The Government’s move to provide another relief package to businesses and individuals badly hit by the latest wave of the pandemic would lift the hopes and morale of these segments after the severe setbacks their businesses had suffered by the latest spate of lockdowns and travel restrictions.
President Gotabaya Rajapaksa has made a request to State Banks, other financial institutions and private sector banks to place a moratorium on debt repayments of business concerns and individual businesses now reeling under the third wave of COVID. He has also asked private leasing companies to halt the collection of lease repayments until the situation improves.
The President made a similar request at the outset of the first outbreak of the pandemic last year. How far his request was heeded is unknown - there were many complaints that certain financial institutions and leasing companies implemented this only in a halfhearted manner and that the full amounts of outstanding dues were charged as a lump sum subsequently when the situation improved.
This attitude defeats the whole purpose of offering relief to those affected. If the amounts outstanding are recovered in lump sums or if repayment periods are extended only for short durations this would not give the expected benefits to those affected. On the contrary, they would be falling from the frying pan to the fire being unable to raise the money to meet the sudden demands from the banks. Hence, what ought to be done is to ‘stop the clock’ meaning outstanding amounts should be freezed for a given period and the outstanding monies collected only once the businesses are back on their feet.
Certainly, State Banks could afford this luxury of waiting for their money given their history of extending loans and overdrafts to numerous State bodies in the red and waiting beyond the due dates of recovery for their money. Of course, banks have to remain solvent and they cannot afford to ‘block’ their money for long periods which indeed will be the case if moratoriums are allowed for a vast army of businessmen some of whom may default.
The economy too is far from being ideal for such a venture to be put in motion. Vehicle leasing companies too have to stay in business and cannot be expected to take undue risks in projects that would see their takings drop drastically and eventually forced out of business by being too generous.
Hence the issue is a complicated one which places the Government in a Catch-22 situation - having to help the Small and Medium Enterprises (SMEs) tide over their difficulties on the one hand and ensuring that the banking and financial sector in general does not collapse, on the other.
Besides, the backlash faced by the businessmen and business sector has doubly aggravated this time around. During the initial outbreak when the ‘go slow’ (on loan repayments) request to banks was made by the President, the businesses had not reached a state of collapse. However, now after one year and intervening shutdowns and travel restrictions in force, the businesses are down in the dumps and it would take more than loan repayment moratoriums by the banks to pull out these businesses. In fact in most instances, there are no businesses any more for bank loan moratoriums and such concessions to figure in the equation.
Hence, the best course would be to assist in reviving these collapsed business entities as the first step and for this to happen the eradication of the Coronavirus from our midst will be the ultimate solution.
But from the looks of things the pandemic is going to remain in our midst for a long time if public cooperation is not forthcoming. Even during the current strict lockdown conditions over 500 violators were arrested on Thursday and from scenes witnessed on television on the stampede to recover the goods washed ashore from the burning MV X-Press Pearl on the Negombo coast, no deterrent, it seems, will be adequate to prevent our people from self-destructing.
Perhaps this may have prompted Army Commander General Shavendra Silva who is heading the Anti-Coronavirus drive to declare that there would be no breather on May 31 and June 4 as earlier stated. State Minister Dr. Sudarshani Fernandopulle opined that the full effect of the lockdown would only be known by June 14, giving credence to speculation that the present shutdown might continue without a break for some more time.
In any event the Government will have no option other than resorting to lockdowns until the full stocks of the vaccines ordered by the Health Ministry arrive to give herd immunity to the community. This, no doubt, is going to be a Herculean task that would not only place untold hardships on the public but also deal a paralyzing blow to the economy. But at the moment there seems to be no other alternative. Hence it will be time for new strategies to be mapped out in dealing with the emerging challenge with a view to causing minimal damage to public well-being as well as to the economy.
