Sri Lanka: People should not be made to pay for the crisis

Tu Senan, Committee for a Workers’ International

As we write protests continue to take place across Sri Lanka the day after protesters defied one of the strongest-ever curfews in place and gathered in many parts of the capital city and across the country on Sunday 3 April 2022.

Despite repression and the arrest of hundreds of activists who are now held without charge, many have shown determination to be on the street.

The government of the much-hated president, Gotabaya Rajapaksa, had implemented a state of emergency, banned social media and put military personnel on the street. But many have had enough and repressive measures were not enough to contain the eruption of anger that is taking place.

One old man killed himself on Sunday right outside Gotabaya’s house by climbing onto a live transformer. He had demanded an immediate end to the power cuts.

A number of opposition parties, including former allies of Gotabaya, were claiming that the government no longer has majority support in parliament.

There were reports that there could be a no confidence motion, like the one faced by Prime Minister Imran Khan of the Pakistan Tehreek-e-Insaf (PTI) in that country. Khan dismissed the vote as unconstitutional and is likely to call a general election.

The main opposition parties in Sri Lanka are expecting a similar situation as they hope to do well in an election against the unpopular Rajapaksa family. But the government is claiming to be holding so called ‘all-party’ meetings and working towards a compromise ‘deal’.

Any so-called ‘interim arrangement’, drawing in some of the opposition parties, and even protest leaders, into the government, will not solve the current crisis.

The main demand of the countrywide protest against Gotabaya and his government is not just replacing them with opposition leaders, but to end the hardship that is faced by millions now.

Neither the government nor the opposition has any viable solution to end the crisis. The government is attempting to buy time by shuffling around the cabinet. This will not be enough to satisfy the protesters. More decisive battles are yet to come.

Kicking the can down the road will not work

The ‘kicking the can down the road’ policy of the Sri Lankan government is unlikely to last long as the government simply cannot borrow enough to pay all its debt.

While it is crystal clear that more borrowing will only compound the crisis, the government may have to borrow almost the equivalent of its total debt in order to import essential food and fuel, and start paying what it promised to pay this year.

No lender is willing to go that far as many predict ‘inevitable default’. But the government repeatedly denies that it faces default and continues to maintain that it will pay all its debt.

The government uses what’s left in the depleted foreign reserve to pay the debt, which is a temporary solution because soon there will not be any reserves left. 

Even sections of the capitalists are amazed why the government is hell-bent on paying the debt. “Why would they want to, I’m a bit flabbergasted.

They are bankrupt, pretty much,” asked Richard House, head of emerging market debt at Allianz Global Investors. He added: “They are wasting precious [foreign exchange] reserves. It’s just delaying the inevitable.” [Financial Times, 8 February 2022]

Given the government’s refusal to default, it is likely that some sort of ‘restructuring’ or some form of ‘debt swap’ is possible.

This will be at the cost of dismantling state services, the reduction of wages, handing out parts of the country to the international and local vulture capitalists, increasing poverty, and harsh conditions for millions for generations to come.

Most poor sections and the workers will be asked to pay for the crisis that they did not cause. The president, while claiming that he did not cause the crisis, is making every effort to punish the poor for it.

The capitalist profit motive and the policies of the capitalist state, in general, are the fundamental reason for the crisis. No opposition in Sri Lanka blames capitalism but reduces everything to mismanagement. All the right-wing opposition parties claim that the main reasons for the crisis are the ‘unsustainable’ debt policies and the tax cut that was made by the government in 2019. [CNBC]

Reducing VAT (Value Added Tax) from 15% to 8% is repeatedly cited as the main failure by right-wing economists and the opposition, who make no reference however to much lower corporate tax (which has gone down to 18%, and in some cases even below 14%, from around 36% in 2009).

Billions lost in VAT revenue are mainly due to the fact that many have not registered, as the VAT threshold that was set up by the government was high.

This meant even well-to-do small and medium businesses fail to pay tax. But it is false to assume that the crisis could not have developed if the pre-2019 tax system had been maintained.

