How is the economy performing if the Stock Market is doing well — the CSE hit an all-time high this week — and if all other indicators that people commonly rely on are ticking? Some say it doesn’t matter if Stocks are up, and if all the indices are looking good, if there is inflation in the country, and people feel they can’t make ends meet.
That they say is the most important economic indicator i.e: how people feel about the way their wealth stacks up, how their rupee stretches and generally about their future.
This is not a very good way of looking at things if the standard is applied variably. They say things are not going well and people are poor even though the Stock Market is performing, when their Government is not in power.
But if there is a right-wing Government in power, then Stocks mean everything and everything else must be going as smooth as silk in the country.
It stands to reason that if that standard is applied to a right-wing Government, it should apply to any Government, but we will let that pass. If people feel that there is inflation that bites, it means also that many people are making their own price adjustments.
People who are hit by inflation may not be consoled, but the fact is other people too are able to live because they have at least been able to raise the prices of their goods and services. So, inflation overall is not so bad after all, if everybody is surviving. About inflation, Governments in denial say prices go up because there is price gouging. They say prices skyrocket not because of inflation but due to corporate greed, and because the rich are making a killing.
But people know better than to make such simplistic assumptions. They know everybody has to raise their prices because prices are up across the board, and because there were supply chain disruptions after the Covid-19 pandemic.
Some people are patting themselves on the back saying that they predicted the economic collapse of 2022,which they say was due to lack of fiscal discipline coupled with excessive borrowing, as part of our economic approach.
HASTEN
They say that they predicted that this country would become a Lebanon, and it did become one. In the first place, this is a complete fallacy.
This country did not become a Lebanon, and there was in fact no substantial economic collapse which could not have been avoided. In Lebanon, even today, people can’t take their money out of their banks.
There are restrictions on cash withdrawal limits for account holders, that have been imposed by Lebanese banks. Besides that, the economic meltdown in this country in 2022 happened because the political leadership at that time didn’t take the elementary steps such as going to the IMF when it was painfully apparent that there was no alternative.
Things happened the way they did with regard to the default because the entire collapse was politically engineered. Suffice to say that there were people within the then administration that wanted the Gotabaya Presidency to bite the dust.
Of course, the Covid-19 pandemic erupted and the economy came under severe strain, and those who wanted the Gotabaya Government to fold were able to make use of the situation to hasten the then President’s exit.
How else could it be explained that the succeeding President Ranil Wickremesinghe was able to bring the situation under some kind of control within days? No Lebanon like situation ensued, no banks began placing limits on withdrawals.
Of course, the petrol queues and the power cuts were hard, and there was no doubt considerable pain inflicted on the ordinary people. However, this would have been avoided, had the situation not been engineered from within in a political palace coup, and if the then President took the elementary precautions such as heeding the call to go to the IMF on time.
Those who are having a self-congratulatory orgy saying they predicted a Lebanon, are also saying they predicted long term issues such as fiscal indiscipline and borrowing would be the economy’s undoing. Of course, long term structural failures have always been a facet that blighted our economy. It doesn’t take a genius to say this, even a small child could. Sri Lanka had gone to the IMF some 16 times before 2022, and on some of those occasions, the pundits who are having a self-congratulatory tizzy fit about apparently getting the Lebanon-theory right, were the ones that were at least partially responsible for making such structurally flawed policy in their capacity as advisors to the then Governments, drawing enormous salaries for doing so.
Of course, there was reason to be optimistic even before the sovereign default and meltdown of 2022, going on the assumption the Government would get elementary matters straightened out, once it was obvious that the Covid-19 pandemic had wreaked havoc. Once President Gotabaya messed up right royally, however, every right-thinking person was livid about the then Government and joined the effort to get him moved out immediately. That was natural.
Now the aforementioned self-congratulatory characters out there are saying that they are being good Cassandras when they press alarm bells about this Government. Really? Before the ink was dry on their dire pronouncements, the Colombo Stock Exchange recorded an all-time high this week.
This Government has inherited a post-default situation. It is a Government that necessarily has to work with the IMF and has done so. That this administration has to be cautious goes without saying, but there is no sign that it will ignore the need for elementary precautions.
tariffs
Though the Trump tariffs and allied factors and ‘iffy’ situations with regard to GSP + are part of current reality, the tourism industry is booming and there is no drastic effect on our foreign remittances due to any major event such as Covid-19.
Therefore, those comic Cassandras patting themselves on the back saying they predicted a Lebanon — when there wasn’t one – need to take it easy. It was during their time during the Chandrika Bandaranaike Kumaratunga Presidency that we went to the IMF as if was monthly therapy. Those days we did the IMF pilgrimage almost every year, if memory serves right.
It’s rich that people that advised such Governments say only they warned about fiscal indiscipline. Structural failures such as fiscal indiscipline and excessive borrowing have been as familiar to our economic circumstances as our breed of armchair critics who say the sky is falling each time the dollar goes up or down.
It appears that the Government has got one part of the needed remedial recipe quite right, which is corruption-busting. Granted that there is a lot more to be done in getting the economy revved up, but there is no alarm in the economic indicators such as the Stock Market. It’s fair to give the administration time.
So, while being vigilant about where the economy is heading, the Government has to ensure that the ordinary people are protected from the adjustments we have had to make after taking corrective measures, working in tandem with the IMF and other parties that have been stakeholders to the economic recovery.
Of course, there would be legitimate criticism of the Government with regard to specific policy matters and such scrutiny is necessary. There is no sign that the policymakers are averse to such a critique. However, they don’t necessarily have to take any advice from failed policymakers/technocrats of the Chandrika era who hilariously think that only they felt our economy was structurally flawed for a long time. Of course, it was structurally flawed, and who needs re-telling? However, even in 2022, we could have still done the Houdini and escaped relatively unscathed if Gotabaya Rajapaksa hadn’t chosen to commit political-suicide and take the country off of a precipice with him.
Now all that is behind us. What we need is to recognise the realities — the political realities of the upheavals of 2022 — and make sure we are not too shaken by the Trump tariff challenges, because there are other areas in which we can compensate.
There are no 100 percent guarantees that there would be significant positive economic changes for the simple reason that no Government whatsoever can guarantee that fact, after we defaulted in 2022 and went through the wringer in economic terms. But certainly, there is much to feel good about, including but not limited to the fight against corruption, and considerations such as generally harmonious relations between ethnic groups, which are all positive developments.
We could all help with vigilance about where we are headed, but certainly, there is no reasonable cause whatsoever for a self-congratulatory and alarmist tantrum.
