16 May, 2022

Blog

Bankruptcy, Blame Shifting & Burden Bearers

By Ameer Ali

Dr. Ameer Ali

In announcing the “pre-emptive negotiated” $51 billion debt default”, which in other words meant an official declaration of bankruptcy after notifying the creditors, CBSL Governor Dr. Nandalal Weerasinghe (NW) said, “We have lost the ability to repay foreign debt. It has come to a point that making debt payments are challenging and impossible. We need to focus on essential imports and not having to worry about servicing external debt”. Treasury Secretary Mahinda Siriwardena started the blame game by scapegoating, “recent events including Covid-19 pandemic and fall out from hostilities in Ukraine (for) eroding Sri Lanka’s fiscal position”. But long before NW was imported to head CBSL to pick up the pieces from two years of destructive monetary and fiscal policies, both in support of an unrealistic vision of development rooted in the mind of a triumphalist and sectarian president, several economists and experienced central bankers warned him and his regime of the inevitability of bankruptcy unless those policies were reversed and IMF assistance sought immediately to restructure the country’s ballooning debt and financial difficulties. Their warnings fell on deaf ears.

Now that the inevitable had happened, the new Minister of Finance, a bosom buddy of the President, is playing a blame game. While the Treasury Secretary scapegoated the pandemic and Ukraine, the minister, in an interview with state-run Hiru TV, picked former Treasury Secretary Attigala, former governor of CBSL Ajith Nivard Cabraal and former secretary to the President P. B. Jayasundara as the chief culprits who prevented seeking IMF assistance when, as he said, “almost all cabinet ministers were in favour of going”. The three “were talking about a home-grown solution instead”, he added. The minister seems to be having short memories, because he had forgotten that soon after Professor Lakshman was appointed as CBSL Governor on 24 December 2019, President GR hurriedly called a meeting with the Monetary Board and instructed its members to assist implementing HIS economic policies, or, vision to be more appropriate. After that meeting, he arbitrarily reconstituted that Board by removing a couple of members whom he thought would be obstacles and brought in ones who would be affirmative. Governor Lakshman himself rejected going to IMF and was talking about an alternate path to develop the economy. That path was GR’s path, and the so-called homegrown solutions were the rocks and pebbles laid out along that disastrous path. If at all one wants to blame someone it should be GR and his Viyathmaga cabal.

However, blaming any one is pointless at the moment, because the reality of bankruptcy has begun to hurt and has to be confronted. Bankruptcy imposes a heavy burden on society, and that burden would be born disproportionately by the common people. The first international reaction came from Fitch, the reputed credit rating agency. It had downgraded the country’s largest commercial bank, Bank of Ceylon’s business profile score from b-/negative to ccc/negative. That bank’s risk profile, asset quality score, and earning and profitability scores were also lowered accordingly. This downgrading would obviously have flow on effects on the strength and viability of other banks too. Leaving aside the technical details of this and other associated ratings to the care of financial experts and economists, what they imply in practice is further depreciation of the rupee. That would ultimately mean escalation in cost of living through higher import prices and retail prices at the bazaar. CBSL’s tightened monetary policy would add further to rising prices. The economy has to produce and export more and more to import less and less. With ruling political instability whether this would be possible is doubtful. In the end, it is the ordinary folks who would be forced to carry the bulk of the burden caused by this bankruptcy, and to which they were not a party. This then was what NW meant when he said that the situation would get worse before getting better. The question is how worse would it get and how long would it take to turn to the better.

Given this bleak prospect, IMF assistance would have to come with very stringent conditions. Whether the safety net that would be worked out between IMF and local negotiators is going to be sufficient to provide a minimum level of comfort to the suffering masses is yet to be seen. The Head of IMF has warned in the meantime that growth rates would fall throughout 2022 and 2023 in 143 economies that produce nearly 86% of the global GDP. With such pessimism a financially bankrupt country like Sri Lanka would need an honest government with pragmatic policies to manage the economy. Can Sri Lankans expect that honesty and pragmatism from the current regime whose reckless economic management, dishonesty and wasteful expenditure proclivities produced the current situation in the first place? Nationwide public demonstrations that have become daily scenes are answering that question in the negative.

