Sri Lankan budget implements IMF austerity measures

 Sri Lankan President Mahinda Rajapakse, who is also the finance minister, handed down an austerity budget this week, designed to boost business profits at the expense of living standards, along the lines demanded by the International Monetary Fund. Like governments around the world, Rajapakse’s is heaping the burden of the ongoing world economic crisis on the working people to meet the dictates of the financial markets and global investors.

As required by the IMF, the budget deficit has been slashed from this year’s deficit of 8 percent to 6.8 percent for 2011—the biggest cut in 19 years. This has been achieved by a continued freeze on public sector salaries, tax increases on essential goods and services and a further cutting of price subsidies.

Much worse is still to come. The IMF requires the budget deficit to be reduced to 5 percent in 2012. The government had to take a loan of $US2.6 billion from the IMF in July 2009 to avert a foreign reserves crisis caused by the worldwide financial crash and the huge expenditures on its protracted communal war against the separatist Liberation Tigers of Tamil Eelam (LTTE).

In Monday’s budget speech, Rajapakse announced big tax cuts to local big business and foreign investors in the hope of attracting investment. Taxes on all export and tourism companies were trimmed from 15 to 12 percent, and taxes on financial services by even more—from 20 to 12 percent. Taxes on banking and financial institution profits were lowered from 35 to 28 percent.

By contrast, Rajapakse provocatively refused to honour an election promise in January of a 2,500-rupee ($US22.50) monthly pay rise for state employees, to end a four-year pay freeze. Instead, he proposed a 5 percent monthly allowance and a 600-rupee cost of living allowance. As a result, most public sector workers will receive only about 1,000 rupees extra per month. Pensioners will be given a paltry 300-rupee monthly allowance. These increases are negligible compared to the rising cost of living. The cheapest meal in Sri Lanka will cost a worker more than 100 rupees.

During the war, Rajapakse cited huge military spending as the pretext to suppress wage rises for public and private sector workers. In this budget, he claimed that the government could not afford wage increases because a phase of development had begun, based on “mega infrastructure projects”. These projects are designed to facilitate business investment, however, not meet the pressing needs of the masses.

Having already imposed heavy taxes on essential food items and fuel, Rajapakse announced several more tax increases, including for motor vehicle licences, foreign telephone calls and cable TV. Taxes on liquor and cigarettes rose from 35 to 40 percent. The government will also end the fuel subsidy to the Ceylon Electricity Board and increase electricity tariffs by 8 percent from January 2011.

These imposts will add to rapidly rising living costs. In September, the government reduced wheat flour subsidies by 75 percent, triggering price increases for flour and bread. Wheat flour is the second staple food of working people. In October, prices of potatoes and onions doubled and sugar prices increased by around 20 percent, due to government taxes.

Alongside satisfying the IMF, the budget’s highest priority was to maintain the military spending. Even though the war against the LTTE ended 18 months ago, defence expenditure rose by 7 percent to 214 billion rupees, or 20 percent of total budget outlays. The government is boosting the security forces to maintain a military occupation in the North and East of the island, and to prepare to suppress the struggles of workers and youth.

Military spending almost doubled the combined allocations for health and education—62 and 51.5 billion rupees respectively. These allocations rose by 10 and 5.5 billion rupees respectively but did not offset rising inflation.

Dwarfing all these items was total debt servicing, estimated at a staggering 815 billion rupees, a 48 billion increase from the last year. As the expected government revenue is just 987 billion rupees, the government will be forced to continue to borrow heavily. By August, total public debt had risen to 4,465 billion rupees. Last year, about 20 percent of export earnings went to finance debt servicing. A Sunday Times columnist warned on October 31: “At the end of 2010 it is likely that the foreign debt would be about thrice the amount of the foreign reserves and would probably require about one fourth of this year’s export earnings to service it.”

Rajapakse predicted economic growth of 8 percent in 2011 compared to the current year’s estimate of 7.6 percent. But this year’s growth figure is mainly due to the low 3.5 percent growth of last year. The estimate is extremely dubious. Sri Lanka’s main economic partners in Europe and the US remain mired in slump. Sri Lanka’s exports have still not recovered to the level of 2008. Overall export income rose by 10.7 percent during the past 10 months, but textile exports—the biggest earner—fell 5.1 percent. Over the same period, rising import prices saw the trade deficit widen to $3,630 million—a 103 percent increase compared to the corresponding period last year.

