 It's been a year since a very pivotal moment in Sri Lanka's history. It was in last July as July 2022 that as a result of a mass uprising, the then President Gautabhai Rajapaksa was forced to leave the country and then subsequently resign as well. But that was not one, just one uprising that's been building for months due to a very severe economic crisis. Just a few months before that in May, the Prime Minister Mahindra Rajapaksa had to resign as well. And after all these developments, there was a fresh hope in Sri Lanka that the Rajapaksa clan would finally be out of politics that there was a scope for a new kind of construction, so to speak. There were a lot of very interesting discussions, mobilizations taking place. But one year later, the situation is quite a bit different and there's probably no better sign than the fact that in various ways the Rajapaksas are back plus the economic crisis continued in a probably in a bit of a different form. The government, the new government has continued with a set of repressive policies. To talk about all this, we have with us Aailan Kadirgamar, a senior lecturer at the University of Jaffna who has talked to us in the past and given us a very incisive analysis of both Sri Lanka's economic condition as well as the protests from last year. Aailan, welcome back once again. Thank you so much for talking to us. Thank you for having me. Right Aailan, so first I think the most obvious question here is really one year down the line, where do you see the promises that seem to emerge from July 2022 when there was so much discussion, so much vibrancy in the political scene. How do you analyze the general situation? Sri Lanka continues to be mired in a very deep economic crisis. I think that's first of all topmost in everybody's mind. Last year, our economy contracted by 7.8 percent or the final quarter of 2022 by 12.4 percent. The latest data that we have is for the first quarter the GDP is here, again a contraction by 11.5 percent. This is similar to what was happening during the Great Depression. Sri Lanka has never been through this kind of an economic crisis. Poverty has doubled. The incomes of day wage laborers has dropped by half. Food prices have doubled, so people are hardly able to make ends meet and that's what's topmost in their mind. But at the same time over the last year, since people chased away President Bortobaya Rajapaksa and then there was a man who were in parliament for the Rajapaksas to elect Ronald B. Kramasinha as president, it has been relentless in terms of the repression. They went after the student movement, they went after activists and they've kept the trade union and social movements reactive by one measure after the other of repression. This authoritarianism, so they keep people on the defensive. They brought about a draft anti-terrorism act in many ways as bad or worse than the prevention of terrorism act that we have. Any protest is met with tear gas and a heavy hand of the police and military. So now there is a draft labor law. This is to sort of change our labor laws that have been there for a number of particular new unified labor law which might have a huge setback to the trade union movement in this country. And not only that, they are just following the IMF's recipe. So Sri Lanka's parliament just passed what is called domestic debt restructuring. In other words, Sri Lanka defaulted on its external debt in April last year. And now they are trying to come through some negotiations both with the bilateral donors, that is China, Japan, India, and others. But more importantly, a larger share of our debt is to private creditors, international sovereign bonds that they had floated. So it was always to be negotiated and to have some kind of a haircut or a reduction in the principle of the external debt. But that is what really is the problem because we don't have enough foreign exchange to repay that debt. But in a twisted move, the government has first decided to restructure domestic debt. And that too, they're not touching the banks or the finance companies or individual donors. They're only going after the retirement funds of working people. And what we see is possibly 30% in the next 10 years or for the length of the period that they are hoping to go forward over a 16-year period, the loss for working people would be as much as 50% of their retirement funds. And this is after the retirement funds have already taken a hit with the huge devaluation of the rupee and inflation last year, which has already brought down people's real incomes and the real value of the retirement funds by as much as 45%. So on all fronts, it's bad news for the people in Sri Lanka. The economy continues to contract and collapse. People's freedoms have been curtailed by the sort of repressive authoritarian measures of the government. And then there is a concerted attack on labor and working people. So what is going to come out of this, it really depends on the kind of political changes that we need. But President Rahul Bikram Singh has been adamant to not even hold local government elections and whether what he would do in terms of parliamentary elections and presidential elections, presidential elections due next year have also become of concern to people. So Ailin, in this context, we'll come to some of the economic aspects as well. But before that, I wanted to ask a question about the current ruling dispensation, so to speak. So we know that Rahul Bikram Singh, when he became the president, was an MP, was part of a one MP party, that is, he was the only MP. And there was a lot of talk about how the Rajapaksas had basically backed him to become the president and there was this alliance. So right now, considering the fact that there were a lot of questions about his, the legitimacy of his rule, what is the nature of the coalition that is continuing to remain in power as in however they sort of manage to stay on despite these challenges? Yeah, so they need each other. The Rajapaksas need Rahul Bikram Singh to protect them and they don't want elections in time soon either because there's likely to be a landslide against them. And Sri Lanka has shown that in the past, we've never allowed an entry coup. We've never really allowed a full blown dictatorship to take hold. And at every elections, people have voted decisively, even with the most consolidated of regimes. And I think the Rajapaksas know their fate if you go for elections. So they need Rahul Bikram Singh. And Rahul Bikram Singh is also is going to be hard for him to win any election. So they would like to continue with the current dispensation politically and to be able to keep their power