MP Weerawansa makes spurious case against the IMF

Fact Check

In his statement, the MP claims that the government’s economic strategy in line with IMF guidance is not effective because total export income has decreased by 10% this year compared to last year. 

The MP is correct in citing Sri Lanka’s export income (in value terms) for January and February of 2023 as having reduced by 10% (10.7% to be exact) when compared to the same period in 2022.  

The MP cites the reduction in export income as the basis for concluding that the IMF programme is not providing a remedy for the economy. The claim is spurious for three reasons.  

First, it is unusual and arbitrary to use export income growth as the criterion to evaluate the efficacy of an IMF programme. The more relevant criteria for such programmes is the improvement in macro stability variables—such as inflation, interest rates, fiscal deficits, reserves etc.—all of which have improved in January and February of 2023 (The reference period of the MP). 

Second, there is a timing mismatch in the cause and effect cited. The IMF programme is at an early stage, having gained staff-level agreement in September 2022, and board-level approval only in March 2023. Over two-thirds of the actions agreed on the programme remain pending even at the end of April (see IMF Tracker: https://manthri.lk/en/imf_tracker). It is a programme spanning four years till about February 2027. Yet the MP cites the lack of an arbitrary outcome in January and February 2023 as a judgement on the efficacy of the programme. 

Third, Sri Lanka’s export performance can also be assessed on the volume of exports—whereas the income is a function of both volume and price. CBSL publishes a monthly volume index for exports with 2010 as the base year. It shows that Sri Lanka’s overall export volume has actually increased by 6.5% in January and February of 2023 compared to the same period in 2022, and the income reduction then is indicative of a dip in price rather than production. The MP correctly cites the reduction in export income.  

But his claim, that it demonstrates the lack of efficacy of policies followed under the IMF programme, is spurious for the reasons set out. Therefore, we classify the MP’s statement as FALSE. 

Additional note: When evaluating the export income performance of a country, it is also instructive to compare it against external trends. To illustrate, FactCheck.lk compared Sri Lanka’s export income change in the fourth quarter of 2022 with that of the World and Asia. The comparison is for the latest period for which global trade data is available. 

Exhibit 1 shows that world apparel exports fell by 9% in the last quarter of 2022 compared to the same period in 2021, and the Sri Lankan apparel exports decline was similar at c. 10%. This sector accounts for c. 40% of Sri Lanka’s overall export income. Exports from Asia fell 5.7%, while world exports fell by 0.1%, but Sri Lanka’s total exports (linked to more affected sectors such as apparel) declined faster by 12.5%. 

Exhibit 1: Sri Lanka’s Export Income compared to the regional and world export income.  

Source: CBSL External Sector Statistics, WTO Statistics, UNCTAD Global Trade Update March 2023