Rising interest rates
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Every morning as he wakes up nowadays, Aldoris, the choon- paan karaya, fires a round of calls. “Has kerosene arrived; has petrol arrived; has the diesel bowser come; and is there cooking gas (LPG)?”He is asking these questions not only on his behalf but also on behalf of his customers, many down our lane. When he gets a positive response, he informs his customers who then rush to the particular queue to wait their turn – often many hours, to fill the vehicle tank or collect LPG or kerosene.
Aldoris has also been waiting in queues, more than half the time that he should normally spend on the road selling his breakfast goodies, but he does it without any fuss, realising that everyone is suffering these days.
An added bonus for Aldoris is that he often stays in the queue with a tuk-tuk loaded with food which he sells to others in the queue, particularly everyone’s favourite ‘hot, hot buns’!
The ‘queue’ syndrome today is the tragedy of Sri Lanka and no government politician, Prime Minister or Central Bank Governor is able to tell us with some positivity as to when this era of queueing for fuel would end. With a new Prime Minister from opposition ranks, one would have expected parliamentarians from all sides of the spectrum to close ranks and work jointly to alleviate the country’s problems. No way, that was going to happen. As usual, our MPs continue to fight amongst themselves while the country is burning.
As I reflected on these issues, the doorbell rang. It was Karthelis, the fish vendor, at the doorstep. Where was Kussi Amma Sera?
“Sir, ada maalu gannawada? (Sir, would you be buying fish today),” he asked.
“Ow, ow (Yes, yes),” I said, wanting to help Karthelis during these bleak times. Karthelis chatted while we waited for Kussi Amma Sera to come from the kitchen.
“Sir, aei ape deshapalagnayo henawenne egollo lotharaiyak dinala wage, pinthura ganna kota wena ratakin hari pita-rata ayathanayakin hari adara labena kota. Egollanta thiyenna oney dukbara muhanawal, mokada me adara – dollar billion ganan – api apahu gewanna avashyai ne (Why are our politicians grinning like they have won a lottery while pictures are taken of them receiving assistance from another country or foreign organisation? They should be having sad faces as most of this support – billions of dollars – is money to be repaid by all of us”, he asked.
I nodded, thanked him and walked back to the office room since Kussi Amma Sera had arrived.
Today’s topic is on interest rates with my interest piqued during a recent conversation with Karapincha Perera, the tea-kade gossip.
For those who think interest rates would further go up and help savers, forget it! That’s not going to happen, according to Central Bank officials, who say interest rates, already high, will moderate at those levels.
“We are getting a good return these days for deposits,”
said Karapincha.
“Yes, that is one route the Central Bank uses to increase savings and reduce consumption (as people save more and spend less) and also inflation,” I said.
”Will these rates go up?” he asked. “No, as I stated earlier, they won’t as they are already at high levels,” I said.
Higher interest rates are a double-edged sword; while they help depositors and reduce inflation, they affect borrowers and also increase the interest rate payments of government debt by billions of rupees.
Traders (primary dealers in the Treasury bill and bond markets) have been trying to push the rates higher than the 23-24 per cent offered at Treasury bill auctions by the Central Bank. A recent t-bill auction saw an unprecedented request for the government to borrow funds at an astronomical 37 per cent offered by the Bank of Ceylon. That offer was rejected and bills allowed only in the 23-24 per cent range.
Interest rates in the US have also risen and would fuel demand for the US currency, making it stronger, which means it would adversely impact the rupee value at home and could result in depreciation, at a time when the US dollar is holding at Rs. 350-360 levels.
The hike in interest rates and the possibility of further increases have virtually stopped customer borrowings from banks. “Our lending has come to a grinding halt with high interest definitely curtailing lending,” a senior banker was quoted as telling the Business Times, adding: “Basically, the high-interest rate was introduced to curtail lending and it is working.”
The economic situation is gloomy with the Central Bank Governor Dr. Nandalal Weerasinghe saying, at a recent public meeting, that they had no choice other than making decisions unfavourable to the public. “We don’t have a choice,”
he admitted.
After finding short to medium-term bridging finance as things get worse, the next big challenge is how to get the economy on track which will happen only 12 months from now. Inflation will rise to 30-40 per cent, he said.
“The poor and the vulnerable will suffer immensely and find it difficult to live with their incomes. Many people will go unemployed, particularly in SMEs. However, the export sector will grow, that is our saving grace. This will give us some cushion, some stability,” he added.
With such a bleak scenario, little wonder then that the conversation of the trio, now gathered under the margosa tree with steaming mugs of tea in hand, was also on the era of queues and ‘polin’.
“Mata ikmanata uyanna wuna, mokada eeta passe gas polimata yanna wuna hinda (I had to do the cooking quickly and after that joined the LP gas queue),” said Kussi Amma Sera.
“Kochchara wela hitiyada (How long did it take)?” asked Serapina, adding that she stayed in a kerosene queue for eight hours.
“Mama saren sareta yaluwak ekka maru wuna polime. Peya dolahak hitiya gas hamba-wenna issella (I took turns with a friend and we stayed for a total of 12 hours before getting the gas),” replied Kussi Amma Sera.
“Heta, mage ware polime inna. Mona nasthiyakda ape kale (It’s my turn tomorrow to wait in a queue. What a waste of time),” noted Mabel Rasthiyadu.
A few minutes later, Kussi Amma Sera walked into the office room with my second mug of tea, humming a Sunil Perera song, saying: “Sunil Perera hitiyanam sindu keeyak kiyaida mae thathvaya gena (Sunil Perera would have had many songs on the current situation).”
I agreed, for the late veteran singer was a master at his game of poking fun at politicians and reflecting through song how these individuals are interested in themselves and not the country or its people!
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