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Living On Loans

Jun 12, 2010 2:30:51 PM - thesundayleader.lk

Since when did taking loans become fashionable? Especially when it is done mortgaging the very people whose burden you are supposed to ease? Call this scribe old-fashioned or whatever else, but in my book taking loans to build mansions just to impress the Joneses or to boost personal egos is simply out of the question. Even if due to sheer necessity, taking a loan was indeed required and there is absolutely nothing wrong with that, who in his right mind would go around the country advertising the fact?

Funnily enough this is exactly what is happening in our beloved Republic of Sri Lanka where anything and everything is given a spin to portray the regime as the doer of all things good. Even as each of its citizens, including those just born, have as their endowment from the government, an individual burden of Rs. 208,000 as debt according to Central Bank statistics at the end of 2009, we now have a government that is busily piling on to this figure without a care in the world.

Just last week it was announced with much fanfare that China rather benevolently had provided in excess of US$ 4 billion to fund various projects in Sri Lanka in just the last 12 months. Mind you, not a cent of this colossal amount comes as a grant which means every cent of it has to be paid back by the 20 million inhabitants of this land minus of course the politicians who obtain these loans, who enjoy tax free salaries – thereby not contributing a red cent to the national exchequer to repay the loans.
Also gone are the days when the terms and conditions of these loans were made known to the people. Instead these days we are vaguely told that country ‘X’ has generously provided loans to the value of so many billions at ‘very concessionary rates.’

Last week India jumped on the bandwagon to provide a US$ 1 billion loan for various projects in the country. Again there was no mention of the terms but only the usually vague offering that the funds come at ‘very concessionary terms.’ If these terms are so concessionary, what exactly is the problem in spelling them out to the people who have to repay these loans?

After all, if someone takes a loan on your behalf and you have to pay it, would you not be interested in being told the exact terms of the contract? Unfortunately, this is not happening and no one is complaining either — all very happy to pay up because the ‘patriotic’ regime obviously can do no harm. This, if any proof is needed, is a classic case of the anesthetic of familiarity, where a people who have been bombarded day and night with patriotic hogwash to cover the most blatant of indiscretions, have been anesthetized to such an extent that they accept without the slightest murmur anything and everything that is piled up on their collective backs.

Taking huge loans is well and good if the nation has the capacity to pay them back but with outstanding government debt running at 86.2 percent of GDP at the end of 2009 according to Central Bank data, serious questions could arise as to repayment capacity if caution is not exercised.
This is probably what prompted former Malaysian Prime Minister, Mahathir Mohamed to comment in Colombo last week that Sri Lanka should target investment led growth and minimise borrowings which could lead to a future debt crisis.

Gone are the days when finance ministers like Ronnie De Mel would labour in parliament amid much hostile questioning to explain such basic details as the tenure of a loan, the interest rate, the grace period and most importantly how the regime intends to find the money to pay back the loan/s. Such disclosures, which are obligatory on the part of the finance minister, no longer take place and thanks to the anesthetic of familiarity, no one in parliament even thinks it fit to demand these details. And the end result, the regime keeps piling on the burden on the man on the street who at the end of the day, benefits little from the pie-in-the-sky projects that much of these funds are used on.

A telling case of misplaced priorities in terms of mobilisation of financial resources comes from, of all places, Hambantota.

Billions of rupees are being pumped into mega projects taking place in the district, which is the home base of the Rajapaksas. The pet projects of the President, the Hambantota Port, the new international airport, the new international cricket stadium are all coming up in the district at astronomical costs and every cent that goes into these projects has got to be paid back. But the issue is this, last week’s newspaper headlines screamed that the highest percentage of malnourished people, yes you guessed it right, lived in Hambantota District.

Let’s take the billion dollars that India promised the President on his visit to Delhi. The money is again for mega projects, this time in the North and East. This is in a scenario where the government has been distinctly backward in resettling and looking in to the welfare of the thousands of war-affected people. The World Food Programme that provided provisions for thousands of IDPs is winding up its operations in the region. The UN, which again looked into the welfare of the war-affected, is drastically cutting down its welfare budget. This leaves a huge funding vacuum, which the government has to step in and fill, but it has so far shown no inclination to do so, instead, focusing, like in Hambantota, on mega projects.

If history is anything to go by, after a debilitating three-decade war in the Northeast and two insurrections in the South around the same period, what we have now are the explosive ingredients for another time bomb. Whether it will explode first in Hambantota or Kilinochchi only time will tell.