Thus, economic reparation demands political reparation to start with. This is the dilemma the country is facing now. Any compromising solution to be worked out between the current regime and opposition appears to be unacceptable to an awakened generation of young Sri Lankans whose number has bulged the country’s population pyramid in middle. They have rejected the call for a dialogue by the Prime Minister and are prepared to occupy the streets and maidans until the regime gives up. Unless the political crisis is resolved economic reparation is long way off.

*Dr. Ameer Ali, School of Business & Governance, Murdoch University, Western Australia

Print Friendly, PDF & Email

Latest comments

  • 11
    1

    EE

    “CBSL Governor Dr. Nandalal Weerasinghe (NW) said, “We have lost the ability to repay foreign debt”

    There is NO restructure here BLACK & WHITE it is DEFAULT!!!!

    • 3
      3

      Dear Dr Ali,
      thanks for the valuable article.
      .
      Rajapakhes drove against the wall. Now all have to bear the burden. It was not overlooked that the country has to pay more of its huge loans in 2022 and 2023. Knowing all the facts, but totally being presumptous, the men in the leadership ruined it.
      Debries left are to be cleared by the very people. Having watched how many are among the young protesters, we can be proud of them being that dynamic. This is the revolution that the nation expected for ages. However, there are lot more culprits and hired men of Rajapkashes are making their every efforts to damge the youth. My eyes could not believe but it was true that a brave pollice officer joined protests uttering his heart out. The kind of palpable changes were rare in srilanken in the recent times. Now we see the light at the ned of the tunnel in terms of high criminals can be be caught soon. From BErlin to Chicago…. srilankens all together join hand with their fellow in srilanka for a common gain -. which is to get rid of SONS of bitches born to Medamulana cave.

    • 0
      8

      Gus,
      “There is NO restructure here BLACK & WHITE it is DEFAULT!!!!”

      It is a pity that you cannot understand the difference between “We have lost the ability to repay foreign debt” and ‘We are not going to repay foreign debt’. Up to now Sri Lanka has a very good track record of repaying foreign debt on time. At the moment country is facing a foreign currency problem arose mainly due to COVID pandemic and therefore the Government is seeking to restructure the debts so that the country can repay the loans without defaulting. Asking to restructure debts is not something to be ashamed of.

    • 1
      1

      This comment was removed by a moderator because it didn’t abide by our Comment policy.

      For more detail see our Comment policy https://www.colombotelegraph.com/index.php/comments-policy-2

    • 10
      1

      Please request all foreign representatives in SL, especially the US counsel and the EU ….. to warn Gota/Rajapakses that any violence against the demonstrators won’t be tolerated.

      I don’t know who can do it ……… but has to be done now without delay: got to be pre-emptive …….. The Rajapakses are up to no good: they are plotting something.

      • 3
        0

        Nimal my guess is same as yours. Like how MS openly threatened, I will start fire and burn , JR allowed the country to actually burn , few extra days, Rajapaksas are capable of starting a war all over, this time against their own country.

  • 22
    3

    “Unless the political crisis is resolved economic reparation is long way off.”
    This is what we continue to say but the majority of this country failed to accept the truth and continued to support fake patriotism, racism and fundamentalism which made the political leadership to corrupt and rob the country. When the national anthem was sang in both Sinhala and Tamil the majority turned against it. When the Tamils remembered their dead people we opposed it. When the Muslims wanted to bury their dead body’s majority opposed it. Now, the country is going around begging no one is there to sympathies us.
    The Economists and Civil servants failed to tell the truth that the political instability is the fundamental problem. They just served for masters instead of people.

    • 1
      12

      Ajith,
      “When the national anthem was sang in both Sinhala and Tamil the majority turned against it. When the Tamils remembered their dead people we opposed it. When the Muslims wanted to bury their dead body’s majority opposed it.”

      Do you think if the majority Sinhalayo allowed Tamils to sing national anthem in Tamil, allowed Tamils to remember their dead people and allowed Muslims to bury their dead bodies foreign currency could have keep on flowing to Sinhale/Sri Lanka? The things that you talk have nothing to do with the foreign currency crisis. The foreign currency crisis arose due to COVID pandemic that dried up remittances from Sri Lankans working in foreign countries and crash of tourism. Tourism crashed before COVID due to terrorist attacks by Muslims killing foreigners and situation got worse due to COVID pandemic.

