tag:blogger.com,1999:blog-4966710058180675982.post3584567402720902869..comments2024-03-18T13:52:18.879-04:00Comments on Black South Asia: Does Arujuna Sivananthan have a Axe to Grind by commenting on Sri Lankas economysbarrkumhttp://www.blogger.com/profile/05883150662027018076noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4966710058180675982.post-82313182997378810652012-02-20T22:15:18.794-05:002012-02-20T22:15:18.794-05:00In Sri Lanka's case, since the capital account...In Sri Lanka's case, since the capital account is virtually closed almost the entirety of the external debt is in fact public debt.<br /><br />I think your figures are a bit high, for the UK, <br /><br />http://www.economist.com/blogs/dailychart/2011/09/government-debt<br /><br />Some differences with the UK & US and Sri Lanka<br />1. The public debt in those countries has shot up recently because of the bailouts. UK debt was around 40% prior to the crisis.<br />2. They have already achieved a high standard of living. Even if they stagnate or decline, it is from a high base. We are still poor.<br />3. The public debt, apart from the bailouts has funded for the most part infrastructure and services of value. In SL it is being used to fund interest repayments, pay salaries (for which very little is delivered). What infrastructure has built gone to the pockets of cronies in building white elephants.Jack Pointhttps://www.blogger.com/profile/00324737814154929009noreply@blogger.comtag:blogger.com,1999:blog-4966710058180675982.post-76962742803328979972012-02-20T09:18:00.423-05:002012-02-20T09:18:00.423-05:00Jack Point,
I think that I have demonstrated that ...Jack Point,<br />I think that I have demonstrated that regardless of whether External debt or Public debt is used Sri Lanka appears financially no worse (or maybe even better) than the US or UK.<br /><br />It is possible that I am using the wrong metric and if I am shown the numbers to prove that SL is financially worse off than the US or UK I will stand corrected. <br /><br />My opinion is that this is a global crisis and it is a "beggar thy neighbor: approach to solving the issues.sbarrkumhttps://www.blogger.com/profile/05883150662027018076noreply@blogger.comtag:blogger.com,1999:blog-4966710058180675982.post-50695168224138935212012-02-20T09:03:43.154-05:002012-02-20T09:03:43.154-05:00Jack Point, I was well aware that Public Debt and ...Jack Point, I was well aware that Public Debt and External debt can be different. To quote from External Debt wiki (also has a link to <a href="http://en.wikipedia.org/wiki/List_of_countries_by_public_debt" rel="nofollow">Public Debt by country</a>)<br /><br />external debt, the total public and private debt owed to nonresidents repayable in internationally accepted currencies. public debt is the money or credit owed by any level of government, from central to local, and the private debt the money or credit owed by private households or private corporations based in the country under consideration.<br /><br />I used External Debt because Arujuna Sivanathan used external debt in his article, and apparently no one quibbled over that metric being used by Arujuna (also please note at bottom).<br /><br />When we look at Public Debt to GDP, the US is 102%, UK is 80%, Canada is 84% and Australia 26%. The US and UK also run current account deficits to GDP ratios around the same range (approx 3-5% of GDP) as does Sri Lanka. <br /><br />The Manufacturing base of the US and UK is long gone and will take at least a decade to turn around, so earning ones way out by export of manufactured good is not viable to reduce debt. One of the ways the US and UK can reduce the debt is to cut subsidies, which of course is called something else, "Social Safety Net". I think getting rid of the Dole (welfare payments in US), reduced NHS (Medicare, Medicaid in US) will bring about riots on the street. No different from the riots we had in SL a few days back because of increased fuel price. <br /><br />Other ways to reduce the debt of the US and UK would be to sell of assets (See <a href="http://www.economywatch.com/economic-statistics/economic-indicators/General_Government_Net_Debt_Percentage_GDP/" rel="nofollow">Net Debt</a>) and that would still leave a debt of around 70% GDP. The other obvious way would be to devalue their currency as their debt is denominated in their own Sovereign currency. <br /><br />I agree there is a financial crisis, but that seems to be affecting the whole world (please also see <a href="http://www.economist.com/content/global_debt_clock" rel="nofollow">Global Debt Clock</a>). So when someone like Arujuna Sivanathan who advocates that <b><i>"Sri Lanka must be subject to a regime of punitive economic sanctions"</i></b> pontificates on the economy, I doubt that he has the best interests of Sri Lanka at heart. Thats when I do my own research and comparisons of Sri Lanka's economy to the economies of the West.<br /> <br />note: Both the <a href="http://en.wikipedia.org/wiki/List_of_countries_by_public_debt" rel="nofollow">Public Debt wiki</a> and <a href="http://www.economist.com/content/global_debt_clock" rel="nofollow">Global Debt Clock</a> list Sri Lankas Public Debt at 80%. From the <a href="http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2010/English/18_S_Appendix.pdf" rel="nofollow">SL Central Bank Special Appendix pg. 7</a> it is apparent that the 80% includes domestic public debt. Domestic Public debt, including Treasury Bonds and Rupee Loans is LKR 2,566 billion (USD 23 billion) or 45.8% of GDP. Foreign Public debt including Rupee denominated Treasury Bills and Bonds to foreign investors is LKR 2,025 billion (USD 18 billion) or 36.1% of GDP. So every man woman and child owes about USD 900 to foreign debtors. Not too bad compared to the UK and US.sbarrkumhttps://www.blogger.com/profile/05883150662027018076noreply@blogger.comtag:blogger.com,1999:blog-4966710058180675982.post-15068757233475185472012-02-20T02:00:08.883-05:002012-02-20T02:00:08.883-05:00"Compared to the US and UK every man woman an..."Compared to the US and UK every man woman and child in Sri Lanka only owes about USD 900 or roughly a One lakh of Rupees. When viewed in this context, Sri Lankas finances do not appear to be all that dire."<br /><br />You need to compare income to debt (this is why the debt/gdp ratio is used). Debt in absolute terms does not mean much, it is in relation to capacity to repay (or in relation to size of the economy ie GDP) that it becomes meaningful.Jack Pointhttps://www.blogger.com/profile/00324737814154929009noreply@blogger.comtag:blogger.com,1999:blog-4966710058180675982.post-47751585323201731522012-02-20T01:56:54.724-05:002012-02-20T01:56:54.724-05:00See also:
www.lankabusinessonline.com/fullstory.p...See also:<br /><br />www.lankabusinessonline.com/fullstory.php?nid=1754089613<br /><br />Its old but adds perspective.<br /><br />Sri Lanka went through this crisis in 1999 and 2008 so it is not new.Jack Pointhttps://www.blogger.com/profile/00324737814154929009noreply@blogger.comtag:blogger.com,1999:blog-4966710058180675982.post-21941771163556533972012-02-20T01:54:06.632-05:002012-02-20T01:54:06.632-05:00I did not know of his other connections but I find...I did not know of his other connections but I find his pronouncements on the economy sensible.<br /><br />Some of the figures that you quote above are misleading. What you need to have is public debt, not external debt. External debt includes the debt of companies, banks and individuals. This does not become a problem for taxpayers, unless there is a government bail out. <br /><br />Some explanation is here:<br /><br />http://en.wikipedia.org/wiki/External_debt <br /><br />The public debt is the debt that is borrowed by the Government, which ends up on the tax payer, the UK is 977bn or 62% of GDP.<br /><br />Countries such as Greece with unsustainable public debt are indeed in crisis (Spain, Portugal are also at risk), but since Sri Lanka's finances are heading that way I think we may conclude that we are indeed in crisis.Jack Pointhttps://www.blogger.com/profile/00324737814154929009noreply@blogger.com