Monday, January 24, 2022

Streets ahead of Lebanon

Sri Lanka will be a Lebanon. That’s the refrain one day. On the next, they say Sri Lanka will be a Myanmar, military Government and all. On the third day, they say Sri Lanka will be an Ethiopia, or a Zimbabwe. At least with regard to those last two, even those who say it know it’s more a figurative sort of prediction — they know the country will never be a Zimbabwe but they use the Zimbabwe comparison to indicate there is runaway inflation.

However people from whom one would have expected some sort of credibility such as Rohan Samarijiva for instance have started saying the country may end up as a Lebanon of sorts. Funnily, he seems to in fact believe that this is in the realm of possibility.

This is delusional. Yes, a proper, well articulated critique of the economy is necessary, especially in these difficult times. Nobody can grudge that, because the economy has taken several hits, and there is a question mark over the possible recovery of the country from these dire straits in the short term.

A good, reasoned critique is in that context not just welcome but necessary. But instead we have normally rational people saying the country would end up a Lebanon. But Lebanon and Sri Lanka are chalk and cheese and no matter how intense our foreign exchange problems, we would never end up being a Lebanon. That’s a country that has no export portfolio to speak of. That’s in stark contrast to us in this island.

Thriving

We export goods and services but it’s just that the pandemic skewed the prospects for most of these revenue channels. Our export sector business mandarins are consummate operators. Many of them are so good at what they do that they have branched out abroad, in Bangladesh, the Maldives and so on.

That’s unheard of from anyone in Lebanon. Besides that, we have had middle income status for a long time which means that the country cannot easily be reduced to penury.

Besides all this, Lebanon had pegged its currency to the dollar which we never did in this country. Then, Lebanon came by with a Ponzi scheme as an answer to its dollar crisis. The country began paying very high interest to anyone who deposits in dollars and of course these rates were maintained by taking money from subsequent depositors to pay the earlier depositors.

As soon as the Ponzi nature of the scheme was exposed, the banks saw a run on deposits and the entire economy started coming apart.

Lebanon also has had an armed outfit, the Lebanese Hezbollah, playing a major part in the country’s affairs. This sort of parallel Government administration is unheard of in our country. The Lebanese banks are neither solvent or functional and this is in stark contrast to a banking system in this country that’s thriving in crisis. That’s a fact. The private banks in particular have been able to lend and earn, and though the interest rates are low the banking structures themselves have been solid and there have been no Ponzi schemes.

It’s the same as saying that we are not a Myanmar. Different civil society actors — not Samarajiva’s type — have been predicting for some time that President Gotabhaya Rajapaksa’s Government would foist military rule on the country, but this has been a thoroughly debunked theory primarily because the civilian structures and indeed the military structures in this country are solid and are not susceptible to the Thailand, Myanmar and Pakistan type military hegemony over civilian rule — or outright military rule.

There is also one major difference between how Lebanon is approaching its crisis and we are approaching ours. Also, it needs to be remembered that Lebanon has been in a dangerous financial quagmire much before the pandemic hit the country and the world. It’s foreign exchange liquidity crises have been festering since as way back as 2016.

This is in stark contrast to Sri Lanka whose woes are purely pandemic induced, at least in the main, which is easily determined by the fact that the crisis began with the pandemic. The other contrast between the two countries is that Lebanon opted for the IMF bailout which this country eschewed. That should of course at least theoretically mean that in this country the regime is far more confident of weathering the storm than they are in Lebanon, and why not, the regime would feel, because the macro-economic fundamentals of this country are far different to that of Lebanon in any event.

The macro-economic picture has been solid in this nation relative to the Lebanons of this world. It’s why all the adverse reports about Sri Lanka are of a speculative nature. The opinion makers ask whether the Ratings downgrades would bring the economy crashing down, whereas about Lebanon, sadly they have to say that the economy has already crashed.

comparisons

The incessant comparisons with other countries come this furious and fast because Sri Lanka is going through this unusual phase i.e: the world is unused to seeing a country which was among one of the first to liberalise during the free market liberalisation wave that preceded globalisation in the seventies, facing pandemic economic fallout. It is the shock that Sri Lanka is a bit shook by the pandemic that is driving the new narratives, but the story has no flesh so far in its bones.

