Most ordinary folk are clueless about the debt restructuring that’s taking place with banks being closed down last week ostensibly to help with the process. They are being told everything is fine and they should trust the wizards that are doing a good job. This they have been told for a very long time, and in 2022 they learned the wizards didn’t do such a good job after all.
It’s also said that the Banks and the pension funds such as EPF and ETF haven’t been touched in a way that would adversely impact the depositors. The Banks are too big to fail then? Of course a run on the banks or a banking system collapse is the last thing that Sri Lanka wanted. The Banks it was said had taken an unfair share of the burden already and could not afford another haircut, that being the antiseptic term that was used. If the Banks could not afford a haircut then Government bonds issued would have to be touched, but here too only a limited amount of these instruments were affected.
However superannuation funds would have to be invested under certain conditions aiding the Government’s debt-reduction efforts, or be taxed substantially, which leaves the fund managers with little or no choice. The bottom line however is that the restructuring process is so esoteric that most people do not understand its implications. The fact however is that there has been minimal disturbance of the usual processes and status quo, or so people were told.
For the people it’s all the same as they have long felt that they have been excluded from the processes and the methodologies that affect them most when it comes to economic planning. Never mind the debt itself but the debt restructuring is now under control they are told. So how about future debt? Aren’t we getting into more debt having restructured our old debt?
BURDEN
But these are all issues that the common man is insulated from. There was never any importance accorded to the issue of debt in the first place and other than being told that the country is in dire financial peril due to debt, people were never told how we got there in the first place and what measures would be taken to avoid a debt trap in the future.
One reason is that these issues never form part of a campaign by established political parties which are reluctant to explain the esoterica of debt and its implications to the public. Political campaigns have always been conducted on the basis of what the people would gain when political parties are in power, and there has never been any party that has been overtly worried about explaining how all their benefits — i.e handouts and goodies — are being funded.
The people have in turn been willing to abdicate the responsibility of that part of governance to elected politicians. In some ways it has been fair. The people elect politicians because they have neither the time nor inclination to run for office and shoulder the burden of maintaining the economy themselves.
This sort of governance by extreme-remote, though not ideal, may suit the wealthy countries which can get-by even if there is mismanagement and overspending, but when it comes to developing economies the story is very different.
People who do not learn the inside workings of debt, debt management and even debt-restructuring are condemned to suffer the results of their ignorance. They think governance especially at the level of issues removed from their day-to-day reality such as the national debt should be left to politicians only, and live to rue the day politicians mess things up.
There is a valiant attempt to bring down State expenditure and one aspect of it is to bring down defence costs we are told. It was probably very long overdue, but this is also going to create an entirely new class of unemployed.
It was a vicious circle. We spent much on sustaining an unsustainable cadre of combatants and did it during wartime as well as peacetime. We got into debt maintaining that unsustainable armed cadre and now are thinking of scaling-down only when the debt crisis is no longer an issue that can be ignored.
POTENTATES
People are never told by their politicians especially in the excitement of political campaigns that having so many young men and women in the Army serving no gainful purpose is going to bite back at them one day. They will have to suffer when the debt bomb resulting from this unchecked expenditure explodes.
Campaign narratives are never exciting and pleasing to impressionable hordes if these hard truths are told. But if the politicians are not asking these questions then the people should ask themselves about why there is so much debt and what their leaders are doing about it.
The people are told by the experts that the recent internal debt restructuring efforts are successful because the Banks were spared and the superannuation funds were not touched. But on the other hand Government politicians have themselves told us that Parate execution has been misused by some Banks and that the legislation with regard to Parate law would have to be looked into. Banks no doubt have clout that the ordinary people don’t, but indubitably if there is a run on the banks it’s the ordinary people’s deposits that would be affected, so it’s a no-win for the people against the power and clout of these institutions. On the other hand it is said that if the Banks would have had to absorb some of the shocks of debt restructuring — which we are now told they have been mercifully spared — the Banks would have had to be miserly with their loan books.
DELIVERED
It’s theorized the Banks would not have had the money to give out loans if they had to absorb ripples from punitive debt-restructuring. That in turn would have adversely impacted the economy because little economic growth can be expected even if the interest rates are lowered, if Banks have little or no money to lend.
But yet, ordinary folk may be asking themselves why they are kept in the dark about debt-restructuring in the shadow of a five day bank holiday. The truth is that a lot of folk couldn’t care less. They are resigned to their fates. They feel governance issues that concern the elite and educated should stay with the elite and educated.
They have ceded all the power to the potentates and would only wake up and make a noise when things go so obviously wrong that they don’t have their essentials such as fuel delivered to them. The minutiae of complex economic issues never concerns them.
But they are still not sure how the economy would fare. Will the recent restructuring work and will there be a second round of restructuring necessary, as has been the case with some other economies that faced similar difficulties?
The experts so-called are studying those issues but the ordinary folk are content to take what comes their way. They will keep their fingers crossed. Whether we sustain more debt to pay our existing debt for instance was never a problem to them. Now they are not sure whether the debt-restructuring will be medicine that’s worse than the malady. But it’s again not an issue that they want to exert any mental energies over.
Their job is not to look under the hood. But if the technicians do a shoddy repair and make a packet on the spare parts, they wouldn’t know because they are not looking under the hood even once in a while.
There is implicit faith in the ‘process’ and this time around if debt-restructuring works is there a guarantee that it will work anytime in the future, if say there is a second round of debt-restructuring that’s called for? It’s not a question you can ask people who have religiously reposed their faith in others.
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