A pain reliever with terrible side effects

Wednesday 5th January, 2022

Santa has arrived late, wearing a saataka and carrying gifts only for some citizens. He seems to have got his numbers wrong and thereby left most Sri Lankans disappointed. If only he had cared to take a look at Sri Lanka’s population data before embarking on his gift-distribution mission.

The government has unveiled a relief package, which will cost the state coffers as much as Rs. 229 billion. Co-Cabinet Spokesman Udaya Gammanpila has sought to deny the Opposition’s claim that the government has granted some relief to the people as it is planning to hold local government elections soon; he says the relief package is intended to help the people affected by the rising inflation. People clutch at straws during crises, and the relief package will therefore be welcomed by the beneficiaries thereof. How does the government propose to help the people who are neither public servants nor Samurdhi beneficiaries nor pensioners but affected by the high cost of living similarly? Farmers’ associations insist that the government’s offer to increase the guaranteed price for paddy from Rs. 50 to Rs. 75 is of little help because private traders already pay that amount for their paddy. A mere request to the private sector employers to grant relief to their employees will not do. Most businesses are struggling for survival. Only a few companies are doing well, and they include those which have gained from import restrictions. Besides, there are millions of self-employed people who are not entitled to poor relief. Whom can they turn to?

Finance Minister Basil Rajapaksa, on Tuesday, said taxes would not be increased to raise funds for the relief package, which also includes tax concessions for essential goods. So, more money will have to be printed, and inflation will rise further as a result, and it will be swings and roundabouts for the people, or worse.

Why didn’t the government unveil its relief package earlier? What has prompted it to fork out Rs. 229 billion as relief may be its realisation that public resentment has passed the tipping point, and there will be uprisings unless some relief is granted immediately. People are so resentful that they have even started hooting at some ruling party grandees in public places, and the government seems to have chosen to throw some money around in a desperate bid to assuage their anger. But whether its modus operandi will yield the desired result remains to be seen because the vast majority of people will be left without any tangible relief.

When the Finance Minister announced the relief package and fielded questions from journalists, he looked unfazed by the prospect of a sovereign default. Or, he may have pretended to be so. He said all loans would be paid back. Is the government planning to have foreign loans rescheduled, or will more strategic assets of the country go the same way as the Hambantota Port, which the yahapalana government handed over to China on a 99-year lease, claiming that the loan obtained for its construction could not be paid back?

Even if the forex inflow improves significantly, helping settle external loan instalments and pay for imports, a sustainable solution to the country’s economic crisis will have to be found. Instead of coming to terms with reality and acting accordingly, the government is being as overoptimistic as the proverbial pauper who walked into a restaurant and ordered oysters for dinner, hoping to pay the bill with pearls he expected to find on his plate. It does not pay to be overoptimistic during crises; one should not ignore the worst-case scenarios in such situations if disaster is to be averted.

Understanding a problem is half the battle in solving it. The government does not seem to have identified the causes of the economic crisis. It ought to listen to expert advice and refrain from playing politics with serious economic issues.

There is already too much money in circulation as can be seen from the steep rise in inflation, and printing more money will be like pouring rotgut down the throat of a cirrhosis patient who needs oxygen support. This is the price a nation has to pay for having square pegs in round holes.