The country may well be what it used to be — reasonably functional economically, and a middle income success of sorts.

The failed state narrative has come up before of course in various guises. When the battle against terrorism was raging the country was called a failed state many times and that was not due to economic performance, but due to the failure of ‘governance’ in the main due of course to wartime disruptions.

Factual

Terrorist battle torn though we were, were we a failed state by the governance yardstick? We had functional institutions — it’s just that we had temporarily disrupted governance in certain areas due to the obvious exigencies resulting from hostilities. Those days the comparisons were with Palestine but whereas there is lingering insecurity in the Golan Heights we are back to being a peaceful and secure nation.

The point being that it’s not useful making comparisons with various countries that are war zones or economic disaster zones just because there are economic difficulties. This country has some antecedents that makes us a nation that’s resilient, and also this country has a solid institutional background where we have a functional civil service and a functional health sector and so on.

It’s not quite right to try to traduce these achievements and make it seem as if the country was a house of cards that was waiting to collapse and finally did.

Those who made the comparisons may say that they were not made seriously, and that they were cautionary references with the caveat that ‘we may become like this if we go in like this.” That’s careless and also disingenuous.

Readers would always take comparisons literally because we have to assume that the bulk of them do not have the time to make these assessments themselves. That’s why they rely on opinion makers and experts. If the experts are careless with the facts and make representations that are not truthful or that’s downright dishonest, anysubsequent confession that a comparison with this or that country was a mere literary device and not a factual comparison, is thoroughly disingenuous.

On the other hand, ordinary people are more cued into these realities we think. The majority of them will be alarmed but deep within they would know that there is no use in comparing us to Lebanon. They will know that there have been Cassandras who say scary things and that they have been in business for a long time. So they always keep saner counsel. This writer is not saying we are out of the woods yet. But no, we are not a Lebanon or a Myanmar, period, and never will be.

Sri Lanka will be a Lebanon. That’s the refrain one day. On the next, they say Sri Lanka will be a Myanmar, military Government and all. On the third day, they say Sri Lanka will be an Ethiopia, or a Zimbabwe. At least with regard to those last two, even those who say it know it’s more a figurative sort of prediction — they know the country will never be a Zimbabwe but they use the Zimbabwe comparison to indicate there is runaway inflation.

However people from whom one would have expected some sort of credibility such as Rohan Samarijiva for instance have started saying the country may end up as a Lebanon of sorts. Funnily, he seems to in fact believe that this is in the realm of possibility.

This is delusional. Yes, a proper, well articulated critique of the economy is necessary, especially in these difficult times. Nobody can grudge that, because the economy has taken several hits, and there is a question mark over the possible recovery of the country from these dire straits in the short term.

A good, reasoned critique is in that context not just welcome but necessary. But instead we have normally rational people saying the country would end up a Lebanon. But Lebanon and Sri Lanka are chalk and cheese and no matter how intense our foreign exchange problems, we would never end up being a Lebanon. That’s a country that has no export portfolio to speak of. That’s in stark contrast to us in this island.

Thriving

We export goods and services but it’s just that the pandemic skewed the prospects for most of these revenue channels. Our export sector business mandarins are consummate operators. Many of them are so good at what they do that they have branched out abroad, in Bangladesh, the Maldives and so on.

That’s unheard of from anyone in Lebanon. Besides that, we have had middle income status for a long time which means that the country cannot easily be reduced to penury.

Besides all this, Lebanon had pegged its currency to the dollar which we never did in this country. Then, Lebanon came by with a Ponzi scheme as an answer to its dollar crisis. The country began paying very high interest to anyone who deposits in dollars and of course these rates were maintained by taking money from subsequent depositors to pay the earlier depositors.

As soon as the Ponzi nature of the scheme was exposed, the banks saw a run on deposits and the entire economy started coming apart.