This argument, however, is linked to renewed pressure from the IMF and the capitalists to increase income tax and VAT along with maintaining high prices for fuel and other key commodities.

The government took a U-turn recently towards the IMF after receiving no additional assistance from either China or India. This means the government may be pushed into implementing these measures as well as dismantling public services under the guise of ‘reducing state expenditure’.

The last report of the IMF admits that they “encouraged the authorities to reform state-owned enterprises and adopt cost-recovery energy pricing” [IMF].

This does not mean however that the Sri Lankan government will review the contracts with the Chinese, particularly in terms of the Colombo port city project, or be fully transparent about its dealing with China or India.

The government is still asking for an additional $2.5 billion from China and a $1bn from India. The government’s dealing with the crisis is likely to remain messy and most of its dealings will not be transparent.

The finance minister has already been ridiculed and accused of lying as he tried to hide the government’s dealings with the IMF.

There has been a lot of zig-zagging by the Rajapaksa government in recent times. Their anti-IMF, pro-Chinese past position had provoked the west to step up its war crime accusations, and India to increase its rhetoric on Tamil rights and implementation of the 13th amendment (an amendment that was introduced following India’s military intervention in 1987, which led to the establishment of provinces).

Early last year, Rajapaksa cancelled the contract with India and Japan in relation to the Colombo ports’ Eastern Container Terminal (ECT) development, causing increased tension with the Modi regime.

Meetings with so-called Tamil leaders and initiating the rhetoric on ‘political solutions’ etc., were part of India’s immediate response.

However, all these decisions have now been silently reversed by the government. As part of the aid provided by the Indian government, the billionaire friends of Modi’s have been invited back into Sri Lanka, not just to renew the ECT contract but also to set up so-called ‘renewable’ energy projects in Mannar and Poonery (northern parts of Sri Lanka) by the notorious Adani group.

The Adani group is known for its corrupt dealing with Modi and his Bharatiya Janata Party (BJP), and the enormous environmental damage it causes in India. It is not clear how far the IMF will go to bail out the economy. It can also lead to falling out with other key lenders. The fate of government policy is written on the wall; in the words of Shakespeare, “For loan oft loses both itself and friend”.

What can be done?

The bourgeoisie, in fear of their losses, is trying to frighten people by saying default would be a disaster, but with or without default the continuation of capitalism will be a disaster for the masses. But economic defaulting will not be a ‘huge disaster’ if the burden is not transferred to the wider population.

In fact, capitalism is such a crisis-ridden system that a majority of countries have had frequent crises and defaults. So-called international relations set up by the profit-mongers are designed to punish the poor and protect the wealth of profiteers.

As punishment for non-payment of debt, the Sri Lankan government will face difficulties in borrowing and many other dealings with international agencies and banks.

The government will be forced to agree to harsh conditions and for further borrowing, which will lay the foundation for future crises, as the Argentine experience shows.

However, these measures will not stop the economy from functioning. Armageddon will not descend on Sri Lanka on the day after the default. But the fear created by the government and the capitalists about the default is linked to preparing the masses to bear the brunt of the losses. This should be resisted.

It will not be so bad if the government refuses to pay all its debt. Without any agreement –without surrendering any rights, land, or resources to the capitalists – the government could flatly refuse to pay the debt.

Not just sovereign debt but all the micro-debt of small businesses and individuals should be cancelled. Of course, this will provoke much harder punitive measures by international agencies. In order to withstand these pressures, the refusal to pay the debt alone will not be enough. Various additional measures have to be taken.

Default is not a full solution but a first step. Additional socialist measures need to be taken. Full capital control must be implemented immediately along with price control of essential commodities.

The commanding heights of the economy – its key parts – should be brought under the democratic control of the workers to plan and produce the immediate needs of society. It should be paralleled with decisive investment in improving local manufacturing and farming.

Workers’ committees should be formed in workplaces to oversee production and distribution democratically, and to improve productivity. This should be linked to improving wages and working conditions.

