Add Sri Lanka to the "austerity" roster

[Hannah Bell]

Sri Lanka: IMF insists on severe austerity measures

After a 10-day inspection visit, the International Monetary Fund (IMF) mission to Sri Lanka announced last Thursday that it was “encouraged” by the government’s planned measures to cut the budget deficit. However, the IMF will continue to withhold the third installment of its $US2.6 billion loan until after the government delivers further spending cuts in its long-delayed 2010 budget, now planned for June 29.

Neither the IMF nor the government has disclosed the content of their closed-door discussion or any details of the planned cuts. But the austerity measures will be in line with those being imposed by the Greek government and other debt-ridden governments around the world to offload the brunt of the global financial crisis onto working people by slashing public spending, selling off state assets and increasing taxes.

In February, the IMF withheld the third installment of the bailout loan approved last July because the government had failed to adhere to the IMF’s budget deficit target of 7 percent of GDP for 2009. The deficit rose to 9.75 percent last year, primarily due to the huge military expenditures on the civil war against the Liberation Tigers of Tamil Eelam (LTTE). Last year, the public debt jumped to 86 percent of GDP, from 81 percent in 2008.

Under the terms of the IMF loan, the government has pledged to cut the budget deficit to 6 percent by 2010 and 5 percent in 2011, including by widening the tax net and gutting “loss making” state corporations. Before the latest IMF visit, treasury secretary P. B. Jayasundara said the government wanted to renegotiate the loan to set the deficit target for 2010 at 7.5 percent. The IMF team, however, insisted that the targets remain...Last year, interest payments accounted for 35 percent of budget expenditure and defence for 21 percent. Neither of these areas will be cut...

http://www.wsws.org/articles/2010/may2010/sril-m24.shtml