      • 3
        0

        EE,
        You may not see the direct impact on the economic crisis. Do you know that the impact of Covid is much higher in India than Sri Lanka and India is not begging like Sri Lanka. The tourist problem started with Easter Bombing which targeted Christians and Foreigners and it helped the corrupted Rajapaksas rob this country. Your racist mind and attitude will not accept that who was the master mind and don’t try to put the blame on Muslims. The Suicide bombers were in the pay list of Rajapaksas.

  • 19
    2

    The President and the Prime Minister of this country are behaving like the proverbial dog in the manger. They cannot and will not clean up this mess and they will not allow any other persons also to do it. They want to hold talks with the protestors now! The protestors have said they are not prepared to hold talks with losers! Further, Gota said he took up the presidency because the people wanted him to, as though he were doing them a favour. But now when the people want him to go, he is digging his heels in, and is refusing to budge! This shows that when it suits him he will listen to the voice of the people but not at other times.
    As his US citizenship has been revoked, he will have to Go Home to Uganda!

    • 3
      0

      CM,
      “They cannot and will not clean up this mess and they will not allow any other persons also to do it.”
      How can one do that when they are the Architects and Engineered the problem.
      They are not the type who say, ‘Mea Culpa’!!
      They are used to and formalised in saying “I am not responsible for this mess”!!
      This culture ‘Not responsible and Not Accountable’ attitude, is abhorring!!!
      Unfortunately, the electors couldn’t see??!!
      ‘Clouded mindset’ of cultured people of 2500 year hereditary,
      1. “Who is a Patriot?” and
      2. “Who is a Traitor?”
      Unfortunately, to be patriotic in this country is being a Sinhalese or minimalist quantum a Buddhist! If not practicing when alive, atleast when in-articulation overcomes them posthumously, suffices!
      That is the mindset of culturally emancipated country!! Is not discrimination??
      Example:
      Not a SB, so unfit for appointment as PM, but hailed as best FM only posthumously – and cremated at state funeral, (as normal practice of Buddhist and Hindus), instead of burial as the norm of a practicing Christian!! Posthumously Buddhist!!
      Not trying to be a sectarian, evincing ‘need to reaffirm’ the basic human rights of one’s belief!!
      Lakshman Kadirgamar!!!
      The defining moment!!!!
      Quō vādis?

  • 12
    1

    Dear Dr Ali
    While agreeing to much you have said, I do not agree that–
    ….it is the ordinary folks who would be forced to carry the bulk of the burden caused by this bankruptcy, and to which THEY WERE NOT a party…..
    They were indeed collaborators and complicit. It may be they were misled or carried away by rhetoric or taken in by the absurd and twisted lies, however, they were not discerning enough or did not realise that they were supporting a band of incompetent people with only a desire to loot and build up the family image.May be 50% do not deserve or have the capacity to be entrusted with such an important decision. Otherwise how do Raththaran Weerawanse Johnston Vasu et al always come in.

  • 7
    0

    About a Home Grown Solution to a fully muddied intractable problem, there has been no paucity of solvers. However none from the powers that be would ever set their face on eminent stalwarts of the calibre of Dr. WA Wijewardena or Dr. Ameer Ali. Wasn’t the problem itself Home Grown?
    To say the least , warnings together with timely remedial measures were consistently forthcoming?

    • 1
      0

      Express22,
      Dead right on the money?!
      Responsibility?
      Accountability?
      Stature of SL Leaders, demands there should be “No Takers”
      Taboo is the “Operative Word”
      Comply first and complain later!!
      Or better do not, but suffer in silence, which is golden!!!
      Heard this before??
      “It is my word, just follow and do not question”?!
      His Masters Voice!!!

  • 4
    0

    Let’s ask Johnston if he can head the treasury, and Rohitha Chain-ber-lain to head the monetary board. Since there is no money in the treasury anyway, they might come up with a magical solution..! Gnana can be the secretary to his excellency the president….

  • 2
    0

    It is a crisis of mammoth proportion.

