EDITORIAL
LIVING ON HOPE AND A PRAYER
The news that we have borrowed more money in foreign currency at very high interest rates compared to the so-called prime borrowers, is disconcerting. As has been pointed out in previous articles in this newspaper, our country needs additional foreign currency debts like a junkie needing an additional fix in a rehab.
The exercise may have saved the government an early international embarrassment and may smooth out the worse effects of the bad management of the economy of the past years sufficiently to prevent a rout of the SPPF at the forthcoming National Assembly elections due next November, but the consequences are that we have simply postponed the days of reckoning and added more debts.
According to the IMF in its 2005 report, which our government, despite claims it is practicing transparency, still refuses for it to be published on the IMF website, the level of our external debt before we discovered junk bonds, was unsustainable. Even under the best scenario, the debt level of our country will remain high by 2011 when the next presidential election is due, according to the IMF. The additional borrowing can only make matters worse.
The new loan is being used to repay debts we have been unable to repay in the first place, so we are told. Therefore, it does not change our situation. In fact matters will get worse because we have, in the process, increased our total external debt.
The Government claims that it has accumulated a surplus on budget spending. Indeed, it was due to this that the credit rating agency gave us a B rating. Yet, the surplus in local currency is useless for the government in respect of its external debts. These rupee surpluses cannot be converted into foreign exchange. This is the crux of our problem.
Our new Minister of Finance and the Central Bank Governor Francis Chang Leng were last week mouthing a lot of hot air. They failed dismally to tackle the most critical problem we face as a country – how can we make our currency convertible to foreign currencies on demand. Yet it has been recognised even by our government that such a condition is the reason why our economy is in decline when even the poorest country in