Our debt needs to be restructured. Or so we are told. If the debt had been negotiated in time, we are also told that the current grief would not have materialized.
Moreover, they say that ratings are all important and that the current problems arose because the government did not have a good understanding of ratings from international agencies.
We are not the only country that has excess debt and the major powers have mountains of debt and are the biggest debtors in the bloc. But our debt, we are told, is a millstone around our necks.
We are told that we do not have the financial capacity — the structures and the revenue streams — to manage the debt. So we are forced to restructure the 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 want to avoid getting bogged down in debt, perhaps the best way to start is to make debt a thing of the past. How do we do this? It’s elementary. We pay our debts. Down to the last dollar.
But it has been anathema to think about paying off debts and it is clearly not encouraged by most people in the world of debt restructuring and loans. If the debtors pay their debt, what good is it that the rich lenders are in the lending game anyway?
However, the freedom the country gains by repaying its debt is phenomenal. There would suddenly be room for improvement to broaden the revenue base and improve people’s lives. There would inevitably be a breath of fresh air for the economy.
So why aren’t we repaying our debt? It is thought to be a ridiculous question anyway, as the amount of debt that has grown over the years is phenomenal.
In this case, can we repay a substantial part of our debt? It’s also not seen as a solution and it’s fair to wonder why.
This is because the slow torture of debt settlement is good for lending nations and lending organizations who could squeeze the last dollar of interest from the debt owed. However, that shouldn’t bother us. Early debt settlement is not illegal, although sometimes some levies are charged.
While the whole country has been made aware of the issue of debt repayment and plans are underway to restructure the debt, the short, medium and long term plan (you get the idea) should be to pay down our debts and to avoid going into debt again as much as possible. It is of course the external debt we are talking about.
This type of comprehensive debt repayment strategy is not common in political think tanks. As stated earlier, this is anathema because all issues relating to debt repayment naturally need to be discussed and addressed in a way that would benefit the lending nations. This is how “things are done”.
But there are ways to avoid this systemic expectation of approaching the subject of debt repayment as a lender-focused structured settlement plan.
A country could theoretically aim to repay all of its external debt in five years, for example. However, any mention of such a plan would be laughable. But this is despite the fact that such rapid debt settlement would totally empower debtor countries and make them competitive as global economic competitors.
The East Asian miracle was not triggered by going into debt, then going into more debt, then restructuring the debt. Instead, these nations engineered sustained economic growth. But they weren’t heavily in debt in the first place, one might argue.
However, this is not entirely correct. It’s just that despite the debt, these countries were able to engineer a manufacturing miracle and build sustained growth. This meant that the issue of debt did not arise.
At this time of crisis in Sri Lanka, the discourse is about claimant status and the possibility that Sri Lanka as a country can move forward and somehow avert catastrophe .
However, sustained economic growth like in East Asia at the start of the East Asian economic miracle would save Sri Lanka from having to restructure its debt in a major way, although of course some negotiations would have to be undertaken for this purpose at the outset.
But, over time, these negotiated restructuring schedules could be rescheduled if the country acquired the capacity to repay a substantial amount of debt quickly.
Is it all in the sky? This is not the case, if we envision high economic growth and work towards this goal within the framework of a five-year plan (or two five-year plans). Sustained economic growth could be targeted if we forecast such an outcome and stay the course. .
However, psychologically, we prepare for the opposite outcome. The agreements we are supposed to enter into with various lending entities are meant to be supplication agreements.
If we fully complied with it, the country would be condemned for a long time to financial basket status, and it is certainly not the best place to begin a transformation that would allow us to achieve sustained economic growth.
What must be avoided is the debt settlement trap, or the debt restructuring trap, both of which would condemn us to settling the debt issue on others’ terms.
This is not feasible because no country – especially a country that had a relatively formidable economy in the region like ours – should be turned 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 opportunities to pay it off provided we generate the revenue to pay it off.
Although Sri Lanka is not an East Asian country, we have the background to be a manufacturing nation, as we were one of the first countries in the region – and indeed the world – to liberalize and get used to global market capitalism.
Now we are told that something happened along the way and we destroyed one of the most promising economies in our part of the world.
But, we did no such thing. What we learned as a participant in the global economy after our borders opened cannot be suddenly forgotten. What we have learned would not and should not suddenly be unlearned.
If we pay down our debts in the short to medium term, then that should make us financially viable as a country, allowing us to improve our infrastructure in ways that encourage people to stay and work for the betterment of the economy.
Today, psychology has become so defeatist that young people are taught that there is no future in the country.
If they are debt-free — that is, on a per capita basis — that should be a great incentive for them to stay in this country.
Of course, there is no short-term magic wand strategy to wipe out the debt, even though some politicians who have risen to the helm of three-wheeled political parties have promised to settle the national debt with their personal largesse. Besides the dishonesty of these statements, their insincerity is almost breathtaking.
Debt restructuring involves nation building and the performance of the best capitalists.
Although we don’t have an Asian Tiger work ethic, we do have people with the ability to build. It’s just that they give up at the most inopportune times and are harassed and discouraged at the most inconvenient times. It’s almost part of the national character.
In short, the demons can be identified as ours. Yes, there are experts in various international forums who want to keep us in chains, but that’s the least of our problems if we resolve to settle all our debts for example.
But, inside, we have to banish our own demons. How could we do it? That’s an entirely different article for another time.