This does not however mean that Sri Lanka should cut all its links to the outside world – rather deals will have to be made to import machinery, fuel, and other key materials that are essential.

Any of these measures of course will not be implemented by the Gotabaya government or any capitalist government. Hence taking such decisive action is linked to re-organizing society.

Unless the workers who produce all the commodities democratically control state affairs, such a plan cannot be implemented. We cannot get there by parliamentary means alone. Workers, farmers, and students should start forming their own committees in the workplaces, colleges, universities, and local communities to mobilise mass opposition.

As a first step, a national assembly can be organized to bring together rank-and-file trade union activists and socialist organizations, and other activists, to prepare for further struggle. Democratically organized assemblies can begin to take measures to refuse to pay debt, and organize production and distribution. This will create an alternative power base that can challenge all the capitalist institutions.

Trade unions can bring together their members to form a national body that can organise strike action, including a general strike along with mass protests.

The general strike of 1953 forced the government of Dudley Senanayake to resign and pushed back on its anti-worker policies. Conditions today are many times worse than in the early 1950s, yet union leaders are refusing to take decisive action.

Trade unions have the power to stop the hardship put on workers. Empty rhetoric such as ‘it will have to get worse before it can get better’ is now popularized by all bourgeois sections in the country. This is to justify the further misery that they want the masses to face. This should not be tolerated. Strike action, including general strikes, along with mass struggles can stop the onslaught and open the way to the implementation of an alternative programme.

Unfortunately, there is no force that exists in Sri Lanka that can advance such a programme. Where to borrow from is the only difference that exists between the government and the opposition.

Even the JVP, which dresses its liberal views in Marxist rhetoric, stated that they will negotiate with China and the IMF once they have “taken power”! However, they are happy to postpone their ‘revolution’ until the next election which they hope to win!  

The JVP leaders did not spell out what they will be negotiating or how they will start to solve the current crisis. The central question is that change needs to start with a repudiation of the debt and taking control of the key parts of the economy from out of the capitalists’ hands, then a government representing the workers and poor would both call for the workers and poor in other countries to follow their example, while also being open to negotiate, on a principled basis, concrete issues with both individual capitalists and other countries.

Trade unions that are linked to the political parties have so far refused to take any decisive action. Trade union leaders have not shown any intention to come together on a central platform to plan and coordinate actions.

In this political vacuum, the Samagi Jana Balawegaya (SJB, United People’s Power) has begun to be seen as the main platform for struggle.

Some of the recent protests that have taken place in the capital city, Colombo, have been headed by this party. However the SJB campaign mirrors that of the notorious right-wing UNP leader J R Jayawardena (JRJ) in the mid-1970s. JRJ used the mood against the then government to mobilise support by scaremongering about ‘red danger’, together with anti-Tamil rhetoric.

Significant forces within the main left party at that time, the Lanka Sama Samaja Party (LSSP), were, to an extent, able to counter some of this chauvinist propaganda. No such party exists today. Though the JVP has gained some traction recently, particularly among the Sinhala population, this is due to the enormous political vacuum that exists. As the discontent against the Gotabaya government grows, they may see further growth in their support. But this party has no programme or perspective for struggle.

It is worth remembering that the JVP is the richest political party in Sri Lanka with significant resources at its disposal. Apart from empty agitational speeches, they so far have not done anything to even mobilise unions and other bodies that they control. Even their speeches are void of content; in the words of Siritunga Jayasuriya, general secretary of the United Socialist Party (USP), they are like the “sermons of a preacher at the funeral”.

The USP has launched a petition campaign demanding non-payment of debts [see full statement here ].

The main opposition’s call for a general election to be held now is wishful thinking. The Rajapaksa government strengthening its grip on power through various measures is what is likely to happen unless it is forced back by a strong mass movement.

However, the popularity that Rajapaksa enjoyed in the past as a ‘war hero’ has quickly vanished in this crisis. According to one survey, the government approval rating stands at 10% – an historical low. On economic confidence it stands at an abysmal minus 83%. However, the Rajapaksa family will not give up power voluntarily. Instead, they will use further repressive measures and Sinhala nationalist and racist propaganda to keep themselves in power. Previous governments used the Tamil national question to whip up Sinhala nationalism.