    Many unpopular measures have to be taken, not because of the stringent conditions agreed with IMF.

    The present corrupt, nepotistic government even if they do not go home will they be able to implement such stringent measures before they are swept out of power in a violent upheaval?.

    It is better to go now than to postpone until you are taken over by events with tragic consequences.

    History is a bitch!.

  • 2
    0

    “Now that the inevitable had happened, the new Minister of Finance, a bosom buddy of the President, is playing a blame game”.

    This fellow, PC Ali Sabry was the nearsighted architect of the 20th Amendment, which has made his master the behemoth that he now is. Does he have no shame to stand up and continue to defend that scoundrel? Sabry has carved out his exit path, according to my elders. People in Toronto are apparently waiting to ask him a few “questions”.

  • 3
    0

    In order to take this struggle to the next stage in a non-violent manner, there are a few important steps we need to take.
    1. All protesters must be reminded of the dirty manner in which Derana and Hiru have been constantly helping in the propaganda machine of the Rajapaksas. Till date they under report and sugar coat their news. Unfortunately the rural people who have no internet access end up listening to the Mara family propaganda. Therefore most villagers are not even aware of much of the current issues trending against the monster family.
    We have to ask protesters to inform their loved ones to immediately boycott Derana and Hiru.
    2. The military and police must be made to understand their role in the security of the country. We are not in colonial rule. In a democracy, the citizen is the prime concern of the security forces as well as the Judiciary. Therefore they have to listen to the public outcry and assist with their demands. The elected leaders who break public trust have no legal backing to command security forces against the citizens.
    3. At this stage every civil servant must side with the civil demands. We are requesting the removal of traitors, thieves, criminals, and corrupt elements from our government. It is a right of every citizen to demand good governance. We pay taxes to keep the government running.
    If these three points can be passed forward, we can be a step closer to our aim.

  • 2
    2

    Here’s news:
    .
    Basil and his wife have contracted COVID.
    .
    http://www.colombopage.com/archive_22A/Apr15_1650038736CH.php
    .
    I’m sorry, I still don’t have much sympathy for either Mr Kaputa or Mrs Kaputa.
    .
    A slightly earlier story seeks to “explain” the cargo that was taken in February 2021 – last year WAS currency notes – printed in Lanka for the Ugandan government. All this is “National Level Work”: right now, I’m trying to put right certain things at a miniature level, where only I have all the details of the cheating going on.

    • 3
      0

      What is the story behind this Kaputa? I am confused with this Kak Kak Kak Basil Basil Basil.

      Fun Fact:
      Prabakaran was called many names but not a thief even by the Sinhala Buddhist.

      • 2
        0

        Bert
        I think this may explain the origin of the Kaputa link with Basil.
        He used the Sinhala term when speaking in English.

        https://youtu.be/8qKm6qTFxok

    • 2
      0

      SM I too read , in that case, it must be the Kaputa variant.

  • 2
    3

    recent events including Covid-19 pandemic
    —————
    I am not attempting to defend him, but he is partly right on this.
    The tyrannical lockdowns in 2020 was when the avalanche was created.
    It was the working classes who felt the pain back then.
    Now some of the privileged classes are finally feeling the inconvenience of it,
    and all of a sudden are so ‘concerned about the country and common man’
    This includes these two faced journalists, who got their full fat wages to ‘work from home’,
    while demanding more tyrannical lockdowns from the Rajapaksa government, not caring
    how much damage it caused to the working classes.
    Even during these lockdowns, the rich were constantly violating the so called ‘rules’, while the
    poor were being punished for it.

    • 2
      0

      Dear SS
      …The tyrannical lockdowns in 2020 was when the avalanche was created……
      Stupid back-scratching that is.
      I beg to differ ;
      Here are how the other SE Asian countries moved ahead during covid times.
      Change in FE Reserves during COVID Pandemic in US Billion in alphabetical order :
      COUNTRY END 2019 2021 MONTH
      BDesh 33 47 Oct
      China 3100 3222 Nov
      India 450 638 Nov
      Malaysia 106 116 Oct
      Spore 280 415 Nov
      SKorea 410 464 Nov
      Sri Lanka 8 3 Sep
      Thailand 224 246 Oct
      Vietnam 79 105 Aug
      Only country that was ripped off on vaccines and testing equipment and foolish shift to organic fertilizer.
      There is a limit to misinformation.

