The Government is taking great pains these days to explain to the people that Domestic Debt Restructuring (DDR) – more fashionably described as Domestic Debt Optimisation (DDO) – is not what it is portrayed to be and will in fact have no effect on anything that will directly affect the people.
Therefore, the billion dollar question is, what was the hype leading up to it all about? The hype has a history that can be traced back to a presidential address in Parliament some months back, where the President assured Parliament that there would be no DDR and that there was no reason for speculation in that regard. It can be presumed that the thinking behind that assurance was to allay fears of a further economic meltdown, precipitated by a run on local banks. This assurance was later echoed by multiple ministers, including at least one State Minister of Finance, in just the past few weeks.
However, it was revealed during yesterday’s full-day parliamentary debate on the subject that there had been a Cabinet paper submitted in the recent past that averred to an assurance or rather a pre-condition imposed by International Sovereign Bond (ISB) holders that a DDR was necessary in order to facilitate same with external debtors. So the takeaway of it is that those who consistently denied the imminent possibility of a DDR were not being entirely truthful about the matter.
It will be recalled that Boris Johnson was compelled to resign as Prime Minister of Britain and also from the leadership of the Conservative Party when it became clear that he had lied about an infamous party at his official residence during Covid lockdown. The parallels are unmistakable, but the outcome of our politicians getting caught lying through their teeth is already a foregone conclusion.
The deception does not appear to end there; the notion being floated that the Employees’ Provident Fund (EPF) is ‘voluntarily participating’ in the proposed DDR has also been proven false when it was revealed during the parliamentary debate yesterday that the top management of the institution were clueless about it as no details or specifics of the process had been communicated to them even as of yesterday (1). In fact, it had come to light during consultation at the parliamentary Committee on Public Finance (COPF) on Friday (30) that the EPF management had got to know about the inclusion of the EPF in the DDR process through Facebook!
The callous manner in which the country’s single biggest private pension fund is being handled is not second to when it was the plaything of vested interests during the bond scam of 2015 or the stock market manipulation prior to that. It is unfathomable that the EPF that consists of 2.5 million contributors does not have any sort of representation from the contributory body and is exclusively governed by the Monetary Board of the Central Bank.
Interestingly enough, it is the same Monetary Board that is also working out the modalities of the DDR, which brings into focus a serious conflict of interest, while also rubbishing claims of ‘voluntary’ participation. As far as the Government is concerned, the EPF is a soft target as opposed to other stakeholders and that is probably why its participation is taken for granted while its actual management remains in the dark. Needless to say, it is an utter affront to the 2.5 million hardworking members who make up the fund that their voice is never heard and their legitimate interests are never given the importance they deserve in order to secure the best possible return on investment.
In the latest slight to the EPF, the DDR proposes to limit interest payment to 9% for the next 16 years while the current weighted average interest for investment funds is around 13.5%. What the lawmakers fail to understand is that it is one more incentive for the toiling workers to seek greener pastures elsewhere, knowing well that the pot they will receive on retirement after labouring their whole life through will not help them make ends meet. It must be kept in mind that those contributing to the EPF are essentially hard-working, target-driven private sector workers as opposed to the easygoing public sector workers who are entitled to a pension on simply completing 20 years of employment.
What is seemingly indefensible is the apparent selectivity that has been employed in singling out the sectors and institutions that will fall within the ambit of the DDR, notwithstanding ‘voluntary participation’. Rather intriguingly, it has transpired that those ISB investors who secured bonds at premium interest rates post-bankruptcy have purportedly been left untouched by the DDR, while sitting ducks like the EPF have been made to face the music.
As far back as December 2020, an Opposition lawmaker suggested to the then regime during the Budget debate that year to immediately initiate the process of an orderly default given the unsustainability of the country’s debt stock. The governing party members, who are essentially the same as today, scoffed at the suggestion, dismissing it as absurd. Two years later, the same MPs are championing the virtues of not only external debt restructuring but also DDR that involves the EPF.
The carte blanche granted by the cloak of bankruptcy has enabled this Government to do what would have been unthinkable under normal circumstances. From providing the necessary backdrop to implementing politically- and economically-sensitive cost-reflective pricing of fuel and electricity, increasing personal and corporate taxes to unprecedented levels on top of VAT, withholding, and other taxes, cutting down on free health and education, and privatising profitable State-owned business entities that are even considered strategically important to national security are all being done either using or abusing the bankruptcy carte blanche.
What takes the cake is that even constitutionally-mandated elections have been suspended on the pretext of bankruptcy. We now have the spectre of the dissolved Local Government institutions being reconstituted with the same members whose terms have expired, once again riding on the back of the bankruptcy carte blanche. The DDR is no different and is yet another project under the same scheme of things.
While the Government and the Central Bank in particular have taken great pains to explain that the DDR will not in any way affect the 53 million local bank accounts, what it is not telling the people is the fact that around half of these accounts are loans, leases, advances, or overdrafts, where customers are struggling to make payments. Therefore, if the regime is as concerned about the welfare of local bank customers as it claims, then it should also look into the possibility of restructuring these debts under the DDR and provide them some breathing space. If it chooses to not do so, then it will have to live with the allegation that the DDR specifically targeted the hoi polloi or working class at the expense of the super-rich bond holders.
At the end of the day, it is the same people who raised both hands and sang in praise of the former President’s ill-fated policies who are singing the praises of the DDR in its current form. The current President, who was then the subject of extreme criticism and ridicule, is today being hailed as a hero. So what confidence is there among the general public that today’s hero will not be tomorrow’s villain when the DDR begins to bite?