the LTTE numbers only a couple of thousand soldiers."
The comments of the World Bank, after the Paris Aid Consortium meeting on 18
November 1996 are not without relevance:
"The bank said the highest priority for Sri Lanka was peace and said donors
were prepared to offer more aid if a settlement to end the island's civil
war were reached. 'Deploring the cost of the hostilities and human suffering
(donors) hoped that negotiations leading to a peaceful settlement could be
initiated without delay' the bank said. "
This view was reiterated by the Asian Development Bank in its Annual Report
on 23 April 1998:
" The government has said the budget deficit in 1997 was 7.5 percent of GDP
and aims to reduce it to 6.5 percent this year. ...The war escalated last
year after the military launched a fresh offensive to capture a key northern
highway. Government officials say Sri Lanka spends nearly six percent of GDP
on its security forces and the war. "The status of the ongoing civil
conflict is a key determinant of the country's long-term development
prospects," the bank said. (Reuters Report, 23 April 1998)
For & Against Giving Aid
In 1987, the arguments for and against giving foreign aid were summarised by
"A number of arguments are from time
to time advanced in support of the view that, in current circumstances, aid
to Sri Lanka should be curtailed, reduced or made subject to stringent
conditions on its use. These include the arguments:
i. that aid should not be given to
countries that consistently and consciously violate human rights;
ii. that aid has made it possible for the Government of Sri Lanka to increase
its military expenditure;
iii. that Sri Lanka's dependence an aid gives donor countries great influence
for good or ill which in the current crisis they would be irresponsible not
iv. that the existing aid does not reach those who need it most - the victims
of ethnic violence.
On the other hand arguments are
i. that donor countries should not
interfere in the internal affairs of Sri Lanka;
ii. that reductions in aid would be negated because other donors would step in
to fill the gap;
iii. that reductions in aid might destabilise an already unstable political
iv. that those who would suffer most from reduced aid would be the poorest
groups whom it is most desired to assist. "
The arguments summarised by International Alert
ignore one important aspect of all foreign aid - the
economic interests of the donor country.
'Aid' is more often than not linked
(directly or indirectly) to the commercial interests of the donor country.
Indeed, the word 'aid' itself is a misnomer. It is directed to promoting private
industrial and trade interests of the donor country. Castis put the
matter, perhaps somewhat harshly, when it declared in 1993:
"Do Western governments give this
money to the (Sri Lanka) regime without being aware of the (human rights)
situation? ... The reasons are economic benefits... Nowadays, imperialism
takes the form of foreign aid."
Perhaps, aid donors (not only from the
West but also from Japan
and the East) should ask themselves whether their own long term economic and
strategic interests will be served by supporting a government which seeks to
impose the rule of one people on another people. Economic development requires
peace and stability and these are unlikely to exist where the rule of one people
by another alien people prevails.
The Annual Human Rights Review by US
State Department, and the existence of organisations such as International
Alert, suggest that the so called 'developed' world is not unmindful of the
dangers caused by ignoring human
At the same time, the support that
rulers such as President Suharto of Indonesia received from the
international community during the past two decades and more, suggests that
even genocide may be
acceptable, so long as it is completed (quickly) without drawing too much public
attention. On this view of the matter, the efforts of organisations such as
International Alert may be seen to be more in the nature of palliative 'public
relations' exercises directed to 'managing' public opinion and securing the
stability of existing regimes rather than addressing the
needs of the
oppressed, crying for freedom.
The fate eventually suffered by Suharto
may have a wider significance and the remarks of Amnesty International in
a full page advertisement in the London based Guardian on 12 March 1994 in the
context of East Timor may have a broader relevance:
''When governments pretend not to notice suffering, to whom can peoples..
turn for help? The United Nations? Alas, the deeper you delve, the redder
the faces. The
cynicism of realpolitik extends even to the UN Commission on Human
Rights... When Amnesty attended the Commission in Geneva last month to urge
action on Indonesia and East Timor, we met only embarrassment. The
governments to which we spoke repeated what they have been promising us for
thirty years: they will pursue a policy of 'quiet diplomacy'''
The question is sometimes asked as to how long Sri Lanka can afford to
continue to allocate more than Rs.50 billion an year for 'military
expenditure'. Economist Dr. Saman Kelegama, executive director of the Institute
of Policy Studies (IPS), declared at a seminar of the Sri Lankan
Association of Economists in early February 1999:
"Spiralling defence costs, which average 50 billion rupees a year now, has
created a large (budget) deficit and curbed foreign investment. The budget
deficit, as a percentage of GDP, rose to a high of 18.3 percent in 1980 but
fell to around 7.0 percent in 1998, largely because of lower government
spending in non-defense sectors, and the sale of the government's assets
like the national carrier, Air Lanka, and plantations.
More than anything else, the government's financial policy is driven by
military concerns. Sri Lanka by 1996 had a bigger army than countries
like Malaysia, the Philippines and Australia, whose populations are much
larger.....The government has been resisting devaluation because of
its impact on military expenditure. Defence spending would (then) rise
because most (equipment) is imported."
Today, in 2006 the military expenditure is set to increase to 140 billion
rupees. However, views such as those expressed by Economist Dr. Saman Kelegama
in 1999, ignore that which the Sri Lanka government may well see as the
economic advantages of a continuing war. For instance, M.M. Jayawardene of the
Kotalawala Defence Academy speaking at the same seminar in 1999, was quick to
point out that high defence expenditure has had a positive effect
on the economy and was not just a drain on the government exchequer.
"Defense becomes paramount when there is a threat, internally or
externally. When defence plays such a vital role in society, the social
contract has to be adjusted.
The war has been a source of employment. Large numbers of rural
youth have enlisted in the military. And their remittances have brought
prosperity in the villages. Forty percent of the defence bill goes to
salaries and wages and one can argue that, with the bulk of recruitment
coming from rural areas, these areas get large inflows of funds.
There were other benefits like education and training that filtered into
the village, and when one takes this positive aspect of defence spending,
the cost or the burden on the exchequer would be moderated. (I acknowledge
that) the high defence spending has led to large budget deficits and cuts in
social welfare measures. (But)... in the short term, defence
spending has a sound positive impact while in the long term there
is a negative impact on economic growth."
The reasoning is not without significance. Sri Lanka may see the enlistment
of rural youth in the Sri Lanka armed forces as an answer to the problem of
rural unemployment and as a way of reducing the movement of the rural
population to urban areas, in search of jobs which are difficult to find.
It may take the view that even if those who enlist, eventually die at the
frontline, their remittances would 'have brought prosperity in the
But, what is the duration of the 'short term' during which 'defence spending'
will have this so called 'sound positive impact'? How long will it take
before deficit budgets, inflation and army desertions take their toll?
How long will it take before foreign 'aid donors' insist on further
devaluation? How long before cuts in social welfare measures begin to bite and
increase the need to resort to further repression to quell discontent? As other
countries have learnt (and as foreign aid donors know only too well)
militarisation is no panacea. Economic development will not come
without peace - and peace will not come without justice.