A debt by any other name

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He doesn’t blink, does he? First, the prime minister and minister of finance, Pravind Jugnauth, looked us straight in the eye and, referring to infrastructure like the Metro Express, repeated in parliament that “a visionary government has to invest and modernise the country”. I don’t know whether he remembers the words he used during the electoral campaign about the alarming public debt and why he had written to Indian Prime Minister Narendra Modi to ask him not to lend the money to the country for this ‘wasteful’ project. He now even thanks the Indian government for having granted him a loan on such “extremely favourable terms”. So favourable indeed that the circumstances surrounding the loan have remained top secret, in spite of the insistence of public opinion to have them made public.

Secondly, though he says he does not have the detailed figures, he insists that our public debt is going down – while we are borrowing, not in millions, but in hundreds of billions. We have already drawn your attention to the special purpose vehicles created for the very special purpose of hiding some of our worrying public debt. Once a loan has been channelled through a private enterprise, it does not harm our figures. However, because this debt is guaranteed by the government, it is a public debt.

When confronted by the fact that not including the line of credit and the loan channelled through these enterprises in our national debt is irregular, Pravind Jugnauth’s reply to MP Arvin Boolell was simple: “Does the Honourable Member know better than Moody’s, the World Bank and the IMF?” Why, do these institutions sit in the PMO and watch the sleight of hand that keeps loans outside our public debt? We need to highlight again here that these special purpose vehicles also help shroud the money borrowed in such opacity that we will have absolutely no control over it.

The situation is very serious. While our public debt stood at 60.7% in 2014, our official debt today – thanks to hiding its true dimensions through SPVs – is 62.9%. In reality, however, our public debt situation is even worse. According to Economist Eric Ng, in an interview in Weekly, it hovers at around 70%.

Yet, since this government took over, hundreds of millions are being wasted on travel, exorbitant salaries to blue-eyed boys and girls, inauguration ceremonies of bus stops, markets, Metro Express… that serve no other purpose than to try to build the prime minister’s image once we have been force-fed a diet of MBC propaganda several evenings in a row. As the election approaches, some amnesia-inducing labous doux goodies will be dished out indiscriminately to make sure the scandals that have punctuated the government’s term in office are hopefully erased from memory. Our public debt will have gone through the roof but the creative accounting will continue!

Money borrowed and which has to be repaid, albeit creatively accounted for and euphemistically labelled with any other name, is debt, full stop. The corporate cemetery and sick ward are replete with entities which used such creative accounting, e.g. ENRON, WorldCom, Parmalat, Fannie Mae, Freddy Mac, AIG, Northern Rock and the most spectacular one, Lehman Brothers, are only a few examples of these. And don’t forget Greece and Argentina!

There will come a time when nothing – least of all creative accounting – will be able to save us. Short of a generous debt pardon by India. At a cost. Hence perhaps the secrecy shrouding Agalega.

For more views and in-depth analysis of current issues, Weekly magazine (Price: Rs 25) or subscribe to Weekly for Rs110 a month. (Free delivery to your doorstep). Email us on: [email protected]

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