YES, that is right. Inflation is not the problem we have today. In fact, inflation is the perfect solution to our problems.
Why did we run out of dollars? Why do we have huge rupee and dollar debts? Why did we continuously borrow? Even after defaulting, why are we going to lenders and begging for more loans?
Because we are a nation of consumers, not producers. We are a population of 22 million, consuming more than we are generating (or producing). Obviously, if you spend more than you earn, you end up borrowing.
For decades, our politicians made us slaves to subsidies. Fuel and fertiliser subsidies, free houses, subsidised water and electricity, free education and healthcare, free cash etc. These politicians did not do this because they loved us, they did it just to buy votes. That is the culture we need to change now.
Out of the total debt of ours – yes, politicians may have squandered a maximum of 10% – but the balance 90% was by us as a nation, by consuming subsidised goods and services for over 30 years.
If we had not subsidised fuel and fertiliser for the last 25 years, our foreign debts would have been less than half of what it is today. The country has 1.5 million government servants, 800,000 three wheelers, 200,000 boutiques and 50,000 salons, spas, cosmetic and photo shooting centres. If you are a person travelling abroad regularly, have you ever met a Sri Lankan taxi driver, a spa attendant, mobile or boutique vendor? Never. Why is that?
Unlike in India, Pakistan, Bangladesh, the Philippines, Indonesia, Thailand etc., in Sri Lanka, people can live a normal life without starving, even if you do not have a productive job because almost every basic need here is free or subsidised.
If you are fed, why hunt? This is the culture our political leaders gifted us with. We should not only change these leaders, but must change our culture and society too.
Let us not subsidise anything except health and education. Let everyone pay the right price for what they consume. Poverty is something that should be defeated, not something to be embraced.
Our leaders gave us free/discounted things and we have become addicted to them. They bred a generation of unproductive individuals to be slaves of a subsidised society. What we are going through today is a direct result of that.
Inflation will get rid of this anomaly. It will push people to be productive. Inflation will adjust the prices of goods and services, and will demand consumers pay the cost for what they consume. In short, inflation will demand we be more productive, or perish.
Inflation should be addressed through productivity, and not by adjusting policy rates. We must implement more productivity-focused economic policies and not consumer-based policies.
Recently, going on age-old theories, the central bank drastically increased policy rates. The objective was to curb inflation. This is sadly a wrong move and will not encourage productivity, but discourage it.
Higher interest rates for deposits is always a subsidy given to deposit holders at the expense of productivity.
No friendly country or lending institution will lend money to Sri Lanka to reimplement or maintain this unproductive, subsidised society. Because if they do, these lenders will not get their money back and the country will declare bankruptcy again.
Lenders, including the International Monetary Fund, must insist that no imported goods, including fertilisers and fuel shall ever be subsidised. They must insist that the dolling out of money by way of various other subsidy schemes be stopped.
They must also insist that the retirement age of all government employees be at 60 years and not 65. Lenders must demand that loss-making government business ventures be shut down or privatised.
Do not lend us to defend our currency artificially. If our currency has no value, let it be 4,000 rupees per dollar, not 400. Do not lend us a penny to be wasted. If you do, you are not managing our problem, but
This economic collapse is the best thing that has happened during our lifetimes. This is a wake-up call, not only to change our leaders but also to change ourselves, our attitudes and that of our society.
This article can also be read at https://www.steadyaku47.blog/post/sri-lanka-inflation-is-not-the-problem-but-the-solution.