Despite his frequent rhetorical references to the “motherland”, “home grown solutions” and “local competencies”, Rajapakse announced a further liberalisation of the foreign exchange regime in a desperate bid to woo foreign investors. Foreign direct investment dropped from the beginning of the global financial crisis in 2008 and fell further to $US208 million in the first six months of this year, down from $US253 million in the same period of 2009.

Big business generally hailed the budget as “business-friendly”. Bankers Association secretary general Upali de Silva declared: “The budget is very positive. Bankers who have suffered under high taxes are heartened by the reduction.” National Chamber of Commerce of Sri Lanka (NCCSL) president Lal de Alwis said: “In this investment-friendly environment, the private sector and investors could expect more Foreign Direct Investment (FDI) to flow.”

However, global financiers and investors were not satisfied. The Wall Street Journal this week threw cold water on the government’s claims to be delivering a “peace dividend”. Its report commented: “But a peace dividend is a one-time payout, a rise to the baseline for growth. What about recurring dividends as an economy expands organically? Here, although short-term prospects are rosy, longer term the picture is mixed. President Mahinda Rajapakse is on track to deliver far less than he promises.”

Sections of the Sri Lankan ruling elite have expressed concerns that the budget has already set the stage for social and class unrest that will challenge the government and threaten the stability of the political establishment. The Island newspaper’s editorial, while praising the budget, warned: “The government ought to remember that people’s expectations are extremely high in the post-war period and they are desperate for relief in a bigger way.”

The Daily Mirror wrote: “To tell a public servant who was promised a 2,500-rupee salary increment at the last presidential election, that all he is to now receive is 500 rupees is injurious indeed. And then to justify that by seeking a rationale in the way of finding satisfaction in infrastructure facilities provided is adding serious insult.”

These comments reflect nervousness in ruling circles about class tensions that are building up as working people bear the brunt of the Rajapakse regime’s efforts to meet the demands of global finance capital. They are also a warning of the brutal police-state measures that the government and the military will use to suppress working class resistance. (WSWS)

Home            Sri Lanka Think Tank-UK (Main Link)

SRI LANKA: An open letter to the Prisoner Number 22032

Dear friends, We wish to share with you the following article from the Sri Lanka Guardian. Asian Human Rights Commission Hong Kong ------------- FOR IMMEDIATE RELEASE AHRC-FAT-050-2010 October 4, 2010 An article from The Sri Lanka Guardian forwarded by the Asian Human Rights Commission SRI LANKA: An open letter to the Prisoner Number 22032 An Open Letter To The Prisoner Number 22032 Posted by Sri Lanka Guardian Breaking news, feature, Open letters 4:19:00 PM "You will be more remembered as a hero of your people, far more than at any other time in your life, if you take up this great cause against the fundamental injustice inherent in our "Justice System". You may be able to tell the Supreme Courts of Sri Lanka and all the other judges about the great lie we propagate in the name of justice." Dear Mr. Sarath Fonseka, October 02, 2010 Colombo - New Delhi -London-Washington Sri Lanka Guardian Now that you are in jail, you could be a great service still to the people of our country by observing and noting the conditions of prisoners. Our prisons are in wretched condition and people are treated in a subhuman manner. This disgraceful treatment of fellow human beings needs to be stopped. With your kind of stamina applied to this task, you will be able to highlight this enormous tragedy of our people. From your own experiences you know that many people are brought to jail unjustly. Some enemy or some petty police officer can fabricate charges and thereafter a man is doomed for many years of a wretched life. For many of them that marks the end of their life as when they return there will be more and more fabricated charges. Our justice system has failed. Due process remains an illusion. Cruelty to fellow citizens is the order of the day. Many poor people have no money to pay lawyers. The lawyers are often unable to help anyway. Now you have a chance to observe all this with your own eyes. You pride yourself in saying that you fought for the freedom of your fellow citizens. Do the fellow citizens have freedom? With compassionate eyes look at the terrible lie about the conditions of our collective existence. A few abuse power and the rest live in wretched and subhuman conditions. You will be more remembered as a hero of your people, far more than at any other time in your life, if you take up this great cause against the fundamental injustice inherent in our "Justice System". You may be able to tell the Supreme Courts of Sri Lanka and all the other judges about the great lie we propagate in the name of justice. The injustice you have suffered can be turned into an opportunity to expose the very heart of darkness that exists in our country. We wish you well, and we will make use of your presence in the prison in order to think about the conditions of all others. Thank you. Sri Lanka Guardian www.srilankaguardian.org www.lankaguardian.com You may write similar letters to him at :- Mr. Sarath Fonseka, The Prisoner Number 0/22032, Ward 'S ', The Prison Commissioner c/o, Welikada Prison, Baseline Road, Colombo 08, SRI LANKA Second Open Letter to the Prisoner No. 0/22032 Posted by Sri Lanka Guardian Breaking news, feature, Open letters 2:18:00 PM SIR, YOU HAVE A RIGHT TO READ, HAVE AIR FRESH & LIGHT October 03, 2010 Colombo - Washington, New Delhi, London, Melbourne Sri Lankan Government is bound by Standard Minimum Rules for the Treatment of Prisoners laid down by the United Nations. These among other things, guarantees you and other fellow prisoners, the right to have fresh air, light and right to read. If you do not get these, you have right to complaint till you get. Following words of Supreme Court judge from United State is worth repeating. "When the prison gates slam behind an inmate, he does not lose his human quality; his mind does not become closed to ideas; his intellect does not cease to feed on a free and open interchange of opinions; his yearning for self-respect does not end; nor is his quest for self-realization concluded. If anything, the needs for identity and self-respect are more compelling in the dehumanizing prison environment." US Supreme Court Justice Thurgood Marshall wrote in Procunier v Martinez (416 US 428 (1974)): The UN Minimum rules states that "In all places where prisoners are required to live or work, (a) The windows shall be large enough to enable the prisoners to read or work by natural light, and shall be so constructed that they can allow the entrance of fresh air whether or not there is artificial ventilation; (b) Artificial light shall be provided sufficient for the prisoners to read or work without injury to eyesight. (Standard Minimum Rules for the Treatment of Prisoners: Adopted by the First United Nations Congress on the Prevention of Crime and the Treatment of Offenders, held at Geneva in 1955, and approved by the Economic and Social Council by its resolutions 663 C (XXIV) of 31 July 1957 and 2076 (LXII) of 13 May 1977). People outside have a right and duty to send books to the prisoners. Why not start doing it now. Thank you! Human Rights Unit Sri Lanka Guardian www.srilankaguardian.org www.lankaguardian.com You may write similar letters to him at :- Mr. Sarath Fonseka, The Prisoner Number 0/22032, Ward 'S ', The Prison Commissioner c/o, Welikada Prison, Baseline Road, Colombo 08, SRI LANKA (AHRC) Read more AHRC Statements from here

