Friday 30th June, 2023
The government’s domestic debt restructuring plan is being revealed in dribs and drabs, and the public will have to wait until the weekend, when it is scheduled to be presented to Parliament, to see what it is really like. The Opposition has predicted doom, and the government has sought to make a molehill out of a mountain, so to speak. Both sides are notorious for terminological inexactitudes and mendacious propaganda. Therefore, one has to take their claims cum grano salis. The public has been left none the wiser, as usual. One can only hope that the domestic debt restructuring proposals will be discussed at length in Parliament and amendments made thereto, if necessary, to make them less painful.
There is no gainsaying that Sri Lanka has to achieve debt sustainability urgently if it is to restore its creditworthiness and sort out its economy. Its debt-to-GDP ratio, which is as high as 128%, has to be brought down. Debt restructuring is an effective way of achieving this end; otherwise, the state revenue will have to be boosted by other means, which are equally painful, to lessen the country’s debt burden. Governments usually increase taxes and tariffs to increase their revenue. Taxes have already been increased exponentially. Increases in indirect taxes have sent the prices of essential commodities and services into the stratosphere so much so that many people cannot feed and clothe their families. If the government resorts to further tax hikes, the public will riot, plunging the country into chaos again.
In bringing down the debt-to-GDP ratio, the government can lessen its dependency on tax and tariff hikes and extremely burdensome debt restructuring if it cares to adopt measures such as casting the tax net wide and taking action to eliminate corruption and curtail the waste of public funds. According to media reports, many businesses still do not pay taxes, and among them are a large number of traders who are making unconscionable profits at the expense of the public. Many professionals do not issue receipts for the fees they receive from their clients, and dodge taxes. Prominent among them are lawyers, who claim the moral high ground and pontificate to politicians about the virtues of good governance! Customs and Excise rackets are said to cost the state coffers billions of rupees a year.
A great deal of foreign exchange continues to be channeled via informal, trust-based money transfer systems such as Hawala and Undial. These systems, which have stood in the way of the government’s efforts to shore up the country’s foreign currency reserves, are also associated with illegal activities such as drug trafficking. Strangely, successive governments have baulked at going all out to stop these unlawful operations.
Government politicians are more airborne than ‘chairborne’, as it were. One can understand the Head of State and those who are involved in negotiations on foreign aid and external debt restructuring, etc., going overseas. But a ban has to be imposed on others’ foreign junkets. The Treasury should be made to reveal how much the wanderlust of ministers and public officials has cost the public. The internal travel of these worthies must also be costing Citizen Silva an arm and a leg.
A lot of public money goes down the gurgler due to serious flaws in social welfare programmes. It has been revealed that even middle-income earners have been receiving Samurdhi assistance. The government has, in its wisdom, sought to introduce a new social protection scheme, Aswesuma, which is also riddled with irregularities. If social welfare expenditure can be rationalised, the government will be able to make a dent in the country’s debt burden.
Corruption in the public sector has cost the economy dear. Trade unions have alleged that some panjandrums and politicians are making a killing by purchasing substandard pharmaceuticals and equipment for the state-run hospitals at higher prices. Perhaps, with the funds spent on the construction of three expressways, a highway could have been built around the country. If public sector corruption could be eliminated, it would be possible to save a lot of state funds.
Fairness demands that the government adopt measures such as broadening the scope of taxation, ensuring tax compliance, the elimination of bribery and corruption in the public sector, the curtailment of waste, and the prevention of the movement of forex via illegal channels, instead of going hell for leather to exploit the captive superannuation funds to lessen the country’s debt burden.