Why are observers ignoring the IMF’s role in the Sri Lankan crisis?

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Editor's note: The ongoing economic and political crisis in Sri Lanka has attracted global attention. A key factor in an explanation of the crisis is the history of the relationship between Sri Lanka and the International Monetary Fund (IMF). Between 1965 and 2016, Sri Lanka was the recipient of 16 IMF loans, each of which came with a set of conditionalities. However, mainstream observers carefully omit any mention of the IMF; they disproportionately discuss the current crisis around the so-called role of China even though Japan is a larger external lender to Sri Lanka than China. In this newsletter, my effort is to focus on the role of the IMF in the Sri Lankan crisis. Elsewhere, I have tried to explain why the China factor is exaggerated by vested interests. I shall do this not as a country case study, but more from a conceptual viewpoint on how a typical IMF conditionality package affects the economies of developing countries. A bit of history may be relevant here. After World War II, when many of today’s developing countries became newly independent, their economies …