Home             Sri Lanka Think Tank-UK (Main Link)

Sri Lanka: Fight against university privatisation

The International Students for Social Equality (ISSE) calls on students to oppose the Sri Lankan government’s plans to introduce a new higher education act this month to pave the way for private universities. The new laws will further erode the access of young people to tertiary education and worsen the conditions facing students in the country’s public universities.

The preparation for the legislation has been accompanied by a vicious crackdown in recent weeks on students opposed to privatisation. In all, 30 students have been arrested across the Peradeniya, Ruhunu, Rajarata and Jayewardenepura universities on a variety of charges under legislation revived by university authorities in April to block political activity on campuses. Another 200 students have been suspended. Last Friday, police detained Udul Premaratna, convenor of the Inter-University Student Federation (IUSF), which organised the protests.

Notwithstanding the ISSE’s implacable opposition to the IUSF’s communal politics, the ISSE demands the immediate release of the arrested students and the dropping of all charges against them. The IUSF, which is linked to the Janatha Vimukthi Peramuna (JVP), is notorious on campuses for thuggery against their political opponents, providing the government with a pretext for repressive measures. The arrests, however, are broadly aimed at intimidating students, stifling political activity and suppressing any opposition to the privatisation moves.

The new legislation, which has not been made public, is to change the 1978 University Act, which makes no provision for private universities. A previous attempt in 1980 to establish a private institution—the North Colombo Medical College—faced opposition from university students and staff, and questions were raised about the validity of its degrees. The college was later brought under the umbrella of Kelaniya University.

Higher Education Minister S.B. Dissanayake has made clear that the new law will open the floodgates for private universities. Addressing the Sri Lanka-Australia-New Zealand Business Council on October 19, he said discussions are already underway with 15 foreign universities to set up private facilities, including Australia’s Monash University and China’s Beijing State University.

Higher Education Secretary Sunil Navaratne told the meeting that his department and the Board of Investment would provide a “one-stop-shop” for international universities. They will not be subject to controls on student fees and will be offered free land and tax concessions.

Attempting to justify the legislation, Dissanayake told the media that the government was seeking the involvement of foreign universities because it would take 10 years to improve the existing 15 state-owned universities. The comment is a tacit admission that the government intends to let public university education languish. The result will be a two-class university system: underfunded, crowded institutions for the majority of students, and private universities for those that can afford to pay.