Lebanon also has had an armed outfit, the Lebanese Hezbollah, playing a major part in the country’s affairs. This sort of parallel Government administration is unheard of in our country. The Lebanese banks are neither solvent or functional and this is in stark contrast to a banking system in this country that’s thriving in crisis. That’s a fact. The private banks in particular have been able to lend and earn, and though the interest rates are low the banking structures themselves have been solid and there have been no Ponzi schemes.

It’s the same as saying that we are not a Myanmar. Different civil society actors — not Samarajiva’s type — have been predicting for some time that President Gotabhaya Rajapaksa’s Government would foist military rule on the country, but this has been a thoroughly debunked theory primarily because the civilian structures and indeed the military structures in this country are solid and are not susceptible to the Thailand, Myanmar and Pakistan type military hegemony over civilian rule — or outright military rule.

There is also one major difference between how Lebanon is approaching its crisis and we are approaching ours. Also, it needs to be remembered that Lebanon has been in a dangerous financial quagmire much before the pandemic hit the country and the world. It’s foreign exchange liquidity crises have been festering since as way back as 2016.

This is in stark contrast to Sri Lanka whose woes are purely pandemic induced, at least in the main, which is easily determined by the fact that the crisis began with the pandemic. The other contrast between the two countries is that Lebanon opted for the IMF bailout which this country eschewed. That should of course at least theoretically mean that in this country the regime is far more confident of weathering the storm than they are in Lebanon, and why not, the regime would feel, because the macro-economic fundamentals of this country are far different to that of Lebanon in any event.

The macro-economic picture has been solid in this nation relative to the Lebanons of this world. It’s why all the adverse reports about Sri Lanka are of a speculative nature. The opinion makers ask whether the Ratings downgrades would bring the economy crashing down, whereas about Lebanon, sadly they have to say that the economy has already crashed.

comparisons

The incessant comparisons with other countries come this furious and fast because Sri Lanka is going through this unusual phase i.e: the world is unused to seeing a country which was among one of the first to liberalise during the free market liberalisation wave that preceded globalisation in the seventies, facing pandemic economic fallout. It is the shock that Sri Lanka is a bit shook by the pandemic that is driving the new narratives, but the story has no flesh so far in its bones.

The country may well be what it used to be — reasonably functional economically, and a middle income success of sorts.

The failed state narrative has come up before of course in various guises. When the battle against terrorism was raging the country was called a failed state many times and that was not due to economic performance, but due to the failure of ‘governance’ in the main due of course to wartime disruptions.

Factual

Terrorist battle torn though we were, were we a failed state by the governance yardstick? We had functional institutions — it’s just that we had temporarily disrupted governance in certain areas due to the obvious exigencies resulting from hostilities. Those days the comparisons were with Palestine but whereas there is lingering insecurity in the Golan Heights we are back to being a peaceful and secure nation.

The point being that it’s not useful making comparisons with various countries that are war zones or economic disaster zones just because there are economic difficulties. This country has some antecedents that makes us a nation that’s resilient, and also this country has a solid institutional background where we have a functional civil service and a functional health sector and so on.

It’s not quite right to try to traduce these achievements and make it seem as if the country was a house of cards that was waiting to collapse and finally did.

Those who made the comparisons may say that they were not made seriously, and that they were cautionary references with the caveat that ‘we may become like this if we go in like this.” That’s careless and also disingenuous.

Readers would always take comparisons literally because we have to assume that the bulk of them do not have the time to make these assessments themselves. That’s why they rely on opinion makers and experts. If the experts are careless with the facts and make representations that are not truthful or that’s downright dishonest, anysubsequent confession that a comparison with this or that country was a mere literary device and not a factual comparison, is thoroughly disingenuous.

On the other hand, ordinary people are more cued into these realities we think. The majority of them will be alarmed but deep within they would know that there is no use in comparing us to Lebanon. They will know that there have been Cassandras who say scary things and that they have been in business for a long time. So they always keep saner counsel. This writer is not saying we are out of the woods yet. But no, we are not a Lebanon or a Myanmar, period, and never will be.

Source: sundayobserver.lk

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