Minister’s disillusion with Prison System

By Jayasri Priyalal 

The policymakers in developed and developing countries are keen to promote resource-distributive policies, anticipating economic growth to take effect automatically. Such dysfunctional growth policies unleash dire unintended consequences in the long run. The trend leads to borrowing from the future, as the benchmark set of solutions proposed, to stimulate sagging economies across the globe, even in the pre and post-COVID-19 pandemic. Policymakers are utterly confused about the extraction of resources for distributive purposes.

‘Debterioration’ is the word the writer coined in May 2019, cautioning against the impact of the unconventional monetary policies introduced in the name of quantitative easing (QE) by the Federal Reserve Bank in the USA and the European Central Bank. The background analysis for the essay on the facts before the onset of the COVID-19 pandemic.

Now it reveals that the quantity of money released with QE is around US$ 30 trillion. The amount is equivalent to total pension funds outside of the USA—the US pension funds amount to US$ 19 trillion. The excessive volume of money cloned did not add surplus outcomes of production and services in the real economy. Unorthodox public-private partnerships are engineered to ease tensions and avoid the bankruptcies of the rich and famous at taxpayers’ expense. The current inflationary trends directly impact the artificial money in circulation. The resultant outcome now turns out to be a net Qualitative Extraction from the future prosperities of the marginalised.

History reveals that pandemics in the past have been turning points in human civilisation. The Black Death, in the thirteenth century, ended the serfdom in Europe and gave way to the wage payment for labour as there was a massive shortage as the pandemic wiped out half of the population in Europe. Similarly, the HINI influenza, popularly known as the Spanish Flu in the early twentieth century, set the benchmark for eight hours of work as many workers had to rest from work to recover from influenza. The first convention of the International Labour Organization (ILO) recommends eight hours as a dignified work period for humans per a workday.

ILO was the first UN agency formed as a tripartite institution in 1919 after WW1. These incidents have shaped the progress of civilisation of humanity, stimulating real economic growth for shared prosperity, not limiting it to a few.

Bonding with Debt and Restructuring Domestic Debt

This writer very well recalls the treasury bond saga under the Yahapalana government in 2017. Then the bond-master, veteran investment banker Governor of the Central Bank of Sri Lanka Arjuna Mahendran introduced the long-term bonds with a maturity tenure of 30 years. They were tripling the volume of the bonds offered in the weekly auction by CBSL in the history of the Government Debt department. It is an irony; such short-sighted decisions were possible under the then Prime Minister Ranil Wickremasinghe, Central Bank affairs and is now overseeing the Domestic Debt Restructuring following the near bankruptcy of the economy. Sri Lankans are destined to realise that the chosen healer, as the disease leading to another debt pandemic, will resurface in time to come.

Domestic Debt Restructuring

Extending the maturity of the guilt-edged risk-free government debt instruments, but for how long? Are they actually risk-free? Short-termism ended in the ‘Debterioation’ of the economy of Sri Lanka. The trend is everywhere across the globe, fake prosperities feeling of richness, thanks to the impotent capital circulated as debt indeed implodes the current debt-ridden unsustainable financial architecture. Will this be another turning point following the COVID-19 pandemic? Major central banks such as China, India and Sweden are now testing grounds for introducing Central Bank Digital Currencies. De-dollarization of the international payment and settlement system is also in the pipeline. Shock Doctrine and Austerity on the Marginalized and Vulnerable

Sri Lanka is a nation where we are good at finding problems in solutions instead of finding appropriate solutions for problems. A parliamentary select committee has been appointed to find out the causes that led to the virtual bankruptcy of the economy.

When the bond saga came to light, the Prime Minister appointed a committee of three legal experts to investigate the allegations against Governor Arjuna Mahendran, and the committee exonerated him. A complete crime drama came to light during the committee of inquiry commissioned by President Maithripala Sirisena. No one has been held accountable or responsible for the crime, but many gained perpetually, creating pain for the entire population. A good analogy to describe the drama is to recall a famous Sinhala saying, which interprets as – consulting the robber’s mother in a soothsaying attempt in search of clues of the robbery.

A classic example is how those in power throw lifeboats to high net worth friends and cronies for their rescue and survival. They take away the life-saving jackets from the struggling ordinary citizens for survival, pushing them into a perpetual life-and-death struggle. The proposed Domestic Debt Restructure (DDR) is precisely the same process in taking away the life jackets from the majority of the working population who had immensely contributed to the growth of the real economy during their productive life span. And the policymakers are in a hurry to throw lifeboats to save those financiers who engineered the state capture with the connivance with corrupt politicians. The lifeboats were gifted to those who extracted profits in financing unsustainable debt, particularly in investing in government debt. Many get off scot-free, and policymakers are passing the burden on the EPF Social Security fund, the most significant funds amounting to LKR 2.8 trillion with conditional shock doctrines, such as imposing of 30% tax, as a form of extraction on the earnings due to the contributors who saved money for their future a secured retired life in coping with demographic and ageing challenges.