Government expenditure on education fell from 2.67 percent of GDP in 2006 to 2.08 percent in 2009 as President Mahinda Rajapakse boosted military spending for his communal war against the separatist Liberation Tigers of Tamil Eelam (LTTE). Under pressure from the International Monetary Fund, the government is preparing new spending cuts in this month’s budget.

University students are already facing atrocious conditions, including crowded lecture halls, and a lack of staff, laboratories, adequate libraries and other facilities. At the University of Kelaniya, for instance, the library has 800 spaces for a student population of 8,200. There are not enough hostels, forcing most students into private accommodation. Many students live in poverty on their means-tested allowance of 2,500 rupees ($US22) a month.

Dissanayake’s claim that thousands of students currently unable to enter university will benefit from the private institutions is a lie. The fees will place the private universities out of the reach of the vast majority of young people. The minister is hoping to negotiate free entrance for a percentage of students but even that is uncertain. The government’s overriding aim is to encourage foreign investment by turning Sri Lanka into the “knowledge hub of Asia”.

Well aware of broad opposition among students, the government is preparing to use the police-state measures that were built up during the war against the LTTE. Using the alleged violence of the IUSF in clashes with police, Rajapakse is preparing for the brutal suppression of all student resistance.

On October 26, the president summoned university vice chancellors for a meeting to deal with student opposition to privatisation. “About two thousand politically-motivated students are attempting to upset the education of over 80,000 university students and those unruly students will be dealt with the law prevailing in the country,” he warned.

Higher Education Secretary Navaratne indicated the thrust of Rajapakse’s comments, telling the media: “[T]he decree of the government prevails there [in the universities] like they [the security forces] did in Kilinochchi [the LTTE’s administrative centre] in the past by defeating terrorism.”

Underscoring the threat to use the military against students, Higher Education Minister Dissanayake in an interview with Lakbima newspaper recalled how the Chinese regime responded to mass protests by students and workers in Tiananmen Square in 1989. The government would not hesitate to sack two or three thousand of students to “defend the country’s university system,” he said.

University students cannot defend public education alone but must turn to the working class, which is also confronting serious attacks on jobs, conditions and essential services as the government implements the IMF’s agenda of pro-market restructuring. Above all, this involves a political fight to build an independent movement of workers and youth against the Rajapakse government on the basis of socialist policies.

Despite their occasional socialistic rhetoric, the IUSF and the JVP are bitterly hostile to such a struggle. While the IUSF promotes the fatal illusion that student protests can pressure the government to withdraw its plans, the JVP is proposing an opposition bloc with the right-wing United National Party (UNP) through the establishment of a “national centre to defend free education”. The UNP, an open party of big business, was responsible for initiating the attacks on free public education after it came to power in 1977 and launched its open economy agenda.

The JVP is already backing away from supporting student protests. Amid the vilification of the IUSF by the government and in the media, JVP parliamentarian Anura Kumara Dissanayake told a press conference last week that his party did not approve every action by students. He added that the JVP had “considered approving the setting up of private universities but cannot approve it because of the sorry state the poor people would face”.

This concern about “poor people” is empty posturing. In 2004, the JVP held ministerial posts in the government of President Chandrika Kumaratunga, which implemented a further round of restructuring and privatisation. In 2005, the JVP backed Rajapakse in the presidential election and supported his renewed war against the LTTE to the hilt. Throughout the fighting which ended with the LTTE’s defeat in May 2009, the IUSF and JVP argued that everything, including education, had to be sacrificed to the war effort.

The starting point of any political fight to defend public education is a complete break with all parties of the capitalist class, including the JVP and its student organisation. The attacks on education are part of a far wider onslaught in Sri Lanka and internationally on the living standards of working people. In Europe, the US and around the world, governments are attempting to impose the burdens of the global economic crisis onto workers and youth. The struggle for free education by students is completely bound up with building an independent movement of the working class in Sri Lanka and internationally against the profit system.

Billions of rupees needed to upgrade universities to provide free, high quality education for all youth who want it. That will only take place in the fight for a workers’ and farmers’ government based on socialist policies to refashion society to meet the pressing social needs of the majority, not the profits of a wealthy few. That is the program of the ISSE and the Socialist Equality Party. We urge students to join this struggle by building the ISSE on campuses throughout the island. (WSWS)

Home            Sri Lanka Think Tank-UK (Main Link)