Latest on IMF and debt restructuring- II
by Jayampathy Molligoda
Further to my article published in ‘The Island’ recently, IMF Executive board has just approved the EFF arrangement for Sri Lanka at its meeting held on 20th March ‘23. In the meantime, our Ministry of Finance and the Central Bank of Sri Lanka (CBSL) in consultation with the financial advisory group hired for negotiations have finalised the latest position of Sri Lanka’s Public Debt as at end 2022 just prior to commencement of debt restructuring negotiations with creditors. The financial advisory group, Lazard was hired by former President, Sri Lanka in May 2022, along with international lawyers Clifford Chance, to guide the government through the process of restructuring its debt, for which estimates range from $70- 90 billion. According to Reuter reports published last September ’22, Sri Lanka was expected to formally reach out to private creditors who hold about $15 billion in bonds. My understanding is ‘Lazards’ is now working on different permutations and combinations.
The purpose of this paper is to critically review the latest position on the debt restructuring negotiations, because various conditional requests and diverse views are being made by ISB bond holders, Bi -lateral creditors and other stakeholders. I hope our high powered ‘negotiators’ have the competence and commitment to seek ways of avoiding the adverse results stemming from the concerns expressed here that are likely to crop up in the debt restructuring process.
Latest conditional request from the group of bond shareholders:
Having perused the document uploaded to the Ministry of Finance (MOF website) recently, the total public debt stock has skyrocketed to US $ 83.6 Billion, which includes total foreign debt of US$ 45.6 billion and the local debt of 38 billion in US $ equivalent. The total debt as a % of GDP as stated in the above MOF doc is 128%.
Latest conditional request from the group of bond shareholders places a cap on domestic borrowing component in the overall gross financing need of the government budget @8.5%. And if the total deficit financing need is @ 13%, means a MINIMUM of 4.5% of foreign debt financing component. This places serious restriction to our earlier thinking of reducing the foreign borrowing component as well as indirectly places restrictions on earlier thinking of asking higher ‘haircut’ for foreign debt holders. Previously, there was no such requirement came from India and bilateral debt holders.
Resist touching banks’ domestic debt:
In the circumstances, my own view is we are reluctantly compelled to restructure local debt i.e.; TBs and, it’s inevitable that the local debt of US $ equivalent of 38 billion would also need to be taken into consideration for debt restructuring – otherwise there is no way of reducing the total public debt stock to the level that is required as per IMF conditions. This would create a serious issue for our ‘financial system stability’ and the deposit holders including pension funds are badly affected.
This cannot be allowed and therefore the government/MOF/CBSL/Lizards need to negotiate hard on this aspect. We need to convince through hard negotiations to try and get away without ‘haircuts for Treasury bills/bonds.
As far as Sri Lanka’s domestic debt is concerned, CBSL top officials view at that time was that they should be able to get away without ‘hair-cuts’. It could come in the form of re profiling debt, i.e., bundle up short term debt instruments to long term T Bonds and ask people to hold to Maturity-may be with a coupon payment; at least to be confined to CBSL debt, EPF plus ETF and Insurance holdings. They have to know fully resist touching banks’ domestic debt. Whether they can sell this to ISB and other debt holders is another matter.
‘Alternative economic approaches’ offered by eminent economists:
Having said all these negative narratives, my concern is whether we have any other viable and practical option as a solution except IMF supported programme? As stated in my article, former Chief Economist and Senior Vice President of the World Bank, and Nobel Prize winner, Joseph Stiglitz, has slammed the IMF for unleashing riots on nations the IMF is dealing with He has been a critique of IMF causing great damage to countries through the economic policies it has prescribed countries to follow, in order to qualify for IMF loans.
However, in my view, neither Stiglitz nor any other eminent economist has come out with a practical and alternative policy framework to overcome the most serious economic and financial crisis faced in the 75 years of Sri Lanka’s independence. Nevertheless, some contradictory views shared through ‘alternative economic approaches’ are that the only sustainable solution could have been based on domestic self- reliant effort supported by proper planning for accumulation, productivity growth and international competitiveness, supported where necessary by friendly nations. An eminent economist, having extensive knowledge on Federal Reserve banking/CB operations world over and development economics/finance has promptly responded to the writer that this question (alternative solution) should have been seriously considered before the decision to go for IMF assistance was taken and the pre-emptive declaration of the country’s debt default, but it is too late now. Social unrest is reaching the boiling point.
How much muddying is enough?
Maduranga Kalugampitiya (MK) in his Kuppi article in The Island of June 6, titled, “Have humanities and social sciences muddied water enough?” tries to highlight the stepmotherly treatment given to humanities and social sciences (H/SS) in higher education and says that the practitioners in these fields are themselves responsible for this downgrading of the two fields. The core of his argument is that the H/SS streams being in a lowly position in campuses, is more a problem with the practitioners of H/SS than one with the condescending attitude of the policymakers and the general public. As a remedy, he goes on to say, we have to muddy the water, meaning, we have to make interventions that will unsettle the status quo so that the authorities will sit up and take notice; and for this to happen there should be a restructuring of the relevant programmes.
