Another whammy!

Wednesday 5th April, 2023

There have been substantial reductions in fuel prices, and they will go a long way towards tackling inflation. The economy is said to be showing some signs of recovery, but more trouble is apparently brewing for the hapless Sri Lankans, who are struggling to keep the wolf from the door. Now, the government is planning to restructure domestic debt, having refused to be drawn in on the issue all these months. That will be a double whammy for the public reeling from unprecedented tax and tariff hikes and high inflation.

The Rajapaksa-Wickremesinghe regime is like a reckless trishaw driver who never plans his turns. It has earned notoriety for indicating left and turning right, and vice versa. There is hardly any pledge it has not reneged on. In Nov., 2022, State Minister of Finance Shehan Semasinghe was quoted by the media as having categorically stated that the government did not intend to go for a ‘haircut’ on domestic debt. But it has now become patently clear that the restructuring of domestic borrowing as well as a painful ‘haircut’ is imminent.

It is hoped that the local banking system, already under severe stress owing to the economic crisis, other financial institutions and the EPF (Employees’ Provident Fund) will be resilient enough to absorb the anticipated shocks of domestic debt restructuring, which is likely to be far worse than anticipated. There are a large number of individuals who have invested heavily in Treasury Bills, etc., and they too are likely to be up a creek. The government has sought to make light of the situation, but prudence dictates that all the stops be pulled out to deal effectively with the inevitable adverse outcomes of domestic debt restructuring.

Whenever the economy hits a bad patch, the government in power has to curtail its expenditure and adopt austerity measures to lessen the country’s debt burden without recourse to extreme measures that stress the state coffers and the financial system. But the Rajapaksa-Wickremesinghe administration is carrying on regardless. It suddenly realises the need to cut down on expenses only when the Election Commission asks for funds! But there is no shortage of ceremonies that only serve to boost the egos of ambitious politicians, the last Independence Day celebration being a case in point. The waste of public funds on politicians’ junkets also goes on unabated. Hardly a day passes without some government windbags attending ceremonies in faraway places.

Wanderlust takes over politicians when they are ensconced in power. They junket merrily, both here and abroad, at the expense of the public. They have been seen attending a large number of religious functions recently, and their travel must have cost the taxpayer an arm and a leg. Religious leaders are also responsible for this mindless waste, for they do not consider any event complete without the presence of political leaders, whom they lambaste in their fiery sermons to hoodwink the public and be popular.

Worryingly, speculation is rife in political circles that the Cabinet is to be expanded soon for the benefit of some more political dregs with deep pockets and shallow minds. There are already too many ministers, and the public must not be made to cough up more funds to maintain a bigger Cabinet. The country does not need more than a dozen Cabinet members and an equal number of deputy ministers. In fact, serious thought should be given to downsizing Parliament, which, more often than not, has inquorate sessions. It defies common sense to maintain 225 MPs.

The Opposition should stop running around like a headless chicken and pay more attention to domestic debt restructuring to ensure that the government will not plunge the country into chaos. Unfortunately, the Opposition parties are busy fighting among themselves to the neglect of their duties and functions. They seldom speak with one voice on virtually anything. The SJB has rejected the government’s privatisation programme out of hand, but the SLPP dissidents have offered conditional support for it.

One can only hope that the government will care to tread cautiously on the issue of domestic debt restructuring lest the country should find itself in a bigger mess.