Elation in Sri Lanka May not last long. Danger ahead!

 

Today millions of people are rejoicing in Sri Lanka at the resignation of Prime Minister Panil Wickremesinghe. The country has been plunged into chaos by economic devastation that has seen widespread food and fuel shortages, cuts in power and electricity sometimes lasting 12 hours a day, crippling inflation and even scarcity of medication to treat the most serious diseases. Lines for petrol snaked for miles through the streets u til the government outlawed sales to anyone but essential services like police, fire and EMS.

Millions of people have taken to the streets in jubilation that the reigning government is now gone

But what comes next? Who will emerge to take charge? Will it be the military who will restore calm using tactics, well that  militaries usually do? Will a military strongman come to power and install autocratic rule and put a clamp on democracy? Will it be a civilian government set on honoring all that democracy has to offer?

Whomever is in charge is going to need to negotiate some type of foreign aid to help the country out of this economic Hell that it is in.

Most likely that aid will come from the International Monetary Fund that was formed for situations such as this, to stabilize countries in situations such as the country is now experiencing.  But boy does that help come with a price tag. Its boiler plate solutions for every instance include:

-Privitation of all industries the government now handles. 

-Opening up the country's financial markets completely

- Overwhelming Fiscal Austerity

So what does this mean?

Let's say the government runs communication services? If what happened in Russia happens in Sri Lanka these services will be sold for pennies, usually to those friendly with the government generating billions for cronies. And without competition prices for services like cell phones will skyrocket

Opening up the country's financial markets will cause "hot money" , among other hurtful thing, put the country in everlasting danger( hot money is foreign  money that flows into a country to take advantage of the higher interest rates offered there. This money does nothing but sit in banks and increases foreign exchange reserves, pays high interests and causes the local unit of currency to become stronger thus increasing imports while choking off exports leading to trade imbalances. And God forbid any bad news come out of the country, a forecasted fall in GDP or a monk tripping over a dog chain, that "hot money" will flee the country overnight leaving the economy in shambles

And don't even get me started on the austerity measures that the IMF insists on. Government spending on services that help the poor such as free school lunch, safety nets like unemployment and other such life saving measures are slashed with unmitigated gusto. 

In addition all these policies must go into effect immediately in contrast to countries like the US were such policies were gradually brought in over more than 200 years

In other words if the IMF were to come knocking at my door I would save all the preliminaries and jump straight out the window. Most of their conditions on lending to a country undermine the very democracy they are sworn to protect. They usually are implemented at gunpoint point.

Sri Lanka is now in an almost hypnotic state of joy after finally getting rid of their despised prime minister. Hopefully they come back to earth soon and realize they now have a lots of work ahead of them. Dealing with the IMF is going to be agonizing and fraught with danger. They had better pay attention or they will regret it dearly.