The global lender of last resort was encouraged to release S426 million   withheld in September last after Colombo introduced “a broad package of measures to rein in the current account deficit, stem the reserve loss, and bolster fiscal performance.”

The IMF has called on the government to maintain “structural reform” and ensure that the state-owned energy enterprises are placed “on a more sustainable trajectory.” Its charter of dos include hike in interest rates, hike in electricity and petrol prices, an 18 percent cap on credit growth, and cut in budget deficit to 6.2 percent of gross domestic product. Devaluation of the Sri Lanka currency is also a part of the menu aimed at making exports competitive.

This is a normal prescription that comes with any IMF loan. In that sense the hike in levy of a host of items two days before the IMF announcement was no cause for surprise. The products that will now cost more are alcohol, cigarettes and all imported vehicles. Two years back the government reduced import duty on cars by fifty percent. Now it has been hiked from 61 to 100 percent for motorbikes, 200 to 270 percent for small cars and 291 to 350 percent for larger vehicles.

Given the hard hit the economy received during the Eelam War IV, and the global economic crisis, Sri Lanka government has very little elbow room. Austerity measures are inevitable even without an IMF prescription. But any belt tightening cannot be based on text book prescriptions. It must factor in the hardships the people are already experiencing and their ability to shoulder additional burden. Because, what looks like an ideal hike in petroleum prices, has the potential to trigger inflationary cycle, and shoot up the food prices to the dismay of middle income groups and salaried class and daily wage earners.

Some 400,000 families use kerosene for lighting. For fishermen, kerosene and diesel power their boats. Fuel price hike lead to increased transportation costs. The POL price hike announced in February resulted in a 10 to 15 per cent increase the price of bread and other bakery products.

President Rajapakse, who is also the finance minister, has spoken of further spending cuts, which as experience shows will affect development outlays. The military budget will remain untouched as the government has come to depend on the armed forces even for routine civilian duties in the war ravaged North.