upepo
Elder Lister
Whenever a country faces a debt crisis, there are several ways in which it can address the issue. Most of the options available aren't easy. I will discuss these options beginning with the best (easiest) to the worst (hardest).
1. Grow your way out of the debt - in this option, the country grows its economy faster than the debt. This is the best and safest option where possible. This is something we can easily do through the right economic policies that lower the cost of living and doing business. However, time is running out as years of denial have increased the debt to levels where it is nearly impossible for the economy to grow faster than the debt in the short run.
2. Raise taxes - in this case, the plan is to raise more tax revenues to ease the debt servicing burden. This is a challenge as the tax-raising measures are likely to be resisted by an economically exhausted populace. In our case, we have been raising taxes since 2013. This regime has raised taxes and massively increased the cost of accessing government services. We have exhausted our taxation and non-tax revenue capacity. This was evidenced in June 2024 during the anti-finance bill protests.
3. Cut spending - if the above measures aren't possible, there is no other option beyond living within our means. Austerity measures are never easy to implement due to entitlement by the public. Thankfully, in our case, there are lots of wasteful expenditures that we can cut. But the regime is instead engaged in catastrophic plundering of the country and wasteful spending aimed at political objectives. The closer we get to the elections, the worse this becomes and the faster we sink into the debt crisis.
4. Debt restructuring - this involves changing the terms of the debt, such as interest rates, principal, tenor, etc., through negotiations with the creditors. This is something we can do, but first we need to acknowledge the problem and commit to prudent fiscal policies. Restructuring the debt without addressing the issues that got us where we are is just a waste of time. Any relief generated by such measures would quickly evaporate due to poor fiscal practices. Debt restructuring destroys the country's creditworthiness, and recovery from the mess is hard.
5. Defaulting on the debt - this is when the government stops servicing the debt when it falls due. This is the worst option as it results in economic turmoil that can take decades to resolve.
Other ideas, like monetising the debt (printing money to pay the debt), are just economic fantasies whose outcomes are better imagined than experienced. The bitter options available are like medicine. The sooner we start taking the medicine, the sooner the recovery. The more we drag our feet, the deeper the mess becomes and the harder it becomes to resolve. The choice is ours.