BY ANY measure, we are bankrupt. The accumulated mountain of debt simply cannot be properly serviced and repaid, and Government's present strategy locks us even deeper in the miserable and suffocating debt trap. When we have to spend 62 per cent of the budget on payment of due principal and interest, and the FINSAC bailout is still not fully integrated, then we are in a serious crisis. But, as I have argued ad nauseam, the present debt crisis was not unforeseeable and is being mismanaged.

While our external debt has remained fairly constant at about $124 billion, our internal debt has climbed exponentially from about $15 billion six years ago to $139 billion at March 1999. Without FINSAC, the total debt, at the end of March, is $263.4 billion ; with anticipated FINSAC losses, of at least $50 billion, the total debt, for which Government will be responsible, is probably in excess of $313 billion. When one considers that the Gross Domestic Product (GDP) is in the region of $225 billion, then is it not clear there is a serious mismatch between our GDP and the total existing debt? We are proportionately much worst off, in the mismatch of assets and liabilities, than many of the allegedly mismanaged and corrupt banks that Government bailed out.

Strategies

It is about time we understand, and understand well, that we cannot borrow or beg our way out of trouble, or for that matter to prosperity or progress. We have to work and produce our way forward. Indeed, it would be wonderful if the money borrowed was used for investment, production and the creation of wealth. But, it seems fairly obvious that the money borrowed was used mainly for the debt crisis, for house keeping expenses and for non-productive ventures. In essence, the strategy of borrowing more, as we are doing, is not intended to ease our debt problem but to aggravate it.

The suggested approach by the Government as outlined in Ministry Paper No. 10/99 is unlikely to get us out of the crisis. The main strategies seem to involve increasing the debt burden through new debt instruments or swapping costly domestic debt for external debt. Nowhere, in the document, can we find the most clear-cut strategy to take us out of the crisis and that is to grow the economy or to create wealth. Perhaps, the Government's appreciation that, according to Ministry Paper 10, which states that "persistent high nominal interest rates in recent years have led to significant increases in interest payments" will mean a reduction in nominal interest rates which would undoubtedly assist the productive sector. More-over, as noted by the Mini-stry Paper, a one per cent reduction in interest rate would mean savings of $800 million annually.

What is quite clear, as I have pointed out repeatedly, is that the persistent high interest rate policy damages the economy and undermines any route or avenue to growth. When an economy fails for three years and more, like ours, something is fundamentally wrong; yet, this Government seems intent to travel on the same road to ruin. Surely, if we continue on the same path, the debt burden will increase even more and debt reneging becomes a distinct possibility. That is why the present economic model and the ineffective strategies to manage our debt burden will not work and need immediate rethinking. An orderly reduction of the prevailing high interest rate must be immediately undertaken even if adjustment to the other economic fundamentals follow.

One wonders if we will ever resolve the debt problem on our own. Nothing in our recent economic experience would suggest that the Government has the slightest clue how to solve it. That is why the Government and its apologists are busily urging debt relief. Would they swap debt forgiveness for prudent and frugal control of our fiscal and monetary affairs by the IMF or surrendering our economic affairs to better management by some external agency?

Budget deficits

I accept that some form of debt relief may be necessary but at what price? And, would there be any assurance or safeguard to avoid running up large budget deficits and once again falling into a similar debt trap?

I believe that even if we had total debt forgiveness, our governmental profligacy and inept management would cause us to slip into the same debt problem within a short time. We borrowed the money, continue to borrow money, and our debt crisis was/is simply of our own making. No one, as some would have us believe, forced us to take loans and wasted them for us. We were the ones who took the loans and wasted them. We must therefore accept the responsibility and use our creative energies to find ways and means to resolve the problem.

I find it totally ridiculous, childish and demeaning to blame the First World and monetary institutions for the dilemma we are in. In any event, since the majority of our debts are domestic, from whom do we beg debt relief?Perhaps, since we seek to exchange high-cost domestic debt for low-cost external debt, this is the first stage before casting blame on foreign lenders!

Nothing in the 1999/2000 budget suggests that during the year the debt management strategy will even show a slight reduction of debt. Our unthinking Government lacks solution to the management of our debt. Like drug addicts, they are addicted to borrowing, preferably on the international market, but will take domestic loans instead, which means that the stock of debt will go up.

We need a Government, or a management team, that can give up this addictive borrowing habit, start to live within our means, grow the economy, create wealth and thereby move to repay and reduce our stock of debt. If we are to manage the debt burden then the objective must be for tight fiscal management, economic growth and selling off government assets to repay the loans. Thus, our present official debt of $263 billion should be programmed for a periodic reduction over the next ten years and more, so that at the end of year two, four, and so on we can determine if the strategy is working. Unless we manage this debt crisis, then it will be with us throughout our lifetime.