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The beast awakens The Coronavirus pandemic is forcing a rethink about how we live, how we work, and how to run an economy. When governments chose to shut down businesses and limit people’s movement to contain the spread of the deadly pandemic, they also had to contend with lower tax revenues, businesses going bust, and people losing their jobs. Now, in the wreckage left behind by the pandemic, governments are scrambling to introduce stimulus packages to get companies back into businesses, to create jobs, and restore tax income. However, funding the stimulus has led to a record amount of debt being added. Global debt across all sectors rose by over $10 trillion in 2019 topping $255 trillion. This includes debt outstanding by governments, businesses and households. At over 322% of GDP, global debt is now 40% higher than at the onset of the 2008 great recession. For Sri Lanka, with its large foreign debt to repay in the next few years, the choices have been stark. Compared to about four billion rupees of net money printing in 2019, Sri Lanka’s central bank unleashed a flood of about 800 billion in printed money in 2020. All this liquidity may not be without consequences in countries like Sri Lanka, running large budget deficits financed by printed money, and also converting existing debt rollovers, unsold at the auction, to printed money. For those believing in orthodoxy, in which governments must eventually pay for their spending through higher taxes or the population must be willing to put up with inflation (another form of tax), apprehensions will now abound.

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