With regard to the weaknesses found in H/SS streams, MK refers to a few issues, saying that the necessary restructuring should produce academics who can engage “in a political reading of the realities that define our existence in society and raise difficult questions about such existence.” However, it is doubtful whether such an exercise will raise the level of recognition being given to H/SS studies because as he himself agrees, “downgrading the humanities and social sciences disciplines are global by nature and are very much part of the neoliberal world order, which dominates the day.” Asking difficult questions and disturbing the status quo are not likely to raise H/SS streams to the dignity they deserve because the relevant subjects under H/SS are by no means the ones that can cut any ice with the global powers that determine which disciplines would best suit to run the circus of their profit-making consumerist economy.
Asking disturbing questions will be the very thing that will make the giants further denigrate the H/SS programmes. Of course, students of hard sciences neatly fit into the “predefined slots” of the mighty engine which determines the world order. It is the students of hard sciences along with those of engineering, medicine, marketing, IT, etc., that have predetermined places in the system with high salaries, perks and prestige. None of these disciplines are free of the market paradigm and help perpetuate the system. None of the subjects coming under H/SS have that glamour in the eyes of those who pull the strings; hence muddying the water will only further aggravate the problems of the field of H/SS. In fact, the widespread idea that spending time and money on these subjects is a waste is directly related to their being evaluated, not by progressive minded academics who envision a more humane society, but by those who are on the top, promoting crass consumerism and profitmaking. Hard sciences, commerce and technology are grist to their mill.
MK’s assumption that H/SS streams are smeared with a bit of soft skills to add some “value” to them is a bit erroneous. It is not only these subjects, even those prestigious subjects like engineering, IT, marketing, etc., have a top layer of soft skills, without which, the students cannot secure a lucrative job. For example, it is an open secret that most of those who are absorbed in to the private sector are not necessarily those with better academic credentials; they happen to be the ones who perform at the interview better although they may have average grades. This, once again, shows the direction of education which is set to produce those so called “employable graduates”; an education which is mightily influenced by the market requirements. As such, whether with or without the topping of soft skills, the H/SS will not compete with the hard subjects. The problem lies elsewhere outside the pail of the curriculum.
The very fact that MK “self-consciously” uses science-related terms like “laboratory” and “H2O” to prove his points in a discourse on the problems of H/SS streams itself shows the popular appeal of science terminology. That’s the crux of the matter. The hard subjects are quite pervasive even in terms of language and the reasons are above and beyond our comfort zone of purely academic interests. Everybody wants to do hard sciences or marketing related subjects because they are the ones that will take them to the promised land of luxury and comfort. Anyone who takes a liking to subjects like, painting, music, language, history, geography, archeology, etc. will have to do it at their own peril unless he sees a clear path for social climbing. As such, the idea of muddying the water will not go a long way with the powers that be unless muddied water can compete with “purified” bottled water in the market place!
MK touches a sore spot when he says that most H/SS researchers wouldn’t produce anything more than “jargonised commonsense”. He goes on to state that the reason is not simply the lack of “rigorous academic training and exposure to critical theory” because even well qualified researchers don’t seem to muddy the water enough. One reason for this, according to him, is the lack of academic integrity of the researchers who for personal reasons flinch from conducting research and push conclusions to their logical ends. They fear the undermining of their own privileged position and the backlash from the society. If this is the case, it is a tragic situation which truly begs the question whether it is worth pursuing H/SS subjects. In fact, it proves that H/SS streams are not only in need of significant restructuring, but even the basic concepts of H/SS have to be reexamined and necessary formulations put in place. It is doubtful whether how much academic training would be enough to make a veteran researcher get enough “training to withstand that pressure”. After all, there are many laymen who can resist pressure from outside without any academic training!
Finally, there seems to be another reason which merits a radical restructuring of the H/SS streams. Of course, the students may be getting training in critical thinking when they are made to study these subjects. The study of almost every subject in H/SS- be it literature, history, sociology, art, economics, political science, language or archeology involves critical thinking. However, as “humanities and social sciences” imply these are much related to our existential problems. This is all the reason why such critical thinking should not be limited to their narrow subject areas. Isn’t it pertinent to ask how much of these critical thinking skills have helped the practitioners of H/SS (teachers, students and researchers) to look critically at the socially and culturally transmitted traditions that have had a stranglehold on our lives? If the conventional mindsets of most of these practitioners are any indication, it is clear that the necessary restructuring must comprise fundamental changes, if the relevant students are to be made progressive minded citizens in our society.
