Our debt has to be restructured. Or so we are told. If the debt was negotiated on time, we are also told that the current grief would not have come to pass.
Plus, they say that the ratings are all important and that the current issues cropped up because the Government did not have a proper understanding of international agency ratings.
We are not the only country that has an excess of debt and the major powers have mountains of debt and are the biggest debtors around the block. But our debt we are told is a millstone around our necks.
We are told that we do not have the financial standing — the structures and the revenue inflows — to manage debt. So we are compelled to restructure debt, and do a host of other things that are bound to hurt our economy. Is this the way to play the debt game?
If we are to stop ourselves from being mired in debt, perhaps the best way to make a start is to make debt a thing of the past. How do we do it? It’s elementary. We pay our debts. To the last dollar.
But it has been anathema to think of paying off debts and clearly this is not encouraged by most folk in the world of debt-restructuring and lending. If debtors pay debt, what is the point in rich lenders being in the lending-game anyway?
However, the freedom the country gains by paying off debt is phenomenal. There would suddenly be room for improvement in expanding the revenue base and making life better for the people. There would inevitably be a fresh lease of life for the economy.
So why don’t we pay up our debt? This is thought to be a ridiculous question anyway, because the quantum of debt that has mounted over the years is phenomenal.
In which case, can we pay off a substantial portion of our debt? This is not seen as a solution either and it is fair asking why.
It’s because the slow torture of debt-settlement is good for lender nations, and lender organisations that could squeeze the last dollar of interest on the debt that is owed. However, that should not bother us. Early settlement of debt is not illegal even though sometimes there are certain levies that are charged.
Systemic
While the entire country has been sensitised on the matter of debt repayment, and plans are afoot to restructure debt, the short to mid to long term plan (you get the idea) should be to pay off our debts, and avoid as much as possible getting into debt again. It’s of course the external debt that is being talked about.
This sort of comprehensive debt repayment strategy has no currency in the policy think tanks. As stated earlier it is anathema because all issues with regard to debt repayment have to be naturally discussed and approached in a way that would benefit the lending nations. That’s the way ‘things are done.’
But there are ways and means of avoiding this systemic expectation to approach the subject of debt repayment as a lender-oriented project of structured settlement.
A country could theoretically target to pay up all its external debt in say five years. However, any mention of such a plan would be laughed at. But this is in spite of the fact that such rapid debt-settlement would totally emancipate the debtor nations and make them competitive as global economic contenders.
Supplicant
The East Asian miracle was not triggered by getting into debt and then more debt, and then restructuring debt. Instead, these nations engineered sustained economic growth. But they were not in substantial debt in the first place, it may be argued.
However, that’s not quite correct. It’s just that debt notwithstanding, these countries were able to engineer a manufacturing miracle and build sustained growth. It meant that the question of debt did not arise.
At this moment of crisis in Sri Lanka, the discourse is all about supplicant status, and the possibility that Sri Lanka as a country could go hat in hand and somehow avert a disaster.
However, sustained economic growth as in East Asia in the early days of the East Asian economic miracle would obviate the necessity for Sri Lanka having to restructure debt in any major way even though of course some negotiations should be undertaken towards this end at the beginning.
But, as time goes on these negotiated restructuring timetables could be rescheduled if the country would acquire the ability to repay a substantial amount of debt, early.
Is this all pie in the sky? It is not, if we envision high economic growth and work towards the attainment of that goal to a five or ten Year plan (or two five year plans.) Sustained economic growth could be targeted if we plan for such an outcome and stay the course.
However, psychologically we are being prepared for the opposite outcome. The deals that we are supposed to strike with various lender entities are supposed to be supplicant arrangements.
If we fully comply, the country would be condemned to financial basket-case status for a long time, and this certainly is not the best place to begin any transformation that would achieve us sustained economic growth.
What we should avoid is the debt-settlement trap, or the debt-restructuring trap, which would both condemn us to resolving the debt question on other people’s terms.
This is not feasible because no country — especially one which had a relatively formidable economy in the region such as ours — should be transformed into an eternal basket case because we have a temporary debt crisis of debilitating proportions.
We could study our debt — and discover that there are possibilities of paying it provided that we generate the incomes to pay it off.
Though Sri Lanka is no East Asian country, we have the necessary background to be a manufacturing nation because we were one of the first countries in the region — and indeed in the world — to liberalise and get ourselves used to global market capitalism.
Largesse
Now, we are being told that something happened on the way, and that we have destroyed one of the most promising economies in our part of the world.
But, we have done no such thing. What we have learnt as a participant in the global economy after our borders were opened, cannot suddenly be forgotten. What we have learned would not and should not suddenly be unlearned.
If we pay off our debts in the short to medium term, that should then make us financially viable as a country enabling us to improve our infrastructure in a way that would encourage people to stay back and work for the betterment of the economy.
Today, the psychology has become so defeatist, that young people are being taught that there is no future in the country.
If they are freed of debt — per capita that is — that should be a grand incentive for them to stay back in this country.
Of course there are no short term magic wand strategies to wipe out debt, even though there were some upstart politicians leading three-wheeler political parties who promised they would settle national debt with their personal largesse. Apart from the rank dishonesty of such statements, their disingenuousness is almost mind boggling.
Debt restructuring involves nation building and for the best of capitalists to perform.
Though we famously do not have an Asian Tiger type of work ethic, we have people with the capacity to build. It’s just that they give up at the most inconvenient times and are harassed and discouraged at the most inconvenient moments. It is almost part of the national character.
In sum, the demons can be identified as our own. Yes, there are experts in various international fora that want to keep us shackled, but that’s the least of our problems if we resolve to settle all our debts for instance.
But, internally, we have to banish our own demons. How could we do it? That’s an entirely different article for another time.