One major event is over now. People have elected a new government having high hopes. The next major event is not the abolition or change of the 19th constitutional amendment. The next big event is the submission of the new government’s first budget. Will it dash the people’s expectations? The writing is on the wall for those who want to read it.
Leaders of the government might be thinking of a big budget deficit. A big budget deficit means a big government. And a big government means lower productivity, lower sellable output, lower capital formation and lower allocation for consumption money to households.
However, I have my doubts as to whether the IMF would support such manoeuvres. For the previous government the IMF insisted to have at least a primary surplus in the government’s budget. Primary surplus means that government revenue must be sufficient to meet its expenditure excluding the payment of interest. For the first time, after many decades, the previous government achieved primary surplus in 2018, but again the target “was missed by a sizable margin in 2019 with a recorded deficit of 0.3 percent of GDP, due to weak revenue performance and expenditure overruns” (IMF staff conclusion, Feb. 7, 2020). The IMF did this observation nearly after two and a half months of Gotabaya’s presidency. Therefore, there is no reason to believe that the IMF would not have insisted on the same condition on this new government. Perhaps, Covid-19 might help to get a temporary excuse. Such excuses would be for the mitigation of economic fallout from COVID-19 but not to run a big government with high budget deficits to finance ambitious projects. This intimates that the government has to slash its ambitious infrastructure projects to be implemented by local expertise and financial resources.
However, if the government wants to have a big budget deficit then it should focus to provide support to enterprising sector enabling entrepreneurs to increase total national proceeds (which is the sum of sales) with profits. For this, the IMF would support as this approach helps recovery of economic fallout, capital formation, take control of current account deficit, and increase the tax revenue eventually. The message from the IMF is clear. In the same report, it observes that, “given risks to debt sustainability and large refinancing needs over the medium term, renewed efforts to advance fiscal consolidation will be essential for macroeconomic stability.”
Fiscal consolidation is a deadly concept for the new government. It seems the government wants to think “out of the box” solution as Nivard Cabraal suggests in recent times. This has already been in government’s official thinking. I quote, “The issuance of an international bond by the government is not anticipated in the near term, thereby rendering the current yields observed in the international bond market irrelevant” (Central Bank of Sri Lanka). Read this again carefully. What is the problem with the current yields in the international bond market? In fact, yield rates are low and positive for the government. But certain governments cannot benefit from low rates if that government’s credit rating is not good. In such an eventuality, the government cannot risk damaging the country’s image trying to access international bond market.
But, as observed by IMF, the government has large refinancing needs in the medium term. It means the government needs money in US dollars. The “out of the box thinking” has kicked in. “The government has taken proactive measures in mobilising funds from multiple sources of market based and official sources of financing to effectively improve the terms and conditions of financing” (CBSL website). Here, what do they mean by “market based … sources?” As far as we know, international bond market is the best “market-based source.” The government has decided not to go for international bond market for whatever reason. Then, does this mean that the government plans to mobilize funds from private financial consortiums? Leave this question open.
CBSL further says “The focus of financing will be to further explore bilateral and multilateral sources to benefit both risk and cost considerations of debt management, and these discussions are well underway. Further, the country is in the process of exploring SWAP facilities with regional central banks, while arrangements are being made for syndicate financing with identified foreign sources.” Borrowing from foreign private sources can break a country than make a country. That was what happened to Greece; in desperation at one point 17 years of future ground-handling income of airports were sold to a foreign consortium. If Sri Lanka issues international bonds, then it limits to 10 per cent of the total bonds and Treasury bills issued separately and borrowing limit also must be approved by the parliament. All these measures are to ensure debt sustainability.
With the Covid-19 pandemic the whole world is in a mess economically. The IMF and other international financial organisations do not have clear policies as to how the crisis should be mitigated. As such, the IMF is going to hold a conference in November 2020 under the theme, “Living in the Extreme: Economics of Pandemics, Climate Change and Tail Risks.” As such, the best source of funds must come from the IMF in times of pandemic getting the US participation in developing such programme invoking its “Exchange Rate Stabilization Act” as many countries use the US dollar as their main reserve currency. This would be a more appropriate “out-of-the box thinking” solution than approaching private foreign funds. In times of difficulty, the government must cling more on to the traditional international financial institutions and donors than newly found friends.
Regulate sports in popular schools ahead of big matches
The Big Matches between popular schools in Colombo and main outstation cities are round the corner. In the past school sports was in the hands of former sportsmen and sportswomen who loved the game as well as their school. They devoted their time and money to coach the budding youth without any monetary gain for themselves.
