Game of Debt

Wednesday 23rd November, 2022

The government is cock-a-hoop, having secured the passage of the second reading of Budget 2023 in Parliament yesterday. Its win came as no surprise. The Opposition’s bark is worse than its bite, and souls are for sale in the House; the government therefore can muster enough numbers to win votes with comfortable majorities in Parliament although its chances of winning a popular election are remote.

Odds are that there will be a replay of the outcome of yesterday’s vote in the House if a division is called at the conclusion of the third reading of Budget 2023, early next month. But securing the passage of the budget is one thing, and reviving the economy by resolving the debt crisis is quite another.

Sri Lanka is striving to extricate itself from a debt trap of its own making with some of its ‘friends’ seeking to make the most of its predicament instead of throwing a lifeline.

Some dissident SLPP MPs, who licked the Rajapaksas’ sandals and supported their economic policies to the hilt, and are therefore responsible for the current economic crisis, have become a ventriloquist’s dummies for China. When they speak, one hears the voice of the Chinese, who are adept at gaming governments, political parties, pressure groups and the media in the developing world. Strangely, some UNP grandees, of all people, are singing from the same hymn sheet as the pro-Chinese SLPP worthies, who are doing their darnedest to torpedo the country’s efforts to secure an IMF bailout package, which will diminish China’s influence here significantly. They never miss an opportunity to launch into tirades against those who are negotiating with the IMF, whose intervention China did not bargain for. China was apparently expecting to grant another loan to Sri Lanka for debt repayment so as to further its geo-strategic interests in a big way. Its plan went awry owing to the IMF intervention.

India has also been leveraging its economic assistance to Sri Lanka to further its interests. It pulled the plug on what may be called distress loans to this country because Colombo was slow in delivering what New Delhi asked for. Indian shock therapy, as it were, has worked; Colombo has gone into overdrive to humour India. Modi’s Rockefeller (read Gautam Adani) has secured two vital projects—the West Container Terminal at the Colombo Port and the Mannar wind farm. Sri Lanka is now under pressure to cough up the Trinco oil tank farm!

Sri Lanka’s creditors will not settle for anything less than a pound of flesh each ‘to be cut off nearest the heart’ of the country’s economy. The US has evinced a keen interest in Sri Lanka’s economic crisis, and cynics say there are more State Department officials here than in Washington. It however seems to have outsourced the task of using Sri Lanka’s economic crisis to further the interests of QUAD (Quadrilateral Security Dialogue) to India, and Japan.

Debt restructuring, which is a prerequisite for the finalisation of the IMF bailout package on the anvil, will be a litmus test for friendship; it will help Sri Lanka know who its real friends are. China finds itself in a dilemma. If it agrees to debt restructuring thereby facilitating the implementation of the IMF loan, it will lose its grip on Sri Lanka, and its rivals, namely the US, India and Japan, will gain in the current geopolitical tug of war in the region. If it refuses to restructure Sri Lanka’s debt, it will be blamed for scuttling efforts being made to rescue the Sri Lankan economy. Having invested heavily here, China cannot afford to let the Sri Lankan economy collapse. What’s up its sleeve remains to be seen.

Sri Lanka is like a battered schooner sailing between Scylla and Charybdis. The success of its perilous voyage hinges on the adeptness of those at the helm. But they are a bunch of failed pilots responsible for many shipwrecks. There’s the rub.

Hapless Sri Lankans, who are bearing the brunt of the economic crisis, have been left with no alternative but to batten down the hatches and hope and pray for a deus ex-machina.