Celebrating what went well or denouncing what went wrong?
By Chani Imbulgoda
“We suffer today, because leaders in the past have failed to govern this country properly”. Oh, the predecessor has not done things well, they all have let the place go haywire”. Familiar excuses… When one takes over the leadership be it the country, be it an organisation, or be it a new position. We, naturally, incline to blame the past, criticize the leadership and highlight what went wrong. We start new reforms, new policies, new practices… condemning the past. We have a tendency to look back through the rearview mirror… only to criticise what went wrong, and start everything all over. Why don’t we give some credit to the past and celebrate what went well, as well?
It is said that those who cannot remember the past are condemned to repeat it. While Tolstoy’s ‘War and Peace’, I wondered how much similarity we can evidence today. Tolstoy describes how the war was waged in early 1800, and how Russia suffered. After two centuries, we witness how Russia repeats it over Ukraine. No lessons learnt from the past. We just passed a civil riot; strikes, protests continue; and controlling and curbing protests are not rare. As a country, have we forgotten our gloomy days in recent past? Bombs, killing, destructions from northern point Pedro to southern Dondra, youth insurrection, misdirection and all the blood we witnessed… It seems that we, rather than learning the lessons unlearned it.
Bringing the beauty of learning from the past, American author, Judith Glaser suggests looking at the past, finding new meaning from significant events, following them and creating successful behaviour patterns. Have we forgotten our glorious past where this country was recognised as the jade of the Indian Ocean? This was known as a prosperous country during the reigns of ancient kingdoms. Once the granary of the East, and even before that, crowned as the Kingdom of mighty by king Ravana, who deemed to be the first to fly an aircraft. I recall my friend in university days who used to say that “there is no future without past”. As Santayana, Glazer and my friend say “we need to look back and learn from our past in moving forward. In the early 19th century, we submitted our sovereignty to colonial masters by conspiring against our own breed. We made Sinhala only policy in 1956 and we opened the economy in 1977, letting our strengths blown out by foreign winds. Lots of lessons are on the stake, if we really want to take. An upcoming book “What Went Wrong” by a bureaucrat, Mr. Chandrasena Maliyadde, a former Secretary to Government Ministries discusses how Sri Lanka failed in many aspects, including public service and University education. There are books on historic accounts, newspapers and media that bring present contexts, and futuristic projections…it is left for us to make our soup adding right mix of past, present and future to taste the soup.
Past is a repository of knowledge!
Reflect on the qualities and competencies possessed by today’s youth with yesteryear’s generation. Do we miss something in the new generation? A state university officer once lamented that those young officers joining the university did not look at the overall picture when making decisions … fair enough, I have noticed a many young staff, and even some old hands think only about the fraction of work they deemed responsible … ignoring the whole process involved. We often pin the blame on the education system. During the good old days, school curricula consisted of lessons on morals and ethics, lessons on history. More importantly, formal education kept space for youngsters to think, there were no tuition classes, and no online assignments to complete. There was time for friends … time to play; time to enjoy nature, and time to talk with parents. Those days youngsters were a part of the real world, nature and ancestors who educate the wholeness of life. Aren’t we missing something in our education system? It is time to look back and look ahead, and look across. Finland, known to be one of the best countries for education in the world, avail time for students to engage with nature; no tough competitive exams, they learn being humane, they learn to be balanced humans. There was a propaganda “Nearest School is the Best School”. In the present context where everything has become expensive, exercise books to transport fees. Safety and security of both male, female children are at stake. Much concerns over drugs, and sex, it is time to revisit and refresh this propaganda tagline. There is a shortage of papers, there was a shortage of fuel and electricity, we never know what is in stock for us in the coming months. We cannot afford to have marker pens and whiteboards in schools now. Time to think about the rock slate which we could use several times and learn well and hard way. I believe more the hard work put in tiring both the hand and head, higher the productivity. Considering the wellbeing of individuals, rising cost and scarcity of essentials and medical drugs, and sustainability of our environment, time has come to think of our past styles of commuting, cycling. Cycling reduces air pollution; cycling makes you fitter. In effect, we will not be compelled to depend on many vehicles imported and perhaps medicine too. We have reached the point where we have to bridge the past with the future. We need to learn from the past and blend it with the future, appropriately without forgetting the present and its context.
Learn from the past, but don’t
stick to it.
