Damned if I do, damned if I don’t
View(s):Was it loud, friendly voices or an argument? Just beyond the garden on this bright sunny morning, six days after one of Sri Lanka’s most challenging local council elections, Kussi Amma Sera and her comrade-in-arms, Serapina, are engaged in a heated debate.
Kussi Amma Sera seemed to think it was the increased cost of fertiliser that caused the coalition government a serious setback at the poll. Serapina, not to be outdone, argued that it was the cost of living and a severe drought, in some areas where harvests have been delayed for three years that led to the government’s reversal in fortunes.
“Ehema nevei,” asserts Kussi Amma Sera. “Aaaa ..?” goads Serapina, daring her friend to come out with a better explanation.
It was interesting to watch the two women in action but time is not a luxury these days with a writing deadline to meet.
Both were correct. On Monday, an amusing way to capture the results which stunned Colombo’s chattering classes, was when our office aide Simeon was heard subconsciously humming – while separating the office mail – singer Sunil Perera’s classic, ‘I don’t know why … Eheme woo-ney aei’.
Jokes aside, the one question uppermost on the minds of policymakers and others dealing with the economy, foreign investment and critical IMF-led economic reforms is: Would the government dare continue these policies which seem to have drawn negative vibes from the village? As if reading my thoughts and hankering for a discussion on the economy, the phone rings.
“Hello, hello …,” it was my good friend Arthika Perera, known for his economic jibber-jabber.
“What’s your reading of the ‘result’?” he asks but the ‘good journalist’ in me prevails, not to express my own opinion but ask others for their views. “What do you think?”
“Well … this is a result of not doing anything substantial for the past three years. Even the economy was sluggish. There will be more uncertainty now with major elections not too far away,” he says.
“Will the government steer clear of the reforms process which was to cut public spending, reduce the fat, sell loss-making state enterprises and reduce subsidies because these don’t seem to have worked, as far as the village is concerned,” I ask.
“If the government is trying to compete politically and be a nice guy at the risk of fuelling an economic and debt crisis, then that’s the route. But if they take immediate measures to catch the rogues of the past, enforce the rule of law and discipline, improve public-sector efficiency, most people will appreciate it,” he responds. The discussion is taking a deeper meaning and thought-provoking shift, much unlike Arthika’s normal nonsensical arguments.
“What do you mean?” I ask. “Well … even if the government loses the next election, this process is worthwhile for the long-term benefit of the country. It is a statesman-like approach – putting country before self. Even if they believe such policies could be political suicide, it would anyway mean doing something noble for the country.” “Interesting,” I laugh aloud, ending the conversation with a “we would be idiots to believe there are statesman-like politicians in the country”.
Interesting points indeed. In reality, the governing coalition is confronted with a “damned if I do, damned if I don’t” situation. The serious question, as stated before, is whether the government will continue with the ‘economic shocks’ that the village doesn’t appear to support and gave an ‘unexpected response’ vis-à-vis the poll or trawl back on the reforms and win support with populist measures?
The economic challenges are daunting. Bunching up of debt repayments means settling nearly US$14 billion between 2019 and 2022 of largely accumulating debt, a staggering amount indeed. Public-sector inefficiencies are costing the taxpayer dearly, the crisis at SriLankan Airlines hangs in the balance while debt payments there rise, pressure is mounting on the resumption of agriculture subsidies, and relief payments owing to prolonged droughts and on the flipside flash-floods that destroyed agriculture crops are digging deep into the meagre resources of the Treasury.
The budget with its main focus on increasing and diversifying exports, increasing tax revenue, cutting back on unnecessary spending and reducing debt will be under fire. Pressure to increase funding to local councils with the number of members doubled is certain to rise since the last budget allocation was based on a smaller number of councillors.
The only “certainty” on the horizon is “uncertainty” with months of disruption expected as the governing parties battle with the gung-ho and rejuvenated joint opposition nibbling at the heels of the rulers. Politics, without any doubt, will outweigh economic and country-first considerations in future policy-making.
“How should we win back the village,” will dominate the economic discussions at the hallowed corridors of the old Treasury building as the government takes stock of the situation and plans its moving-forward strategy.
The stock market has dipped in the immediate aftermath of the election but is likely to recover, though at subdued and cautious levels. Ironically, it was foreign institutional investors that were active over the past few years, while local retailers have taken a backseat. The absence of cash-rich local institutions like the EPF/ETF in the market held back by decision-makers owing to dubious investments in the past much of which were revealed in the Commission of Inquiry on the bond scam, is a huge negative for the market. Efforts by stock market officials to urge these funds to return to the market haven’t succeeded. Their return, with sound investment guidelines and transparent decision-making, could be just what the doctor ordered during a period of ‘wait and see’ at the bourse.
Faced with reality and uncertainty as political parties twist and turn taking decisions and then reversing them during the week on the formation of the government, Central Bank Governor Dr. Indrajit Coomaraswamy warned that the political instability was not good for the country.
Foremost at the back of his mind is how to manage debt, maintain the momentum of foreign investment inflows (expected to hit record highs this year), keep the IMF off his back with prudent policies, proactive liability management and diversified exports that would substantially increase export revenue.
Also worrying is the likely pressure on increasing the number of Samurdhi beneficiaries (as those living below the poverty line appear to have increased) and increasing the per month dole itself. More spending with less revenue coming in!
On two expenses that may have negatively influenced the vote, amounts have dropped. According to Finance Ministry data, Samurdhi disbursements in the first eight months of 2017 fell to Rs. 26.6 billion from Rs 27.3 billion in the corresponding 2016 period. The fertiliser subsidy disbursements, an election issue, fell to Rs 16.8 billion from Rs. 20.6 billion in the same 2016/2017 period.
The health-related ban on glyphosate, a fertiliser, widely used by tea smallholders in the south, drew the anti-government vote as smallholders struggled to maintain plots sans weeds and other destructive insect intrusions.
Finally, disputed policies over coconuts, affected by a drought and compelling imports, were the straw that broke the camel’s back, with the joint opposition gleefully showing off a cost of a coconut that now sells at between Rs.70 to Rs. 100 per nut today. This is a fruit that once cost next-to-nothing and was the first recourse to one’s thirst.
In the distance, Kussi Amma Sera and Serapina are still at it, laying down their ekel brooms, and arguing why and how the election was lost by the ruling coalition. A small crowd of young fellows from the lane have gathered to watch the ‘proceedings’ occasionally giggling when tempers rise and voices are raised. As articulated by an office colleague, it was kitchen economics that swung the electorate. Maybe I need to pay more attention to Kussi Amma Sera’s rambling discourse on the “ee…core … no … mee” as much as listening to our ‘venerated’ economists. Maybe they too need to listen to the Kussi Amma Seras of this world to understand how the village economy works, their needs and their aspirations.