Thread by @ChayuDamsinghe

What's happening in Rambukkana, and anything else that follows, is catastrophic. We can't forget the criminal economic policies that led to this or allow those who advocated for those to be the good guys.

#ProtestLK #SriLanka

(1/21)

Even in 2018, Sri Lanka was facing a long term debt issue. It was tough, it was going to be damn difficult to get through. Realistically, the only option we had to pay our debt and keep our reserves, was more debt.

So we started that.

(2/21)

Why not hope for investment? In addition to the varied issues behind import substitution - a big factor is its difficult to convince huge investment in a country under debt distress. That means shady deals more often than not.

(3/21)

https://twitter.com/ChayuDamsinghe/status/1515747426464075776

But when the new government came in charge of a country under debt pressure, what did they do? Cut taxes, knowing full well that it would destroy the budget deficit and get us locked out of international markets.

Criminal economic policy #1

(4/21)

Of course "growth" right? I already addressed why that's a flawed argument. In any sense, now that we're even further fragile, who the hell is MORE likely to invest?

https://twitter.com/ChayuDamsinghe/status/1512668955579908097

(5/21)

Then the pandemic hit, hitting our tourism and necessitating some more money printing, especially given the tax cuts meant that government had even smaller revenue numbers than it anyway would.

(6/21)

In the context of the tax cuts, there was no other option than money printing in 2020 in my view - desite the consequences, because at that point, the alternative of a deep recession was worse.

Money printing has these moments

https://twitter.com/ChayuDamsinghe/status/1514092187000061953

(7/21)

However, when this external factor (pandemic) hit us, we should have realised our pathway was not going to work, and IMO we should have gone to the IMF at that point. Yes, and we should have restructured our debt then.

But. We. Didn't - Criminal Economic Policy #2

(8/21)

If we had done that then, we could have phased out adjustments, we could have handled things when the world was in a very favourable place, and we could have avoided so many deaths.

But no, our amazing home-grown geniuses said no.

(9/21)

So what do we do? Remember, we're a country with a high budget deficit, a high current account deficit, and billion in debt to repay with no ability to get any loans.

We print more money to worsen all of this. - Criminal econ policy #3

(10/21)

Of course that worsens it. There's more money, there's more spending, there's more imports, that's so obvious. But why would they do this?

Have to help our rent-seeking buddies who lobby us no? They need low interest rate loans, no? To "produce" no?

(11/21)

Now our reserves keep falling and falling, and we don't do anything about it. We keep paying our debt when everyone with an ounce of sense is screaming PLEASE RESTRUCTURE BEFORE WE COLLAPSE.

But do we listen? Hehe no - Criminal econ policy #4

(12/21)

We keep paying debt when it is obvious it is futile and we should instead restructure. This mistake ends up being bad for our creditors also, since they could have gotten away with a small haircut, will now need a big one because we wasted our reserves away.

(13/21)

Now there's so much pressure on our external sector, we really should start gradually floating the currency, raising interest rates to anchor it, talking to the IMF to improve confidence.

But no, we put a goddamn price control on the rupee - Criminal econ policy #5

(14/21)

Why? Jesus christ I don't know. Our debt value doesn't "increase" if our exchange rate changes, dollar debt is in dollars anyway. If we did it properly, the rupee would easily have stabilized below 250 to the USD. But nooooooo, someone had to go and be an idiot instead

(15/21)

So then we're at more debt payments. It's clear to everyone that we can barely pay it. Do we STILL take the action we need to? Of course not. We pay it and then start massive powercuts.

Even at the end, we still denied action - Criminal econ policy #6

(16/21)

It took massive shortages, a decimation of our economy, and a revolution, for these absolute criminal policy advisors to stop what they were doing. Only then did they resign, get removed from monetary boards, stop advising to print money and pretend everything was fine.

(17/21)

So now, of course, when we finally take the action we have to take, it's tough. It's far far far harder than we would have needed if we acted at any point in the last few years.

Blok and Dino worked with Verite to give an excellent story of this

(18/21)

So of course, the criminal delay, the criminally bad policy, the criminal obstruction of good policy, has meant far more pain to the people now.

And what do these advisors do? Admit their mistakes and at least shut up?

No.

(19/21)

Now they pretend like they were saints all along, and it's because we didn't follow their lunacy even more, that we are here.

No. Let me be very clear. We are here because of criminally bad policy. Any pain of fixing that is on you. That blood is on your hands.

(20/21)

I feel that many advisors that brought us here will escape accountability, cause our focus, rightly, is on political leadership

But they shouldn't. We must hold them to account, at least in public opinion

Or else, they'll spew their lies and we'll be in this mess again

(21/21)