VIEWPOINTS

MAY THE FARCE NOT RETURN OR STRIKE BACK

Wijith DeChickera is bemused by the lack of clarity on the part of those who would bail out a bankrupt nation state sans a suitable bucket

In May, the eponymous word might dominate islander mindsets now more mindful of matters political, social, cultural and economic – in the aftermath of a pandemic, defaulting on sovereign debt and the subsequent declaration of bankruptcy, the aragalaya and macroeconomic crises amid debt restructuring, ahead of a double-geared election year.

Firstly, it ‘may’ not be a twin helix event after all, as regards the polls.

Official statements and sociopolitical expectations have yo-yoed between the primacy of presidential and parliamentary elections – and it now appears the presidential will precede parliamentary polls, setting the stage for winners of the first to benefit in the second.

This barometer rises and falls as the fickle fancies of politicos pull strings behind the facade of civics, jockeying for supremacy and tinkering with the elections’ timing despite their protestations of not skewing the electoral playing field.

Secondly and more importantly, there is the vexed issue of debt restructuring.

The good offices of the IMF ‘may’ be indispensable in a milieu where the largesse of creditor nations has to be finessed through an ongoing International Monetary Fund programme that is anathema to a few and salvation to many. “Sri Lanka is still on a knife edge path,” warned the IMF’s Sri Lanka Mission Chief Peter Breuer recently – despite the economy finally registering two successive quarters of positive growth in the second half of last year (1.6% and 4.5% in the first and second respectively, year on year).

Possibly aware of political winds of change blowing, Breuer said the International Monetary Fund was “willing to listen to alternative views” as long as these are “realistic and achievable” in the time frame of the programme, safeguarding “the hard-won gains of the Sri Lankan people over the last two years” – a warning to a rumoured uprising of intractable socialism.

This probably redounds to naysayers in the Marxist and ‘new socialist’ camps critiquing the neoliberal ethos of the IMF, and a decision of the government led by former president Gotabaya Rajapaksa to seek formal IMF assistance for the then floundering nation and abysmal state of the economy, to say nothing of extreme hardships faced by the people due to dwindling if not near nil foreign reserves causing severe shortages of imported essential items.

More than the ambiguous quibbling of the Janatha Vimukthi Peramuna (JVP) led National People’s Power (NPP) ‘may’ be blowing in the wind these days.

The JVP is vague about its ‘alternative views’ and even the seemingly more savvy NPP elite of that coalition merely decry the declaration of bankruptcy in mid-2022 but stop short of elaborating what options they would have pursued – or will in the future.

Third, there ‘may’ need to be sea changes in the fiscal policies of a nation state that has habitually lived beyond its means since a fortuitous start post-independence – a clean sheet as regards external debt in 1948; an average GNP of 4.6% (1950-1960); and a positive frame of potential growth, development and progress into an Asian tiger on the cards, but which successive governments squandered by prodigal borrowing and profligate spending.

In fact, “Sri Lanka has only achieved a primary budget surplus five times since 1948,” noted an ADB consultant, economist and regular IMF columnist recently, adducing that the country “has not been able to balance its budget for 71 out of 76 years.”

The economist put the island nation’s ongoing woes in perspective for those who ‘may’ lack the perspicacity to plumb the depths of our predicament or indeed, even prescribe tentative solutions.

“Sri Lanka had no alternative other than to go to the IMF … The programme is about bringing credibility as the IMF is like an auditor … External creditors are willing to negotiate debt as the IMF is here … As we are already cut out of international credit markets, how could we have repaid the debt if creditors had demanded repayment?” he mused.

He added: “The stricken nation’s gross financing need at the time of defaulting was a staggering 35 per cent of GDP (and its external gross financing need was 9.4%), which is around US$ 8 billion a year. If the IMF did not step in, and bilaterals and bondholders demanded repayments, how would Sri Lanka have paid?”

The questions are as follows…

Do we sell state-owned enterprises (SOEs) in a fire sale at dirt cheap prices out of desperation to repay? Can we deny imports and grind the country to a halt again with no fuel, medicine, food and electricity to repay our debt? And if we default again – as some observers recently predicted we ‘may’ – is there any guarantee Sri Lanka will benefit from as lenient an IMF programme next time?

With national debt at a staggering 128 per cent of GDP, and even if we complete the IMF programme successfully, Sri Lanka’s debt to GDP will still be almost 95 per cent of gross domestic product by even 2032.

So it behoves voters to pick their fiscal, financial and monetary policy managers very perspicaciously.