In the coming months, the most important issue would be the ‘adjustments’ Sri Lankans would have to make to get the economy back on track. So, salaries would have to be slashed? Government servants cadre would shrink? The electricity bill would go up five fold?
What would all that add up to — even if some and not all of those and similar measures are taken to bring the economy back on an even keel? Survival of the fittest?
The coming months would be the period of reckoning. The fat of the economy which went towards creating all that debt we have incurred would have to be decimated. But the basic question is how much more can the people of this country take?
They are already suffering the effects of an economy that has plummeted, and resultant inflation which has made living on their normal incomes extreme difficult. So after two years of Covid related shutdowns and all that type of economic inactivity, when they are used to taking more and still more punishment — do they have the stomach for it?
The poor and the middle classes cannot take any more hits. Well, the middle classes may be able to take a few more, but would also reach the end of their tether soon enough. But yet, the IMF would demand that there would be cuts made, and those would definitely be in areas that would hurt.
For instance, would State subsidised health services suffer drastic cuts? That would be very probable. Free-education could be another area that is touched. How would poor people adjust in the face of such measures if they are indeed the result of the scaling back that the doctor would order?
Can the people be serially pummeled in this nature? This is where the lending agencies would doubtless have to factor in the human element. Asking for adjustments that the people who are squeezed to the maximum cannot endure any more could be fatal to the very existence of the social fabric. Would anyone or any entity recommend it?
DISCONTINUATION
However, what would be the alternative? The entire system has to change. There would necessarily be an attack as it were on the system of extensive social welfare that has been a hallmark of Sri Lankan governance. But before that, shouldn’t there be adjustments in taxation and so on which would not impact those who are finding it difficult to shoulder the burdens of the recent meltdown?
If there are extensive cuts to social welfare, would the vast majority of people be able to absorb those changes? It could be argued that they were able to withstand earlier social welfare cuts such as the discontinuation of the rice ration books in the 70s.
But free education and free health care have become fundamental to the very existence of Sri Lankans. Cut backs on those core aspects of welfarism that became hallmarks of the Sri Lankan State could have such deep-going effects in changing the basics of the social compact.
What would be the repercussions? Would the vast majority of Sri Lankans accept that these changes are necessary, even though they would be told that the administration of this medication is imperative?
Also how could society undergo so many convulsions in such a short period of time? The economic meltdown was one convulsion and before that the Covid lockdowns represented a significant disturbance to normal civilian life.
But the welfare cuts that are bound to follow along with greater taxation and the cutting back on utilities subsidies and so on — all compounded by rising inflation — is bound to be earthshakingly transformative, though mostly in a way that may not be tolerable to the vast masses of people.
ESCHEWING
What measures if any could be resorted to in order that the impact may be cushioned? Not much could be done in that area at all. What do you cushion a body blow with? Also, where is the wiggle-room?
What is being done now seems the early preparation for what’s to come. The Prime Minister has said that the impact of changes to come in the next few months would be drastic. It has been widely reported also that he has concluded that the economic situation was a lot worse than he thought it was.
He has told the people in no uncertain terms that there would be hard times, but what more hard times is the question that most people have.
It was almost amusing to see some sort of economist — of the ostensibly non-political variety — opine on TV the other day that the people of Sri Lanka should get used to eschewing the ‘luxury’ (sukhopaboghi) lifestyles that they have been used to in the past.
What was this gentleman talking about? What luxury lives is he referring to, and on what planet was he?
He was probably referring to the easy abundance that was the lot of the rich and the owning classes who had everything from SUVs and massive mansions, but this was the privilege of a very small segment of the population.
The rest of the vast masses of working folk were travelling in ramshackle transport, and were living paycheck to paycheck, rarely taking a vacation. For hospitals they had run down sheds where they would be lucky to get a bed if admitted. For school admissions they had to bribe some big fat man somewhere, and run the risk of being arrested for corruption.
REBOUND
This is the ‘luxury’ life that most people are now told by this talk show economist that they have to eschew.
Lives couldn’t possibly deteriorate in quality much more, and that is the long and the short of it. When the people are being told things are going to get much worse before they get better, it’s forgotten that people who are on the mat cannot fall down any further.
However, countries such as Greece were able to rebound after a bout of bankruptcy, even though arguably the Greeks had much more help from multifarious quarters before the country was able to get back to normal after the economy collapsed. The recovery came faster than expected.
The country’s benefactors in this time of crisis should factor in Covid. It is true that some dangerously obtuse economic policies led to some of the immediate repercussions that caused the economic meltdown. But, overall if there was no global economic slump and tourism and all our remittances would not have dried up as a result, as a country we would very probably have made it.
Covid definitely has to be factored in. But would the rich countries and the benefactor agencies be able to make that mental leap? It is better to have countries participating in the global economy.
Sri Lanka is a market too, and to squeezing a country totally out of the global markets due to ‘dollar penury’ doesn’t make sense. Inevitably there would be other dominoes that would fall and would all of them be excluded from the global marketplace? At what cost?
Sri Lanka is a literate country that has enjoyed a relatively good standard of living, even though it would be stupid to say that ‘locals should be able to give up the luxury lives they were used to.’
To drive an entire country to a state of sub-par existence would not be wise. We had various powerful regional organisations imploring the policymakers earlier, before the economic meltdown, to lift economic restrictions.
But what if the restrictions are lifted now only for them to mean nothing because the people have been reduced to a state of helplessness because of the exchange rate disparities, and the sheer scale of the hammering they have sustained in terms of maintaining their domestic budgets?
It would surely mean that Sri Lanka and Sri Lankans would be substantially excluded from international markets. The longer the current state of affairs goes on, the great the chance of this type of outcome.
A quick recovery, however, would assure global markets that there is no reason for panic and that too many countries are not going to fall off the cliff and face economic oblivion.