Dhananath Fernando 00:21 Hello, everybody! Welcome back to another episode. We are discussing about the role of globalisation and about Sri Lanka. And if you are following us, you know we have been going through each chapter of the book Dr. Rajapati Rana authored. And last episode was on Chapter five, which is about the role of the international financial institutions in globalisation, and in that particular chapter of Chapter five, we discussed about the role of World Bank. And today in Chapter six, it's pretty much the same theme, but we are going to discuss about the International Monetary Fund or IMF, and if you are in Sri Lanka, you know IMF is not a you know everyone knows that term because we have been there 17 times, and Dr. Rajapatira has been working over the years with the World Bank and of course with all these financial institutions. So this chapter is very interesting. It's a short chapter, but it is it provides a lot of depth. Dr. Ajbadhira, welcome back to our programme. Dr. Sarath Rajapatirana 01:30 Thank you for having me again. Dhananath Fernando 01:33 Thank you for joining again, Dr. Ajbadhira. In this particular chapter, you of course go a little in detail about the IMF and the role of globalisation. Generally, the the what is known to common people is IMF, World Bank is part of like promoting globalisation, or or as in your terms, like they are pretty much aligned with globalisation friendly policies. Dr. Sarath Rajapatirana 01:59 Yeah. Dhananath Fernando 02:00 How do you how do you view that? Since you have an insider view also, and you have an outsider view, how do you first evaluate these? I think Dr. Sarath Rajapatirana 02:10 the first thing I would say is good economics. Right. Okay. I see good economics start with yeah. Dhananath Fernando 02:17 Right. So in terms of on on on this particular chapter, you basically mentioned that we have. I think by the time you write it, it was 16 times, and it was the 17th time. We took a little bit of time to go to the 17th time, and probably that caused us a lot of issues. And you basically, in the conclusion, you mentioned that the modern monetary theory, which was untested, and the delays on the IMF programme was one of the main reasons that we went with a quite a bad economic shock. Could you kindly elaborate on your thoughts on this, Dr. Rajapatirananda? How do you, why do you say so, and what is the logical reasoning? Dr. Sarath Rajapatirana 02:58 Yeah, you know, modern monetary theory not only is it tested; it is, it is wrong. Most of all, not only untested is wrong. Okay, it's wrong. Yeah, and so because if it were true, then we'll be in a terrible world in which prices go up through the roof, and because he says you can print any money, no impact on the price level. That is not true. Earliest research on on on economics done by people, you know, very good people shows that prices and prices and policies are very closely related to each other, Dhananath Fernando 03:44 right? Dr. Sarath Rajapatirana 03:44 So you can't get away with it doing, you know. If you, if you artificially say whatever the increase in inflation, I can come to inflation now. Inflation, then it will be shown in it will misallocate resources. There is a problem. Yeah, Dhananath Fernando 04:06 got it. So that episode was a most recent episode with Sri Lanka and IMF. But I would like to also go back to the history. First, Sri Lanka got the membership of the IMF. I think that was in 1950s. Dr. Sarath Rajapatirana 04:19 No, that was famous, but it's called the Bretton Woods Agreement, Dhananath Fernando 04:24 right? Dr. Sarath Rajapatirana 04:24 Where the IMA World Bank after the end of the Second World War, yeah, they didn't want to repeat the problems they had before the Second World War, so people were competitively devalued against each other, and it was not a very good way of doing business, allocating resources for each country. So therefore, when the IMF was and the World Bank was created at the same time, we call them. But what did I just say? Sorry, Dhananath Fernando 04:59 we can start again. So, in in after the after the Bretton Woods system, after the Bretton Dr. Sarath Rajapatirana 05:06 Woods system, we used to call them Bretton Woods Twins. Dhananath Fernando 05:09 Bretton Woods Twins, World Bank area, Dr. Sarath Rajapatirana 05:11 yeah. Actually, we work very closely with them. Dhananath Fernando 05:14 Right. Dr. Sarath Rajapatirana 05:14 In fact, I taught at the IMF international trade. Dhananath Fernando 05:19 Right, right. So, Dr. How from from the little that I have heard after the Britain move when Sri Lanka got the membership, that was also I think the central bank setting up the central bank by then by John Exter, and then I think after two years we got the membership of the IMF. Or is it the same? Is it in 1950s that how Sri Lanka became a member of the IMF? Do you recall, recollect? Dr. Sarath Rajapatirana 05:46 Actually, I can't. I am not sure about it. I don't remember it. Yeah, we can check on it. Yeah. Dhananath Fernando 05:51 So, could you also explain, Dr. Rajpatina, what's the role in your chapter? You explain about the role of globalisation and the sorry role of the international financial institutes on globalisation. So what is their role actually? Yeah, Dr. Sarath Rajapatirana 06:06 actually they have two or three important roles. Right. One is providing funds to countries that were short of it, particularly after the war. So it is a ready access to resources, monitoring resources. But as I said, and you have mentioned it many times, it's not the money that matters, but the