Rajapaksa’s economic war

Following the military assault on Sri Lanka’s Tamil-speaking people, president Mahinda Rajapaksa has now declared economic war against all working-class and poor people on the island.

The budget was set out on Monday (22 November). (Not content with his powers as president, Rajapaksa is also the finance minister.) He said that he aims to make Sri Lanka the economic ‘wonder of Asia’. And that his handling of the economy would replicate his military success – words which will chill to the bone every Tamil-speaking person in Sri Lanka and around the world.

He wants to bring down the budget deficit. And we all know what that means: cuts, cuts and more cuts. State spending on jobs for young people is being cutback so, at most, 10,000 of this year’s 35,000 university graduates will get a job in the state sector.

And, despite promising to increase pay for state employees during his election campaign, pay is being kept down. Officially, inflation is 5-6%. The budget introduces a pay ‘rise’ of 5% for the state’s 1.3 million workforce. At best, therefore, this is a pay freeze. In reality, it is a big pay cut because working-class and poor people spend a greater proportion of their income on basic commodities: food, cooking and heating oil, etc. The cost of these essential goods has risen far above the rate of inflation over recent years.

Food prices in Sri Lanka are sky high – another consequence of the Rajapaksa regime’s mishandling of the economy. Whereas he cut taxes on imported cars and other such goods, he increased it on imported food. Without a comprehensive plan to increase domestic food production, however, this has greatly increased the prices of basic foodstuffs – again hitting the poorest hardest.

This budget, in fact, has two main aims: to boost big business, including the personal wealth of the Rajapaksa clan and cronies, and to maintain Rajapksa’s grip on power.

Taxation on the banks and big business is being cut. Some taxes have been removed altogether – for instance, those affecting the construction industry. Rajapaksa’s claim, of course, is that this will help with the reconstruction of the war-torn north. Even if this were true, it would be the most outrageous insult: the government rebuilding what it had utterly destroyed. But you can’t put back the lives of the hundreds of thousands of people dead or devastated by war and concentration camp conditions; or the children growing up without parents and all those who have lost loved ones.

But it is not even true. The infrastructure projects are to open up the north for tourism. They will go to private companies, both international and Sri Lanka. The rebuilding is of hotels and beach fronts. The vast majority of Tamil-speaking people – except a profiteering few – at best, will receive a bit of small change, a tip or two, as they slave away in cheap labour jobs. Out of sight of the tourists, the secret camps will still hold prisoners, the villages will continue to lack sanitation, clean drinking water, decent housing, good quality education and training projects for young people and workers in general.

Deregulation of banking will open up the economy even more than it is already to international finance. These are the same institutions which caused the subprime mortgage crisis in the US a couple of years ago, which have brought down the Irish economy and which are now hovering over the eurozone, ready to pick the bones off the emaciated remains of the economies of Portugal, Spain, Greece, Belgium…

No surprise, then, that the budget won the approval of the world’s chief vulture, the International Monetary Fund. The IMF has demanded tax cuts for businesses and the rich, and financial deregulation as a condition for its loans. Rajapksa, his family and cronies, are only too happy to oblige. After all, they will personally benefit from the budget measures.

The budget breaks another election promise: that there would be a ‘peace dividend’ following the end of the war. Yet, defence spending will rise to, £1.8bn, 20% of the national budget, one of the highest in the world. So, the price of Rajapaksa’s so-called victory is the continued militarisation of Sri Lanka, increased direct oppression against the Tamil-speaking people, and the colonisation of the north and east by outside business interests, backed up by military might.

What this budget shows is that the Rajapaksa regime is not only in opposition to the rights of Tamil-speaking people. It is also at war with all workers and oppressed people in Sri Lanka. He played a cynical game with the Sinhala masses, too, promising a glowing future after the war, decent jobs and improved standards of living. All his promises have been broken. Tamil Solidarity offers our support to all those fighting against Rajapaksa’s pro-big business plans.

Manny Thain