Demographic challenges of a widening ageing population

Robust social protection and security systems have to be put in place, enabling the working poor to live and die in dignity. Although Sri Lanka boasts of a universal health care system, as reported in the media, the current healthcare system is in peril as the government cannot finance the health care needs and retain the healthcare professionals in the country.

According to the Institute for Health Metrics Evaluation (IHME) forecast, the life expectancy at birth of a Sri Lankan Male in 1990 was 65.6 years, rising up to 81.3 in 2100, and for Females, from 74.8 years to 87.2 years. (Forecasted data based on Global Burden of Disease 2017 results).

The health data analysis in the IHME database reveals in 2019, health care expenditure per person in Sri Lanka amounted to US$ 154 (average per capita), out of which Government Health spending only amounts to US$ 70.34 out of pocket expenditure the patient amounts to US$ 70.96. Balance paid by development assistance received from donor agencies. The plight of the Universal Health Care operation in the pre-pandemic era. In Sri Lanka, we benefited from the public healthcare system as a form of social security, and taxpayers have been footing the funding since our independence. IHME data reveals how the disease burden is passed on to the patient cutting down on the government health expenditure. And the question remains whether the amount spent by the government on the patient eased the financial hardship of the marginalised in their healthcare needs or filled up the pockets of a few agents who know how to take care of the policymakers’ interest.

The latest forecast of the global ageing population trends reveals that a male reaching 65 years in 2020 is expected to live for another 19 years, and a female will live for another 22 years. This trend is possible due to advances in the medical sciences and healthcare facilities. Now the question remains whether the Sri Lankan public health system is geared to meet the healthcare needs of the widening ageing population in the future.

Safeguarding the Social Security Systems for the Future 

Progressive socially conscious politicians such as T. B. Illangarathne, C P de Silva and Philip Gunawardena, under the leadership of Prime Minister S W R D Bandaranaike the MEP government, introduced the Employees Provident Fund (EPF) in 1958 as a form of social security system sharing the contributions between the employers and employees. Furthermore, the system upscaled with the introduction of the Employees Trust Fund in 1980 by the UNP government under the leadership of President J R Jayewardena with the wise counsellors of Minister Lalith Athulathmudali.

All these funds emerged to secure the retired life of those who contribute to nation-building during their primetime in life. Contributions to ETF come exclusively from employers.

What is happening now is unfortunate. Those who manage the fund have deviated from the primary objectives and are using the fund just as a slush fund, and trying to impose taxes on the benefits occurring to the members to finance the government expenditure, in particular, to service the debts raised for wasteful investments not earning any revenues in the past.

What are the Socially responsible investment options for EPF/ETF in Sri Lanka? 

At the outset, this essay questioned the prudence of the policymakers abusing the resources for distributive purposes rather than directing them to generate growth for long-term societal benefits. Having wasted the opportunities to upgrade the quality of life of those who have contributed to the funds of both the Employers and Employees, the large pool of money has been abused by those in power.

This writer opines that all these funds are managed under a Board of Trustees, elected by the subscribing members representing the employers, employees and government regulatory institutions. At present, the funds are held at the Central Bank for safekeeping. The pioneers of creating EPF would have opted to keep the money in the Central Bank, as at that time, similar debt financing was not the government’s primary motive. Now, the situations have changed, involving numerous stakeholders engaged in the affairs of the funds hunting for opportunities to take advantage of short-term gains at the expense of the long-term benefit of the members. Most 90% of the investments are held in Government debt securities, assuming they are risk-free. Now we know that there is nothing like a risk-free gilt-edged investment.

These funds have to be invested in projects that drive economic growth and strengthen the social security needs of the agening populations, such as building hospitals to provide affordable healthcare and long-term care needs of the members.

 Today, the government cannot source funds to continue paying non-contributory pensions to retired employees. A large pool of employees expected to retire may have to work for an extended period. Lifelong learning and lifelong working will become the norm as technology infiltrates production and distribution; these funds will be invested in upgrading the skills and competencies of the workforce irrespective of their age and building public housing schemes for the members, such as in Singapore.

The system changes many Sri Lankans aspire to should build on innovative schemes preventing abuse of workers’ savings by unaccountable, irresponsible policymakers. The trade unions representing the interest of workers and the industry chambers, employers’ federations and councils need to unite and come forward to protect the social security of the community driving investment for sustainable development goals.

There are solid systems in operation in other countries, such as Australia. Australian Super is a fund professionally managed by the Australian Council of Trade Unions and Australian Industry. The New Pension Scheme in India has also started recently and is progressing well.

Labour law reforms and debt restructuring attract media attention, and numerous public protests and social discussions are boiling up in Sri Lanka. It will be suitable for sensible policymakers who secure legitimacy to govern with a mandate from people’s power to focus on these two critical areas simultaneously to strengthen the ‘debterioration’ of systems started with good intentions due to excessive financialization, as explained.


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