the way how the the the economics were designed, how to get best out of the resources that you get. So the the short term allow country to manage short term resource changes or short term resource resources, which is different from the World Bank. World Bank is long term. Actually, so IMF addresses issues of resource use at a short end of the market, whereas the World Bank has used to go as a 3040 year yeah the Dhananath Fernando 07:13 World Bank can go yes Dr. Sarath Rajapatirana 07:15 3040 years sorry right yeah go ahead yeah Dhananath Fernando 07:18 yeah so Doctor Ajay Tina how the role of these institutions play when it comes to globalisation, because you said when the countries goes through disaster, it could be the world war. Like it's not about the money; it's the programme and the people and designing of that programme to maximise the resources. That's what matters. It's not definitely not about the money. How does that help more globalisation? Is it the right economics that you spoke first? Dr. Sarath Rajapatirana 07:48 Exactly. And how Dhananath Fernando 07:49 that ideological-I'm not saying that. Of course, we spoke about the ideological inclination, but how does that ideological influence comes in, or is it purely because of the right economics, or whether there's an ideological side to it, why the IMF World Banks think about globalisation? No, I Dr. Sarath Rajapatirana 08:08 don't. I will totally disagree with the proposition. World Bank, IMF has ideological position. They don't have. They don't have. If they have ideological position, I would not work for them. Right. Dhananath Fernando 08:19 Right. Yeah. But it's purely nothing Dr. Sarath Rajapatirana 08:21 wrong with ideology, by the way. Dhananath Fernando 08:23 Exactly, and we have spoken about. You have discussed it in the book. But you say it's the right economics is basically yeah, that's inclining it. And also Dr. Sarath Rajapatirana 08:32 to learning from each other, that's most important thing. The World Bank IMM does is by following certain procedures that are that are safeguarding the money of the country that is using them. Others also learn. So when we go on a World Bank mission to a country, we learn a lot from those people who are sitting with us in on the table in the table, and we discuss how how did we do it in one country? How did we do in other countries? So we learn from each other. That's a very important thing. For the if the if the IMF and the World Bank didn't exist, they would have to invent it. Invent it. Dhananath Fernando 09:18 Got it. And Dr. Ajpatana, in in in the in the book you have mentioned the the two types of I think main programmes. There's extended fund facility programmes, and the standby programmes. Like, could you elaborate? Yeah, depending Dr. Sarath Rajapatirana 09:33 upon what type of position you are in. Dhananath Fernando 09:35 Right. Dr. Sarath Rajapatirana 09:36 Supposing you have lost all your reserves and you are going to this thing, you are you are in a desperate situation. You need the IMF to help. Dhananath Fernando 09:42 Right. If it is Dr. Sarath Rajapatirana 09:43 something like you, you make a certain adjustment over time, then it's the World Bank. Dhananath Fernando 09:48 Right. Dr. Sarath Rajapatirana 09:49 Both are equally important. They support each other in this sense. That is, they came to a point in the 1980s. They said we will never lend any money to a country which didn't have. Programme IMF programme Dhananath Fernando 10:01 right. That was the chance by the World Bank. Dr. Sarath Rajapatirana 10:03 I am okay. Both right. Because that means easy to deal with it. Because if you don't, if you if you have very high rate of inflation in the country created by government, poor government, poor thinking on it? Then it's easy to design programme for such a situation. So they work together. Some people don't like it; they are gagging up against us. No, it is not like that. I have been in many of those things. We have a very open discussion. Dhananath Fernando 10:38 Right. This Dr. Sarath Rajapatirana 10:39 is the right thing to do. We can say this is what Chile did, this is what Indonesia did, this this this is why it did well, and that by other countries didn't do too well. But also, we don't need all these IMF. There are many countries in the world that have never gone to the IMF. Dhananath Fernando 10:57 There is also purely because of good economics. Good economics. We have good economics, you need not to go to the hospital, which you have mentioned in the book as well. So yes, but if you are following bad economics, you better go there. Otherwise, and get something and get something. Dr. Sarath Rajapatirana 11:15 You are going to a hospital. That's correct. Absolutely right. Yeah, this is the problem, and you have a good diagnosis of the problem, Dhananath Fernando 11:22 yeah. Dr. Sarath Rajapatirana 11:22 And and then so so I would say that so just to remember that the IMF deals with short term problems, balance of payments problems of payment problems, and the World Bank deals with Long-term problems, but IMF. How do you keep the economy going? Dhananath Fernando 11:46 Sorry, and also the IMF has fairly long long-term in the sense like the extended fund facility programmes are generally like it Dr. Sarath Rajapatirana 11:53 has started more recently. Right. Yeah. Dhananath Fernando 11:57 Right. Right. Right. And but Dr. Sarath Rajapatirana 12:00 I want to enter in one place. Yes, yes. People don't don't like what I'm saying here, in the sense that IMF and the World Bank can be the solely the people, the institutions