Sri Lanka: An urgent need for immediate and decisive debt relief and social dialogue

photo: IndustriALL

More than nine months since Sri Lanka defaulted on its international bonds and entered the worst economic crisis in its history, people are suffering from hyperinflation and severe shortages of basic essentials, including food, fuel and medicines.

Millions of Sri Lankans have fallen into poverty because of the country’s debt crisis coupled with the impacts of the Covid-19 pandemic. This has led to widespread protests which have been violently repressed by the government.

Adding to the country’s plight, the IMF will not release its US$2.9bn bailout package due to a continued lack of commitments from key official creditors and private external bond holders over the restructuring of Sri Lanka’s enormous debt burden. Meanwhile the Sri Lankan government has emphasised the necessity for ‘a common social agreement for economic transformation’ as a pathway out of the crisis.

ITUC Deputy Secretary General Owen Tudor said: “Sri Lanka needs urgent debt relief and cancellation, sharing the burden justly amongst all of Sri Lanka’s private and official creditors. Levels of relief need to be enough to ensure debt sustainability is restored, vital public services protected and fiscal space for long-term investment increased. At the same time, the people of Sri Lanka also need a clear path to a human-centred recovery based on decent work under a New Social Contract to ensure decent jobs, wages, rights, social protection, inclusion and equality. That will require genuine social dialogue with unions.”

In a letter sent to President Ranil Wickremesinghe in December, the ITUC reiterated its call for social dialogue with trade unions to:

  • Ensure a human-centred recovery that prioritises decent work under a New Social Contract.
  • Support work with international partners to introduce social safety nets for workers and implement social protection for all.
  • Address corruption and promote sound public policy.
  • Ensure there is no conditionality which would dismantle essential public services, retrench workers, privatise public properties or threaten livelihoods through lowering social expenditures and suppressing wages, including the national minimum wage under the pretext of fiscal consolidation.

The crisis in Sri Lanka highlights the growing issue of debt distress across the world caused by multiple, ongoing global crises, affecting workers in countries such as Ghana, Pakistan, Tunisia and Zambia.

Developments in Sri Lanka will serve as a crucial test of how the G20 and international financial institutions like the IMF address current sovereign debt challenges and demonstrate the urgent need for reforms to the way debt crises are managed.

Read the ITUC-AP Resolution from October.
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