These games are dangerous

By Usvatte-aratchi

The games that the President, his government and the leader of the Opposition play are fraught with grave danger to the wellbeing of our people and to opportunities to change, grow and the preserve this society. Gotabaya Rajapaksa, as a presidential candidate held out the prospect of a land in prosperity – saubhagyaye dekma. His advisors in viyath maga, in their wisdom, saw that as a clear path to victory against a hopelessly divided government in office, poorly led and with no viable plan of action. Neither the SLPP nor the SJB wanted to inform the public of the parlous state of the economy and very bleak prospects for another two years or more. True, that is not the kind of story that a winning party would carry to the electorate. However, there was ample ammunition against the incumbent government on other accounts to knock it down with a feather. The SLPP made a serious error in not revealing the black picture and making the government 2015-2019 completely responsible for the dire situation in the country and in not pointing out the difficulties they would experience in bringing prosperity to the people, all thanks to the ineptitude of the yahapalanaya government. Instead, they were cock-a-hoop that they had ample resources and claimed that the alleged impending scarcity of resources was a fig leaf to cover the incompetence of the yahapalanaya government, so badly bared. They did not use the first opportunity in the new parliament to make a statement on the state of the economy and the deprivations that the public may suffer when policies were adopted to bring back stability. Instead, the SLPP government went on in jubilant fashion until a few weeks ago, when both Minister Bandula Gunawardena and Minister Udaya Gammanpila talked openly about the economic and financial difficulties the government faced.

Gotabaya and the SLPP avoided that trope perhaps because there was the strong possibility that SJB would have come back with the dark history of the creation of a debt problem. The spate of infrastructure projects from roads in the Hambantota district to the column by the Beira was financed mainly with loans from China, some of which jumped out of a Pandora’s Box, as it were.

It is hard to believe that planners in China were so naïve as to erroneously estimate the flow of income from the roads in Hambantota from the column near the Beira and from the Nelum Pokuna theatre in Colombo and believe that they must remain white elephants a decade after the investment began. They are likely to remain so for quite some time with the public obliged to pay back the loans. President Mahinda Rajapaksa and his supporters often said that daily a 100 ships passed our shores and we were failing to collect revenue from them because there was no port in Hambantota. More than hundred ships pass by Hambantota now and we have failed to collect revenue from them. One asset has already been leased back to the lender. The Covid epidemic only aggravated the situation which was ab initio bad, and to argue that the Chinese did not foresee this scenario is to insult their manifest ingenuity.

Consequently, the factors that motivated the investment must be sought elsewhere. The full suite of politicians and public officers that advised Mahinda Rajapaksa government to design and approve those projects and their financing are again fully in charge of economic and financial policy with the advantage of a Minister of Finance, who is as short of relevant experience as his sibling the President of state craft. Everyone, beware: the Greeks are coming with gifts.

The leader of the SJB goes around the country, promising the public that when he forms a government, he will give all sorts of benefits (sahanaya) to the public. This is pie in the sky and a poisonous pie at that. There will be no resources to play those games, for at least five years from now and that not without a heavy load of good luck. Take a lesson from present day Greece. The Opposition, as well as the government, for once, must tell the public the truth about the economic situation. (Everyone, especially ministers of government, had better learn that all and any benefits (sahanaya) that a government can give the public must come out of the income of some section of the taxpayers. Governments in this country do not earn more than three percent of their revenue; the rest is from taxes. (Many here confuse themselves and mislead the public by calling government revenue (labeem) with government income (aadayama). Income is what an enterprise earns from revenue after it meets all its expenses. Government income is what it earns by way of interest, profits and dividends. When a government borrows to give you sahanaya, it is asking yet unborn generations to pay for your benefits now. How fair is that? A politician announced on 17 October, in parliament, “We (pointing to himself) will compensate farmers for any crop losses consequent upon the implementation of the new fertiliser policy’. He, in fact, was announcing that his government would be taxing the public more to compensate farmers for crop losses resulting their unwise policies of his government. Nobody would pay to replace its lost output to the nation.

In the crudest form, our society, over the years, more conspicuously in the years 2005 to 2014, used substantially more resources than it earned. (June Robinson remarked in 1958 that we consumed the fruits before the tree had grown.) The way to do that is to borrow from anyone who is willing to lend. It is no different from a man who spends well beyond his earnings and borrows, even from a money lender, no matter the terms of the loans. A time comes when the lenders say, ‘It is time to pay up chum, and if you do not have cash, I will accept your wife’s jewellery and even the furniture and the house you live in’. This society, through its incompetent and corrupt agent, government, can default payment and become a pariah in capital markets or plead with the people that there is an alternative route to credibility. That route requires this society to cut resources use, undergo austerity.

Many made a bogeyman of the IMF presenting a programme of austerity with assistance to support the balance of payments. What we now live in is austerity, with no balance of payments support. The Minister of Finance promises us an austerity budget. There is already a freeze on completing projects. Many employees clamour for and are on strike seeking wage increases. Prices of essential commodities are rising daily. Prices of most commodities, except labour, have risen and will keep on rising. That is another way of imposing austerity. When your daily wage would buy only two cans of dried milk powder today compared to three last month for the same wage, austerity is imposed on you. (There was once the case of Argentina, where employees asked for their wages to be paid in the morning rather than at the end of the day. They bought cigarettes with their wages in the morning and sold them at a higher price in the evening to buy provisions for the home.)

What you go through now is what an austerity programme the IMF would have put you through. Besides, that programme would have been better articulated and more openly discussed. In our circumstances, budgetary support would have been inevitable. And they would have set up a structure to reschedule debt repayment. The IMF is not the only institution that can function in that manner. Any agency that enjoys international credibility and offers balance of payments support and budgetary support can perform those functions. Our government itself can do it except that it lacks the will to do so and does not enjoy international credibility. There is no escape from the requirement that our society must save (refrain from using all that it produces) and with those savings repay international debt. Leaders of neither the government nor the Opposition can hide those compulsions from the public and yet claim legitimacy. What they do now is far too dangerous a game to play.