that are helping you. Well, they can. There there are there are countries that have never come to the even from the World Bank, but they are doing very well. Speaker 1 12:23 Yeah, Dr. Sarath Rajapatirana 12:24 yeah. Also, there's a problem of what is called, you know, then if you are rescued every time, like the like the 16th time we went there in India, that's not a very good record. There's a term for it which you you want to avoid doing that repeating because if the other party, lending party, believe that you can go, you can deal with these people and do what they want to do. That may not be in the best interest of the country, also. So, Dhananath Fernando 13:08 absolutely, I think that distinguishing. I mean, that separation of ideas is very important. That there are many countries who are doing perfectly well without the IMF or the World Bank support, which is good because they really do not need to have. They don't need. So yeah, absolutely. They're doing. They're doing quite well. Yeah, Dr. Sarath Rajapatirana 13:26 but very few though. Dhananath Fernando 13:28 But very few. Yeah. But if you are facing a problem, it's not about the money. And here, Dr. Rajabadan has listed down all the IMF programmes that Sri Lanka has entered, and the reason how the IMF also provides and the World Bank provides extend funds below the market rates. Dr. Sarath Rajapatirana 13:45 Yeah, there is some yeah below market rate. Dhananath Fernando 13:49 And if you are facing a problem, it's important that you go there. But the real objective has to be do good economics, become more globalisation friendly, and bring the globalization-friendly policies that you actually have no need to go to IMF. Dr. Sarath Rajapatirana 14:06 Yeah, but globalisation is only just one thing. It's one thing. It's not the only thing. It's only exactly Dhananath Fernando 14:12 there's lot of other things on right. I mean, economics to do in the correct way that you have to do, but it's just just one piece of the broader puzzle. Yeah, Dr. Sarath Rajapatirana 14:22 true. Dhananath Fernando 14:23 So, in terms of IMF and their strategy, or like how they look at things, is there anything that you need to add on the Sri Lankan programmes? Because we have gone there 17 times. Any particular insights? Because you have been, I mean, you have been studying these programmes. You have been there inside, outside. Anything that you would like to highlight, Dr. Amanda? Dr. Sarath Rajapatirana 14:47 First of all, to state, I don't like going to the an institution for 17 times. Dhananath Fernando 14:53 Right. Dr. Sarath Rajapatirana 14:53 I think that is wrong, because people are not making enough adjustments to. Avoid going to the easy way. Took the easy way out to get them money. They and and it's it's sort of very dangerous to have such an arrangement because you can really badly deal with the economy and then be secured. That's not a very good way of doing in running economy. Right. Dhananath Fernando 15:21 Any final thoughts, Dr. Ajapathira? In the conclusion that you, as we discussed at the in the beginning of this conversation, you have commented on the modern monetary theory and the delay of going to the IMF for the 17th time was what caused. But again, it doesn't mean that you know the solution is always going to the same institution back and forth every time when you hit a crisis. That means you're doing something drastically wrong. That means you're not doing the adjustments right to make sure that you're not going there again. Any final thoughts on that, Dr. Ajwata? Before we wrap up, Dr. Sarath Rajapatirana 15:58 yeah, I think we learned a lesson that it is not good to be going to 16 times that you can do much stop the outflow of your funds and things with better easier way of handling it, that then have to go to the fund, and then you get marked. Oh, that country-they are always getting money. Actually, they are getting money. For example, there are many countries in Asia that have depended on it, but I think we are extreme case going to 16 times. Dhananath Fernando 16:44 Got it. So thank you, Dr. Ajay Padilla, for joining this conversation. And we discussed about Chapter Six, which is about the role of the International Financial Institutes on globalisation. And today it was about IMF. And we are looking forward to see you on Chapter Seven, that is about industrial policy versus policy towards industry debate, and we are going to discuss about the Sri Lankan case. This is also something that is widely discussed in the spheres of economics, especially in Sri Lanka. That whether we should really have an industrial policy, whether we should revamp the economy with with industrialization and producing more and more, or whether it is we are having to set up the policies towards industries where anyone who has the competitive advantage they have the space to prosper. Dr. Sarath Rajapatirana 17:35 Yeah. Dhananath Fernando 17:36 So thank you again, Dr. Ajay. We are looking forward to seeing you in the next episode, but also don't forget to subscribe us. We are available in all three languages: Singal, English, and Tamil. In Singal, we can you can find us as Advocata Plus. In Tamil, we our presence is there as Advocata Kural. And if you are not an Advocata Insider, maybe it's time to consider. It's 12,000 rupees a year, and just 1000 rupees per month, you can get access for exchange rate, vehicle markets, and so many other insights, which may help to think about your business and on making strategic decisions. We'll see you discussing on chapter seven next week. Transcribed by https://otter.ai