In the name of security and protecting the unitary state, they have mobilised a chauvinist base to maintain power. Gotabaya recently appointed a task force to implement “one country one law”. But in effect, they made it clear that what they want is one country, one language, one religion – and one family to rule.

The President appointing Galagoda Aththe Gnanasara, well-known in the country as a hooligan monk, to head this task force is a clear indication to language and religious minorities of what is to come. Representing one of the notorious and violent far-right Buddhist organisations, the Bodu Bala Sena (BBS), he has in the past threatened to kill all Muslims.

The responses of the main Tamil and Muslim parties are inadequate, to say the least. The main Tamil party, the pro-capitalist Tamil National Alliance (TNA), has no perspective to challenge this government. In the past, they stood by their traditional ally, the right-wing United National Party (UNP) claiming that’s how they could prevent Rajapaksa from coming back to power. Despite the failure, despite the collapse of support for the UNP in the south, they still hang on to their old ways.

When the tension between India and Sri Lanka unfolded, sections within the TNA came to life and swung into full action, supporting the Modi government. They hoped to attract India and the west to their side by placing themselves against Chinese interests in the country. They went as far as saying they will organise protests and agitational campaigns against Chinese involvement in Tamil areas, and invited the Modi regime to invest instead.

This propaganda helped Rajapaksa create the fear that ‘outside forces’ are working to divide the country. Rajapaksa continues to survive on this non-existing ‘threat’.

In every crisis that the government faces, the Tamil issue is used as a tool to counter the opposition. The Sinhala working class is hoodwinked by the ‘Tamil separatist threat’ to tolerate attacks against them. JRJ used the same tactic to break the strong trade unions and workers’ movement that existed in the country as part of the campaign to smash the public sector general strike in 1980. This was later followed by the pogroms of 1983 where JRJ goons were directly involved.

Even if an election is held now, as the opposition demands, it is not clear that Rajapaksa will be defeated. Rajapaksa has implemented an emergency, passed various repressive laws, and accumulated more power. They have implemented a curfew in Colombo to block and suppress protest: banned strikes, imprisoned student and union leaders without charge, and taken other repressive measures.

The new so-called ‘reform’ of the Prevention of Terrorism Act (PTA) has further strengthened the government’s ability to clamp down on the opposition. The government was quick to issue the statement following the end of the March protests that it was done by ‘extremists’.

The Rajapaksa regime is increasingly dictatorial. Brutal methods that were used in the war that ended in 2009 will now be used against workers and protesters. No one in the country will be surprised if the military is used now to suppress protest and opposition. But the Rajapaksa family still maintains its base among Sinhala-Buddhist nationalists. It’s only the development of an organised mass movement that can bring down this government.

The inability of union leaders to lead the struggle, and the fragmentation of the left, leaves an enormous vacuum. This and increased repression mean the task of getting rid of Gota and establishing a workers-led government can seem an impossible task and impractical.

Heightening national demands among Tamils, increased polarisation between Tamils and the Sinhala population, and ever sharpening divisions along religious lines lead to a feeling that forging strong united opposition is impossible. But recent events have proven otherwise.

Mass actions, at times spontaneous, emerging across the country are showing the way forward. In protests in Lebanon, Sudan and Chile, for example, what we have seen is that the masses go over the head of so-called ‘leaders’ and organisations that hold them back, and begin to show their strength in the streets. But mass action alone will not be enough. It needs to take an organizational form. Unity can be forged with the far-sighted programme and perspective that guides concrete steps.

Democratically organised committees across the country can come forward in a national body to deal with the emergency situation that exists and go forward to establish a government representing working people.

This should also be linked with an appeal made to the working class in south Asia to take the same road by building movements that can form workers-led governments and be the basis for going forward to the establishment of a voluntary socialist confederation of South Asia.