  • 3
    0

    Just read a news item tha vietnam is exporting EV Vehicles to USA. Also going to build a $2 billion plant to buil EVs in the USA.
    Vietnam, south korea, japan after war and destruction became booming economies. SIngapore Malaysia which during british rule sourced ceylon tamils to work in these countries public services are thriving economies. sinhala land because its priority and focus was to keep ceylon tamils downtrodden and victimised is now BEGGAR sinhala land.
    Constant news in the international media about the F#c$ed state of sinhala land.
    In addition laughing stock news items about sinhala land airlines asking for expressions of interest for leasing 21 aircraft!!!
    These news items will negatively affect the intelligent traveller when choosing its next destination for a holiday!!!!!!!

  • 3
    0

    The Home-Grown Solution! Do you know what it is? It was exactly as what it is now, except that the people would be still worshipping them in a stupor through all their hardships and sufferings, awaiting the vistas of prosperity and splendor to come in a few generations later.

  • 5
    0

    I am sorry for the suffering Sri Lankans but make no mistake this suffering is caused by a self inflicted wound.
    Not all but majority of the Sinhala Buddhist elected an idiot for one reason only, make Sinhala Buddhist great again while destroying minorities, all other religions and their cultures.
    Now that the protest is going strong Buddhist monks are coming out to give lip service. Look how fast temples have grown and monks got rich under Hora Gota. The gladly took part of the loot as arms.

  • 4
    0

    I am LOSS TO UNDERSTAND why them RATPACKSES are so THICKED SKIN, when they are being hated by their own constituents and the international community look at them as the laughing stock by and because of these VERMIN clinging to power at all costs including costs of further NEGATIVE IMPACTS on the BEGGAR sinhalas.. IT is possible that this is because the VERMIN RATPACKSES are RATHICK SKINNED!

    • 3
      0

      “I am LOSS TO UNDERSTAND why them RATPACKSES are so THICKED SKIN, when they are being hated by their own constituents”
      They don’t give a rats as* about a constituent that they know could be bought with a packet of rice and a pint.
      It is not their thick skin that is preventing them from giving up power. It is just self preservation. If they give up power they will also be forced to give back the whole family and their goons looted from the country. Gota has cleared himself from over 30 cases by becoming President and is keeping his partner in crime Ali Sarby really close to him. I don’t think even Ali Sarby will deny that he was paid generously nothing illegal its just his fees but where did the funds come from?

  • 7
    0

    To redeem SL we have to first get rid of the evil Rajapakshe family. It is simply no point for anyone to talk to these guys. They want to buy time to shift their loots. Even the name Rajapakshe given to all public places to be removed at once. Also ask the parents not to name thier kids as Rajapakshe .

    • 2
      0

      “To redeem SL we have to first get rid of the evil Rajapakshe family. “
      Haven’t we played this game before, only to pick politicians of the same caliber with a different last name?
      We have put the blame on politicians but shouldn’t people too take part of the blame? They elected these thief’s and morons.
      If this country is to prosper again all Sri Lankans should be and feel equal. Today in theory it is so but in realty it is not. Look at Hora Gota’s record. How many minorities did he chose to key posts? I was surprised wen he chose two out of three economic advisors. But thats after he had screwed everything to a point of no return.
      Today if an honest and qualified minority non buddhist contest for presidency how many Sinhala Buddhist will vote for him? Not many and as a curse for Sri Lanka it has a majority of Sinhala Buddhists so he will not get elected but if a thief, war criminal and crook contests with a label of Sinhala Buddhist he will be elected. So this is the price we pay.

  • 1
    0

    The economy was f****D up by a handful of yobs. Whether is was incompetence, arrogance or corruption, it is the average citizen that is suffering as the result. All these yobs, including the scholars who prostituted their integrity, should be held accountable & prevented from leaving the country. I hope, at least the developed countries will issue travel bans for this despicable lot & revoke visas/residency they may already have, & that includes their immediate families as well.

Leave A Comment

Comments should not exceed 200 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically disabled after 5 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.