The quest for solvency
Blaming China for a nation’s demise assumes that an all-powerful ally or enemy has been able to simply do as they please with little to no oversight.
Ultimately, China and any other vested interest in Sri Lanka is sadly symptomatic of absentee governance, zero foresight and miniscule contingent thinking with a heavy dose of corruption.
Today, the people of Sri Lanka are suffering through an absolute political vacuum that is underpinned by extraordinary economic mismanagement that has been decades in the making.
It is easy to say that the last 10 years have exacerbated Sri Lanka’s economic challenges however, any objective analysis from a fair-minded individual would conclude this malaise has deeper roots.
More simply, an unbalanced relationship between big business, politicians, and civil society in the pursuit of individual needs occurs because of a broken system. If you want to educate your child, secure the job of choice, or win that all-important tender, then all roads lead to a politician’s door.
Resolving Sri Lanka’s palliative situation, the country must embrace its current financials as the start of a new beginning with absolute boldness. While this may be hard to accept, economic and political stability are vital in attempting to reverse the current situation.
Seeking to address wider concerns that encompass societal discrimination, poverty, environmental harm, education, housing, and human development issues requires time.
Furthermore, the debates around these issues and other significant constitutional challenges must start with the people and a policy architecture built around ambition, pragmatism, and adaptability driven by democratic selection.
Planning, building contingencies and diversifying the economy are vital in attempting to create a sustainable and attractive investment climate to drive growth and improve productivity while transforming the island into a self-sufficient country.
The rule of law to safeguard individuals and commercial interest is not an optional extra. If Sri Lanka is to attract long term investors and patient risk capital, governance, transparency, and internationally accepted protections for non-residents are pillars of success.
Upholding the law in Sri Lanka and ensuring that anyone seeking justice can access the courts in defending their rights is essential for a vibrant democracy.
For an island nation basking in sunshine, the lack of investment into renewable energy, agriculture and marine conservation remains nothing short of shameful. Being overly dependent on fossil fuels is an example of laziness and greed.
In a radical shift to an ultimatum, Sri Lanka should actively engage with creditors that are part of the Paris Club while obtaining a tacit agreement under pari passu with these creditors to include a 72-hour window – back us or we will have to declare immediate bankruptcy.
China has declared that it wishes to be treated as a “preferential creditor” in every sense of the word and does not seek to abide by the terms or indeed spirit of a globalised restructuring solution for Sri Lanka’s debt portfolio.
Sadly, two decades of delinquent governance have made this their right. From a geopolitical standpoint, Sri Lankan politicians have surrendered far more than national sovereignty and territorial integrity. They have sold an entire island and the socio-economic welfare of its population and their successive generations to one country.
Changing this downward trajectory will require more than giving oxygen masks to politicians sitting in God’s departure lounge. The current choice of prime minister appears to be the option of last resort.
Unfortunately denying Sri Lanka’s right to think differently in its hour of need demonstrates a monumental loss of willpower masquerading itself as a stenchy stitch up involving the President.
Today’s generation of Sri Lankan youth are bright, engaging, and able with an unending desire to achieve on the global stage. Sri Lankans are known for their hospitality, compassion, and resilience.
Surely, at this juncture, the opposition party in Sri Lanka should be willing to sacrifice its individual leadership ambitions and rally behind an unorthodox individual with an innate capacity to negotiate, charm and execute plans at speed while being fully conversant with the new world order?
Thinking laterally; the immediate default payments and penalties pertaining to interest costs should be purchased/absorbed either at par or a modest discount by a friendly nation.
Why? If Sri Lanka’s debt position is left to the markets a would-be vulture investor could pounce at the point the International Monetary Fund (IMF) is prepared to issue terms and then hold their position post bailout to subsequently enforce the value of these debts in full.
Argentina is a case in question as Elliot Advisers made a 1200% return on their investment over 14 years. They also managed to impound Argentina’s newest naval training vessel. The inverse of this can be used against China to improve Sri Lanka’s bargaining power.
Ultimately, offering to sell SriLankan Airlines in a speculative privatisation programme as a carrot to the IMF illustrates contempt and delinquent bargaining power.
This from a Prime Minister that botched the previous attempts to sell the airline together with successive aviation ministers who failed to rationalise or even entice regional carriers to consider any proposition seriously based on onerous debts and opaque operating methods.
More simply, this is the Prime Minister doubling down at the casino with two chips that if cashed will have to be submitted to the house for historic debt clearance.
That said, the Governor of the Central Bank of Sri Lanka and the Emergency Economic Council together with a couple of streetwise individuals that understand sovereign debt restructuring can negotiate and run this table with the President’s seal of approval as per the constitution.
Sri Lanka cannot be fixed by stale and self-absorbed leaders that have consumed the goodwill of her people. Afterall, appealing to the public to stay calm, endure further pain and maintain a sense of hope is utterly disheartening.
The subsequent debt for equity swap concerning Sri Lanka’s global debt portfolio should predicate a change in political leadership through an organised election that is funded by a third-party guarantee.
In an ideal world, the 225 in parliament would also consider carefully who amongst them can deliver change rapidly or exit politics acknowledging they have failed.
This leaves room for young blood and fresh thinking.
(The author is the Director of Investor Relations at The Investment Committee and 2016 TEDx, Chartwell Speaker on Sri Lanka’s Sovereign Debt Crisis)
The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.