But, see what has happened today. Sports coaches selected by the schools demand millions of rupees to coach the students. And this is readily agreed and paid by the school authorities. In the good old days the members of School teams were provided free meals during match days and also Sports equipment. But it is not so now. The school earn millions of rupees from big matches played for a duration of two, or three days in some cases, and this money could be utilised to buy the required cricket gear such as bats, pads gloves, boots, etc,. I understand a pair of cricket boots is in the region of Rs.18,000 to 25,000. Can a poor village lad who is enrolled to an affluent schools in Colombo, based on his performance in Education and Cricket afford this? These lads should be given all the support to continue in their respective sports rather than drop out due to financial constraints
Coaches in some schools are in the payroll of big-time businessmen whose children are, in the so called pools. Parents of children engaged in a particular sport should not be permitted to come in as sponsors as this would be rather unethical.
The Big Matches between popular boys schools are around the corner and I suggest that the Sports Ministry ensures performance based selections rather than on other criteria.
‘Post turtle’ revisited
I have written about this amusingly thought-provoking creature, the ‘post turtle’ to ‘The Island’ around three years ago (appeared in the opinion column of The Island newspaper on the 19th of June 2018, titled ‘The post turtle era’). The story, which I am sure most of you have heard/read already, is obviously not a creation of mine and I happened to come across it somewhere, sometime ago.
And for the benefit of those, who haven’t heard the story, it goes like this:
“While surturing a cut on the hand of an old Texas rancher, the doctor struck up a conversation with the old man. Eventually, the topic got around to politics and then they discussed some new guy, who was far too big for his shoes, as a politician.
The old rancher said, ‘Well, ya know he is a post turtle’. Not being familiar with the term, the doctor asked him what a ‘post turtle was’.
The old rancher said, ‘When you are driving down a country road and you come across a fence post with a turtle balanced on top, well, that’s your ‘post turtle’.
The rancher saw a puzzled look on the doctor’s face, so he went on to explain. ‘You know, he didn’t get up there by himself, he doesn’t belong up there, he doesn’t know what to do while he is up there, and you just wonder what kind of a dumb ass put him up there in the first place’.”
Now I was having this nice, little siesta, the other day and suddenly there appeared ‘the turtle’ in front of me, sitting on a fence post, seemingly doing a precarious balancing act as the post itself was too high for it to give it a try to jump down to the ground. Not that it probably wanted to do it anyway for it looked quite contended and happy sitting there doing absolutely nothing. And no doubt some loyal and dumb all rolled into one, must have put him up there and been feeding it well too, for it looked quite contended and fat showing a thick head that kept turning to the left and then to the right, while its tongue kept on lolling out as if it was saying something, which must have been absolute gibberish and rubbish anyway.
What a fitting and symbolic representation,
I mean this ‘post turtle’, of the lot, or the majority of it sitting across ‘the oya’, I mused on after I woke up from my snooze.
Many of them get there thanks to the gullible voter, who while ticking the boxes, thinks: he/she will surely deliver the goods this time as promised!
And those two-legged post turtles inside the edifice, bordering the Diyawanna, like the one in the story, keep uttering sheer rubbish and spitting out incomprehensible mumbo jumbo, all in return with thanks to those, who tick the boxes in their favour.
Their statements such as ‘what is oxygen for, to eat?’, is just one among many such stupendously stupid utterances of theirs and I don’t want to tire you with the rest, for they are well known and far too many.
Now I have only one question for you before I end this:
When are we going stop being ‘those dumb asses’, once and for all?
Abuse of use of title Professor
I read with much interest the letter by Mr. Nissanka Warakaulle, regarding the above matter, in the issue of the Sunday Island of 18th April 2021. I agree fully with the contents of his letter. He should be very familiar with the regulations as he is a former Registrar of the University of Colombo. I wish to highlight another instance where it is abused. In the 1970s, the title of Associate Professor was created. Until then there were only three categories of Professors. Firstly the holder of the Chair, secondly a co-Professor and thirdly, an Emeritus Professor. There were also, Lecturers, Senior Lecturers and Readers. The title of Reader was replaced with the title Associate Professor, which is meant to be a designation, to be used after the name. However, this category of academics started using it as a pre-fix, dropping the word Associate!
Profesor Sanath P. Lamabadusuriya MBE
Emeritus Professor of Paediatrics,
University of Colombo
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