When we see a roadblock, a cavity on the road or a commotion or congestion, we naturally turn to the rearview mirror. But we do not turn the car and go back to where we started. No doubt we learn lessons from the past, but we can never create the past again. If you drive constantly looking back from the rearview mirror, you would not proceed much far! Buddha has said that “you can’t have a better tomorrow if you think about yesterday all the time”. One of the key accusations during recent public agitations, and the rebel was that youth do not get opportunities. The anxiety developed over rejection or blocking paths for youth, to be hatred towards old. We often miss fresh blood in decision making bodies, especially when it comes to public sector institutions, owing to too much credit being given to the past. Long number of years in service overshadows competence. When recruiting people for positions, we look at the conduct and experience of the applicant in the past, and make our decision; sometimes a decision to show the door would completely sabotage the future of the applicant. We come across people who wag their past records when they make important decisions for the future. People like to boast about their glorious past and want to create yesterday in tomorrow. I recall an incident that took place at a staff meeting where I work. When the senior officers celebrating past glory, a few newcomers openly challenged and declared they get demotivated in effect. If we cling too much to the past, we will end up spoiling both our present and future.
Change is inescapable. Everything gets changed, context, requirements, and mindsets. History cannot be restored as it was, only lessons and practices can be brought and tried after careful analysis. We normally cling to one of the two paradoxes; one school of thought is glued to the history, experience, and the way things happened. They hardly see goodness in novelty. On the other extreme, the school of thought is forward-looking they ignore the past, condemn the history and embrace novelty. In a car, we have a larger windscreen, two side glasses and a tiny rearview mirror. Why? When we are moving, we need to look at the future with a much broader view, assess the present, and from time to time look back and ensure we are alright.
Past is always a scapegoat for those who don’t want to strive to achieve success. We as a nation today suffer a lot and I believe in owing up to the blame game we play with the past and egoistic attitude and our unwillingness to learn from the past. I always advocate seeing what went well in the past, success stories teach us lessons, where failures are more appealing to worry and enjoy at the same time.
(The writer is a holder of a senior position in a state
University with international experience and exposure and an MBA from Postgraduate Institute of Management (PIM), Sri Lanka and currently reading for her PhD related to reasons of reform failures at PIM. She can be reached at email@example.com)
Rogues have no right to eat while masses starve!
Ali (Raheem) Baba and 225 rogues have no right to eat while the people they are supposed to protect, nourish and maintain go hungry.
A poor widow with a school going child called me from Elpitiya and told me that they had not eaten anything yet. The time was 11 AM. The child had refused to go to school with an empty stomach. But the mother had coaxed him to go to school promising him to keep lunch ready when he returns. She had not found anything to cook by 11 AM and desperately called me. This was just one of such calls I get regularly.
I lost my shirt; I scolded her and told her that she had elected Ali (Sabri Raheem) Baba and 225 scoundrels and that she should go to them and ask for food. I instructed her to do this. Collect as many widows like her as possible and go to the house of their MP (GK) and remind her that they had fed her all these years and now they were hungry and she must feed them. Sit down in the house and do not leave till your problem is solved. While you go hungry that woman has no right to eat. In fact, the scoundrels of Diyawannawa have no right to gobble down subsidised food in the canteen of the den of thieves called the parliament of Sri Lanka.
Another widow called me and told me that she and her children lived in the dark. They have electricity but they could not afford to use it. The family lives in total darkness, every night. The government which could not maintain an uninterrupted power supply at least during the A/L examinations is not a failed administration but a heartless criminal regime. The rogue government which deprived the people of power has no right to use power in their den for light, sound and air conditioning.
And the rogue government has no right to govern at all. It has deprived the people of their right to vote and choose representatives they desire. It has cancelled the provincial council elections and the local government elections. By depriving the people of their right to vote it has abrogated its right to govern. Getting rid of this government is legal, and, in fact, it is the right and the civic duty of the people of this country.
It is this government that robbed the country to bankruptcy, ruined the agriculture and the economy and destroyed law and order in the country. Now, it blames Aragalaya for that. They pretend to be the victims! The effect has become the cause; they turn everything upside down!
Everything they are doing now is some desperate measure or other to keep marking time as long as possible to rob and rob and empty the national coffers before getting out of government and the country.
The scoundrels in the Parliament are accused and even found guilty by courts, of every crime under the Sun. They cheat, swindle and rob openly and unceasingly. This is a curse on the country and its people. We are paying for our stupidity and gullibility. We are a people immersed in superstition and irrational beliefs. There are no better ways to learn life’s lessons than hunger and deprivation. Aragalaya was a great eye-opener and a teacher of the difference between myth and truth, between objective reality and the narrow chauvinism of race and religion; the last refuge of the scoundrel. I hope the 6.9 million have at least by now learnt the lesson.
My dear co-citizens of Sri Lanka, it is time to act. It is pathetic and depressing to see our small children becoming stunted, weak and malnourished. They cannot wait to grow up till things get better constitutionally and decently. The powers that are do not behave constitutionally or decently. They are not gentlemen. They are certainly not ‘Honorable’ Members of Parliament. They have become fascists and tyrants, dictators and underworld god-fathers. Regardless of the cost, we must free ourselves from their murderous grip on us and on the country. It is time to act. For the sake of generations of our children, it is time to act.
Fr J.C. Pieris,
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