Saturday, July 14, 2012
Dr Harsha de Silva MP – Borrowing, what for and what rates?
Dr Harsha de Silva’s contribution to the debate was not in keeping his with his usual fiery self. I believe he made a conscious effort not to hog the limelight in coming out with too many outrageous statements.
What he did say was though the total National Debt to GDP ratios were not off the charts, what were we borrowing for and at what rates. Any person with any common sense will tell you that the Govt. is in the wrong direction, if it is borrowing to pay its recurrent bills, such as wages. That is the case today, which means in a short time the debt will be out of control. We must only borrow for sound investments which have a measurable return in either return on investment or a return on public policy that does not always have a measurable but nevertheless a real return.
The next issue is why are we borrowing from the Chinese at high rates of interest? After all the Chinese lend to the US Govt. by way of investing in US treasuries at 1% and they lend to us at 8%. So it is 8 times greater return to lend to us. Are we planning on paying the Chinese for all this high interest borrowing? I hope not as we will mortgage the future of our children to the Chinese as the investments we are borrowing for at these rates are for those of dubious returns and which mean we are being further ruined!!
The real reason for this high rate borrowing is the commissions earned, or kickbacks paid into overseas bank accounts when the Govt. agrees to borrow at such high rates. The power brokers of the land are engaged in feasting on these kickbacks that are paid to sign us up to these interest rates!! There are no kickbacks in signing on to a 2% loan after all as there is not enough slack for this, but hey with the Chinese high interest borrowings the sky is the limit.
In short the people in Sri Lanka are fleeced. No ifs and buts. When he noted that the five hub concept was good in theory it is not practiced as it should, because to have a 5 hubs the things like CEPA have to be signed. It has not been for 5 years, so the 5 hub is just a name and not a reality as going with the 5 hubs is the legal and infrastructural framework to make it work. With these constraints as well as the impossibility of planning ahead when shocks such as the Expropriation Act can be thrust on us at a whim and fancy there is no hope of SL being positioned to meet the challenges in the Global Economy, and it the Govt. which is primarily at fault in this not the Private Sector