Basically your money is worth less and there’s less of it coming in. If you don’t like data the JVP is paid to think for you
Not content to bungle the peace process, tsunami, and free speech, GOSL has also screwed up the economy. This government has doled out 40,000 government jobs and printed 65 billion Rupees. Once the buzz wore off, everybody was more broke than before. They can’t put food (growth, low-inflation) on the table, so they’ve resorted to crack. Unfortunately, they’ve sold the couch and TV to buy this crack (more debt, decreased public investment, ad nauseum). This leaves Sri Lankans visibly worse off than a year ago, and you can’t pin that on Tsunami. If you think growth and inflation only apply to the elite, then the cost-of-living is also ridiculous. How you like them apples? This Commie/Queen alliance is an unholy Frankenstein, and about as intelligent. At this risk of repeating myself,
Queen B saw that Britney had Bit-Bit and Paris had Bambi and she went and got a rabid pit-bull off the street. Now that damn dog is pissing on the furniture and scaring guests. It likes playing with the CEB and when somebody tried to take that drool-soaked toy away the thing threw a fit. Every night it’s barking it’s ass off at the Tiger sleeping in the yard, but can’t nobody do nothing. The Queen needs the dog, and the only policy left is God Save the Queen.
Besides the mismanagement of the Peace Process and the Tsunami, the economy has taken it in the teeth. The Central Bank report tries to blame oil prices and the Tsunami. Unfortunately, the Tsunami only affected 5 days of 2004, and they weren’t shopping days. Oil prices are a bitch, but Sri Lanka is the only country to experience such a drastic oil shock, according to The Economist. “What really caused growth to fall from 6 to 5.4 percent? And inflation as measured by the GDP deflator, the broadest measure we can find, to nearly double to 9.2 percent from 5 percent, and consumer inflation to jump, from next to nothing, to 16.8 percent?” (Fuss-Budget)
The LBO article is funny and well worth reading. It also makes my eyes glaze over in parts so I asked Ruwani to write a response. My comments are in italics. This is Ms. Hettiarachchi’s response to the Central Bank Report or, specifically, to the Fuss-Budget column
The CB Annual Report is meant to be an independently commissioned report, but what it does is echo GoSL economic policy rhetoric, except in a few areas where the glaring underperformance of the economy can’t be disguised by any verbiage. I’ve read every report since about 1997, and it’s perfectly useless as a serious policy recommendation, but they have thousands of statisticans working on it day and night for half of the year and honestly the only thing good about it are the numbers. For informed field reports check out some of the publications of the Department of Census and Statistics – they are rather underfunded but put out some excellent little pamphlets on a variety of issues like unemployment and poverty.
I am extremely unlikely to read a print document before I spill-food-on or lose it, but good to know. Fuss Budget was talking about ‘stagflation’. What is this strange beast?
Stagflation is a situation of persistent high inflation and high unemployment and can very well describe the phase that the economy is entering. The problem is that the macro tools used to counter both high inflation and high unemployment are opposed. To counter high domestic consumer inflation, you want to dampen consumer demand – using monetary (e.g, higher interest rates, higher bank reserves, issuing govt. bonds) and fiscal policy (lower government spending, higher taxes). To improve unemployment you want to stimulate demand using the exactly opposing tools. It’s a dangerous situation because no single mechanism can relieve the pressures of the workforce and at the same time keep the monetary mechanism from overheating. And in a developing country like SL what we need is one fuck off a huge mechanism, pressing a little on all the levers is not going to help.
So, people need to make stuff that I’m not buying. Meh? Is it OK to sell to foreigners? But foriegners are trying to colonize the motherland… I’m just going to print good Sri Lankan money.
The printing of money is a method of easing the budget deficit when the government is overspending – In SL revenue is nowhere near enough or stable enough to cover sustainable expenditure for anything. So they literally print money – it’s a stupid, stupid idea propelled for generations from tightass conservative monetarists which are useful ONLY for economies that are not experiencing the kind of inflation that SL is. When you print money to cover the deficit, it’s basically the last fucking straw – you can’t raise the funds so you literally make the funds through mechanisms like issuing treasury bills, this just erodes the value of the rupee further – and that’s what the writer is railing about – there has been NO fiscal consolidation (raising funds the legitimate way, through taxes).
So Sri Lanka is poor and we can’t find any money in the proverbial couch. Wait, I think we sold the couch.
All the others are excellent points, public investment has fallen massively, we could have milked ADB and WB loans to the hilt. There’s not a single member of a government oversight committee right now, who is serious about economic development. Even after the tsunami, which is a pretty good excuse to take money for development. GoSL and the BOI have ignored and isolated the incestuous little business community in SL and has been criminally negligent in encouraging investment in infrastructure, which is something we desperately desperately need.
I read that article in the Economist about the low global impact of oil price hikes in 2004, and it’s thoroughly embarrasing to think that there’s a 142 page document floating around saying that SL, which is not nearly as industrialised, not nearly as mechanised or motorised and not even close to a large oil consumer is blaming oil price hikes on poor economic performance.
Have you even accounted for cultural traditions like greasy-haired cover bands and various lamp lightings? Are you insulting the motherland?
Yes! I agree with the writer dude, it’s a pathetic little situation we’re in, and there seems to be no end in sight, because economic policy is myopic, and seeks excuses in this country, and doesn’t bring about lasting change, and is slow to create jobs and improve business confidence and oh I could go on, but your eyes will start tearing so I won’t.
Uh, so I guess not re-electing Frankenmarx would be a good move. Unfortunately, the length of the Queen’s term is correllated with her menopause or something, so it’s unclear when there’ll be elections. It’s also unclear whether the populace likes the commie crack enough to vote for it again. I think a medium term response would be for Crescat to secede.