In a context where Sri Lanka has become somewhat dependent on loans during the past couple of decades, India recently pointed out the importance of Sri Lanka being offered investments after helping Sri Lanka with assistance amounting to around $ 4 billion since January 2022. High Commissioner of India to Sri Lanka Gopal Baglay was quoted as saying that India is planning to invest heavily in newer sectors through both private and public firms.
Meanwhile, the International Monetary Fund (IMF) has asked Sri Lanka to commence talks with China on restructuring Chinese debts, while also stressing that Sri Lanka should engage its creditors.
At the same time, the US Agency for International Development (USAID) said this week that “opaque” loans for “headline-grabbing” infrastructure projects were among the factors behind the current crisis that has engulfed Sri Lanka. It pointed out that China offered opaque loan deals at higher interest rates than other lenders, and financed a raft of headline-grabbing infrastructure projects with often questionable practical use for Sri Lankans, a truth known but seemingly ignored by Sri Lanka.
In fact, these are not at all new concerns. The importance of Sri Lanka being mindful about taking loans, and making sure that loans or investments are used for profitable projects that have a high return on investment (ROI), has been pointed out by a plethora of parties for over a decade. These concerns received greater attention after the previous Mahinda Rajapaksa-led Government obtained mammoth loans, some of which were subject to high interest rates, for projects such as the Hambantota Port and the Mattala Airport, which have become white elephants.
That was however when Sri Lanka did not have to fear its future and economic situation, and other countries could still trust Sri Lanka to repay its loans. This situation has completely changed during the past two years, and both Sri Lanka and foreign countries and international bodies do not see the same ability to repay loans or economic stability now. The bitter truth is that Sri Lanka is now a collapsed nation, and there is huge uncertainty about its economic, political, and social stability. Many see this as a situation where the country should obtain immediate financial and in-kind assistance, especially to assist the most vulnerable groups affected by this situation. However, this is also a time that the country should look at long-term investments and the meaningful use of loans.
The country can no longer afford to lavishly spend money, especially borrowed money. We cannot ignore the fact that although immediate assistance, such as subsidies and allowances under social welfare programmes, are necessary to assist the crisis-affected populace, it is also high time we understood that such programmes should not be the only priority. Long-term investments and loans for projects with high short- and medium-term ROI should receive equal priority. Otherwise, Sri Lanka will keep borrowing just to meet its daily requirements.
That is why what India is saying about assisting Sri Lanka through long term investments is reasonable, even though immediate financial assistance is what the public and the Government are seeking to receive. That is why what the IMF is saying about restructuring Chinese loans without delay to pave the way for its reform package sounds prudent. That is why what the USAID is saying about Sri Lanka’s borrowing habits should be taken into account as a warning.
However, Sri Lanka should not succumb to its desperate situation, and should not opt to sacrifice its financial security and sovereignty when obtaining assistance from foreign countries or international entities. The Government should be prudent enough to see to it that foreign assistance and partnerships are truly beneficial, not just attractive, not only to Sri Lanka but also to all parties involved. It should also understand that the geopolitical importance of Sri Lanka’s location and financial value of Sri Lanka’s resources are factors that attract various external parties, but not necessarily with the willingness to help Sri Lanka.
There is no such thing as a free lunch, and every party that supports Sri Lanka is expecting something in return. As a country that has given the world ample examples of how to invest money and utilise loans the wrong way, there is no excuse for governments to continue to fail to exercise prudence when dealing with international bodies and foreign countries and when utilising whatever assistance it receives.
Borrowed money and investments
29 Jul 2022
Borrowed money and investments
29 Jul 2022
In a context where Sri Lanka has become somewhat dependent on loans during the past couple of decades, India recently pointed out the importance of Sri Lanka being offered investments after helping Sri Lanka with assistance amounting to around $ 4 billion since January 2022. High Commissioner of India to Sri Lanka Gopal Baglay was quoted as saying that India is planning to invest heavily in newer sectors through both private and public firms.
Meanwhile, the International Monetary Fund (IMF) has asked Sri Lanka to commence talks with China on restructuring Chinese debts, while also stressing that Sri Lanka should engage its creditors.
At the same time, the US Agency for International Development (USAID) said this week that “opaque” loans for “headline-grabbing” infrastructure projects were among the factors behind the current crisis that has engulfed Sri Lanka. It pointed out that China offered opaque loan deals at higher interest rates than other lenders, and financed a raft of headline-grabbing infrastructure projects with often questionable practical use for Sri Lankans, a truth known but seemingly ignored by Sri Lanka.
In fact, these are not at all new concerns. The importance of Sri Lanka being mindful about taking loans, and making sure that loans or investments are used for profitable projects that have a high return on investment (ROI), has been pointed out by a plethora of parties for over a decade. These concerns received greater attention after the previous Mahinda Rajapaksa-led Government obtained mammoth loans, some of which were subject to high interest rates, for projects such as the Hambantota Port and the Mattala Airport, which have become white elephants.
That was however when Sri Lanka did not have to fear its future and economic situation, and other countries could still trust Sri Lanka to repay its loans. This situation has completely changed during the past two years, and both Sri Lanka and foreign countries and international bodies do not see the same ability to repay loans or economic stability now. The bitter truth is that Sri Lanka is now a collapsed nation, and there is huge uncertainty about its economic, political, and social stability. Many see this as a situation where the country should obtain immediate financial and in-kind assistance, especially to assist the most vulnerable groups affected by this situation. However, this is also a time that the country should look at long-term investments and the meaningful use of loans.
The country can no longer afford to lavishly spend money, especially borrowed money. We cannot ignore the fact that although immediate assistance, such as subsidies and allowances under social welfare programmes, are necessary to assist the crisis-affected populace, it is also high time we understood that such programmes should not be the only priority. Long-term investments and loans for projects with high short- and medium-term ROI should receive equal priority. Otherwise, Sri Lanka will keep borrowing just to meet its daily requirements.
That is why what India is saying about assisting Sri Lanka through long term investments is reasonable, even though immediate financial assistance is what the public and the Government are seeking to receive. That is why what the IMF is saying about restructuring Chinese loans without delay to pave the way for its reform package sounds prudent. That is why what the USAID is saying about Sri Lanka’s borrowing habits should be taken into account as a warning.
However, Sri Lanka should not succumb to its desperate situation, and should not opt to sacrifice its financial security and sovereignty when obtaining assistance from foreign countries or international entities. The Government should be prudent enough to see to it that foreign assistance and partnerships are truly beneficial, not just attractive, not only to Sri Lanka but also to all parties involved. It should also understand that the geopolitical importance of Sri Lanka’s location and financial value of Sri Lanka’s resources are factors that attract various external parties, but not necessarily with the willingness to help Sri Lanka.
There is no such thing as a free lunch, and every party that supports Sri Lanka is expecting something in return. As a country that has given the world ample examples of how to invest money and utilise loans the wrong way, there is no excuse for governments to continue to fail to exercise prudence when dealing with international bodies and foreign countries and when utilising whatever assistance it receives.
Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!