The shocking truth about the economy - Editorial
30 October 2013 08:05 pm
As the people of Sri Lanka are brought into a revival of patriotism and pride in preparation for the Commonwealth Heads of Government Meeting (CHOGM) in Colombo, a widely respected economist in a centre page interview in the Daily Mirror yesterday warned that the country was precariously on a mountain of debts after debts and debts within debts.
The economist, frontline UNP parliamentarian Harsha de Silva said Sri Lanka’s economy appears to be on an unsustainable path because the Rajapaksa regime was borrowing and borrowing to repay and it was untrue to say that we were borrowing for development. Dr. de Silva pointed out that earlier the Sri Lanka governments had borrowed on soft conditions. We got soft loans at an interest rate of about 2.5 percent, a grace period of 10 to 15 years and up to 40 years to repay the loans. But the regime is now borrowing at an interest rate of 9 percent—the highest in the history of Sri Lanka.
In an economic analysis that would have sent shock waves around the country, Dr. de Silva said that last year the government also allowed local banks to borrow from overseas sources so that the government could borrow from these banks also. Borrowing and borrowing, borrowing from here there and everywhere. The unseen image is that of a beggar with bowl in hand but wearing a crown with jewels reminding the people of the infamous story of the emperor without clothes.
The economist said the Central Bank, the Treasury and others had led the country into a danger zone, with international rating agencies including Fitch Ratings warning that Sri Lanka was getting into a situation where the country would find it difficult if not impossible to service our high cost short term debts. The government has often said it is depending much on foreign direct investments and it went as far as trying to allow the world’s biggest casino magnate James Packer to invest here. But foreign investors would look before they leap and look into the liabilities which could lead to debt default.
Portraying a more dangerous picture which could drag Sri Lanka into a geo-political crisis in the Asia-pacific region, Dr. de Silva said China was only interested in China but Sri Lanka’s strategic location was crucial for China’s self-interest and international objectives or agendas. He said Sri Lanka was being used as a strategic location for China’s sea route for shipments of huge quantities of expensive raw-materials including minerals from African countries to China. He pointed out that with the end of the war the honeymoon with China had come to an end and the terms and conditions for future loans would be more stringent. More dangerously, China had major stakes in the new Hambantota Port and the Mattala Rajapaksa international airport which could be converted into military bases in the event of an international conflict involving India. Sri Lanka would then find itself in the firing lines of a clash between super powers or regional powers.
The final and an equally dangerous warning was about democracy itself with the checks and balances taken away in subtle ways and parliament being relieved of its control over the country’s finances. Whatever the economic pundits may be saying or the rosy pictures they are painting of economic hubs and miracles the people need to wake up and ask: Where do we go from here? When the legendary Abraham Lincoln said that no government can fool all the people all the time he was apparently referring to economic realities which cannot be hidden by all the colour-washing and show piece projects. Indeed Sri Lanka, amidst the CHOGM fanfare is facing its moment of truth and a make or break choice in terms of the economy.