A hard road ahead…… Irrespective of who is driving the bus! – By Aubrey Joachim
In all probability Sri Lanka will be waking up to a new chapter in its history. The chosen leader will come with bright and shiny ‘L’ plates as this would be his first shift at the wheel of the bus with a long and rough journey ahead on difficult terrain. There is a mountain of debt to negotiate, pot-holes on the road and deep precipices on either side that demand utmost care and caution lest the bus end up in an even deeper chasm.
Over the last few weeks the driver and his team have been charting the course of the journey and laid out the planned route. Predictive analytic models have been used to fine-tune the outcome. The throngs of passengers have analysed the route map to select the best driver and what they perceive will be their most comfortable ride. Some are looking for a smooth ride while the young and restless will not mind the risks of an exciting journey ahead.
Irrespective of the route and driver selected, Lankans are in for a very bumpy ride. For a start the debt mountain is huge. A Bloomberg report (19th September) revealed that an in principle agreement had been reached with bondholders. What was surprising to realise is that the current debt stands at a staggering US$ 114 Billion! Two years ago when the country defaulted that figure was US$ 82 Billion. Thus in a little over 2 years the debt has increased by US$32 Billion. The Central Bank says that the current FX reserves are circa US$ 6 Billion. This would mean that US$ 26 Billion has been consumed during this period when no capital repayments have been made, neither have interest payments been made compounding the figure. And yet, there is a group who believe that the country has been led fastidiously by an economic superman. It would appear that the partying has been going on without an understanding of the consequences – akin to Nero playing his fiddle while Rome burnt.
There is logically only one way to solve the debt burden. It has to be paid back to those who have chipped in the pesos. And, there is no point in further borrowing from Peter to pay Paul. Therefore, as the journey progresses the passengers will have to dig deep into their pockets to pay their way through the mountain of debt. In other words, the country must begin to generate some serious cash. Two options are available. Produce more to sell more and generate more income – including paying one’s fair share of taxes. Secondly, tighten ones’ belts to reduce expenses. Do not drive around in BMW’s and Porsche’s when a Maruti will suffice. And sorry, there is one more option – eliminate leakage of billions of revenue through corrupt practices of under invoicing exports, over invoicing imports thereby siphoning funds overseas, understating local profits and avoiding genuine taxes.
In charting their route maps, the drivers and there teams have attempted to address these issues – one team better than the other. The mandated promises to the people have documented the path forward – eliminating expenses at the political hierarchy level such as cutting down ministries, presidential expenses, staff, cars, perks and mollycoddling of retired politicians. The public sector productivity improvements must be demanded and forthcoming. Above all the biggest win would be the preventing of revenue leakage which could flow to the benefit of the masses. Also, care must be exercised in free hand-outs to the masses. There is no such thing as a free lunch. Such recipients too must be ready to put their shoulder to the wheel pushing the bus along the rutty road.
Increasing foreign exchange revenue generation is key to eliminating the outside debt through both product and services expansion. Sri Lanka has been blest with natural beauty, resources and an intelligent population which has so far been wasted. It is time to harness these God given gifts and channel them in the right direction. Once again the manifestos address these issues. They profess open market economic policies as well as expanding global reach. Develop the tourist industry to its full potential. Capitalise on the knowledge base of its smart young generation in an era of exponential technology growth – an ideal opportunity for Lankan talent to draw in the dollars.
An interesting mind-set shift that has been observed is the reaching out to the expertise and financial support of the global diaspora which until now has been ostracised by successive leaders supported by a ‘frog-in-the-well’ mentality of the local pundits. This is a major innovative shift that will pay rich dividends. The pool of Sri Lankan talent in this day and age must not be ring-fenced to the shoreline of the country and the diaspora is showing a determination never before seen in wanting their homeland to develop and its citizens prosper. Cells of Lankan diaspora in various parts of the globe must be used as conduits to new markets as well as transfer of knowledge gained in developed countries back to Sri Lanka. Learn from the India playbook.
Having watched the business forums of the Presidential aspirants they all quote Vietnam as an economic miracle. It emerged from the 20 year war only in 1975 when its GDP was about US$ 15 Billion. In 2022 its GDP was US$408 Billion. Its tourist revenue reached US$ 29 Billion in 2023. Its economy is booming and people are well educated and enjoy a good standard of living. Its airline is the 23rd best in the world. It is a leading technology hub and is the global destination for technology and digital companies. GDP Per capita income is US$4,160 – Sri Lanka is US$3,354. It is one of the fastest growing economies in the world and was featured in the business Press a few years ago as ‘An Economic Miracle.’ Its SME sector is also booming. It is not suffering brain drain. But Guess what? Having beaten the US supported South Vietnam, The Communist North took over the country and Vietnam is to date a Socialist Republic with a one-party system led by the Communist party. The Communist Party of Vietnam (CPV) espouses Marxism-Leninism and Ho Chi Minh ideologies.
Sri Lanka can become that next economic miracle, but a major seismic jolt is required to get it there. Would September 21st be the earthquake the country needed to get it going?
The X factor though is the ‘C’ word and who is best to eliminate the scourge? The driver and team must ensure that the bus does not carry any who have been tainted as it will be problematic to address the issue. If they do carry such passengers, they must be prepared to offload such miscreants at the earliest. Interestingly – perhaps for the first time in financial negotiations – the parties to the debt restructuring agreement introduced “governance-linked bond features” as part of the revised bond treatment, it said, referring to clauses that would cut Sri Lanka’s repayments if it meets certain governance and anti-corruption-related targets.” (Bloomberg report 19/9/24). In other words – trading corruption for a debt haircut! This is not an outcome that the nation’s leaders alone can achieve. Every Lankan citizen at every level must be prepared to turn over a new leaf and say a firm ‘no’ to corruption. This may turn out to be the most challenging.
The journey has begun on a long and rough road ahead. All blessings to the new driver and the passengers. The ride will be rough but the destination will hopefully be an exciting place for future generations! God Bless Sri Lanka.
The author – former Global President of CIMA is an Australian citizen of Sri Lankan descent and is not a dual citizen but closely follows the happenings in his motherland.