intact. They would like to continue in this way where Rajapaksas are able to keep the majority in parliament. And Rahul Bikram Singh can remain the president and push through really a lot of the neoliberal reforms that he's always wanted to do. This has been his dream, so to speak, to be able to push through all these reforms and is going at them one by one using this delegitimized majority in parliament. And given the sort of economic pressures on people, I think it's going to take some time before another movement emerges of that breadth that was there last year. But does this all do with the fact that the economic crisis has maybe changed? Because a lot of reports do say that, for instance, goods are back on the supermarket, the scarcity is no longer as big an issue. But like you pointed out, people's incomes have taken a huge hit. So is there also in that sense a greater difference in who is being affected by the crisis now? Definitely. So we are not seeing the petrol queues that were there last year. And you remember some of those queues went for a couple kilometers. And so shortages are not there. But the reality is that Sri Lanka is consuming much less. Sri Lanka today compared to before the crisis is consuming anywhere from 50% to 30% less fuel. The price of fuel has tripled. If you take kerosene oil which rural farmers and rural fisher folk use, it has quadrupled. So it has become unaffordable for people, but it's available to the middle classes and the upper middle classes. So there is a certain support in Colombo among the business community for Rajapaksa because labour costs have dropped. Or if you take, for example, cement used for construction, even the World Bank data shows that they consumed 53% less cement than the previous year. So that's what farmers, fisher folk, officers, they depend on construction labour. And that explains why unskilled labour's incomes have also halved because there's no livelihoods. So those people are in a very desperate situation. Malnutrition is on the rise. Poverty data, however questionable, has already doubled. So that is what people are facing. But the unfortunate thing is that the political opposition has not got its act together. They should be much more out on the streets mobilizing the people around the cost of living issues on various issues. But they are just sort of quaintly waiting for elections to come. And they hope that that change would be adequate. And they are not taking the risk and mobilizing the people to hasten that process towards elections and political changes that we need. So also, Ailin, going to the economic aspect, you talked about the IMF deal and now Sri Lanka has officially got that deal. And you mentioned some of the kind of reforms. But I also see that privatization is also very much high on the agenda in addition to labour. So could you also maybe take us to what are some of the key aspects in addition to labour reform that you mentioned, Vikram Singh, as a dream package. So what are the pillars of this approach, so to speak? Yeah. So Sri Lanka sort of took the decision early last year, early 2022, to go for an IMF agreement. And Sri Lanka also defaulted on its external debt around the same time. There was a staff level agreement with the IMF in September. 2022. And in this March, the IMF executive board released the loan from IMF, which is really not that much, three billion US dollars over four years. And along with that, there is additional funding coming from the World Bank and Asian Development Bank of another close to four billion US dollars over four years. So you need to include all of it together, seven billion US dollars over four years, which amounts to about approximately 1.7 billion US dollars per year. But Sri Lanka's foreign earnings every year is almost 10 times that much, 18 billion US dollars. So it's not the funds. Sri Lanka is now caught in the trap because it defaulted, it needs the IMF as an arbiter to be able to normalize its external finances to be able to negotiate with its external creditors. So the IMF has really two big conditions that it's pushing on Sri Lanka. One, that by next year, Sri Lanka should have a primary surplus. What is a primary surplus? Our revenues should be higher than expenditure. Not our interest payments. Revenue should be higher than our expenditure. But that's almost an impossible target because just last year, the year before, our primary budget deficit was on the order of 5% of the European. And from there to go to a surplus. And then in two years time, they want a 2.3% surplus. None of Sri Lanka's peer countries even have that kind of a surplus. So they are pushing through the most severe austerity measures. And run of the economy and his government are happy to follow it to the dot. So that is one condition. The second condition that the IMF has put is that Sri Lanka should make progress on debt restructuring, which is to be able to start repaying its creditors. And this is based on a debt sustainability analysis that's there in the IMF report that was released in March. And if you look at the debt sustainability analysis of the IMF, or for that matter, even this primary budget surplus, it's almost as if Sri Lanka's economy its only priority is to repay the creditors. The economy is collapsing. People's incomes are collapsing. But why do we need a primary budget surplus so that we can repay and give confidence to the creditors that they will repay their debt? The actual principal reduction which the president recently announced is a mere 30% haircut. Now, how will we be able to repay this? Domestic debt is not the problem because that we can roll over as rupees. That is debt that we can create. But external debt, they want us to allocate almost 4.5% of GDP worth of debt payments every year for the next many years. Economic growth according to the IMF is only going to be 3% of GDP every year, but 4.5% to repay our donors. So where is the investment going to come? Where is the stimulus for this economy to be able to get us out of this crisis? I think we are looking if we continue to go with this IMF path, we are looking at very severe situation going forward. The one thing that the government has not announced is implied in the IMF agreement is that they are looking at restructuring state-owned enterprises. They don't use the word privatization, but the implication when you restructure these state-owned enterprises. For example, if you take the Ceylon Electricity Board, which is a great boom to our people because almost 99% of Sri Lankans have access to electricity. But over the last year and a half, we've seen electricity prices go up by 200% to the point that I'm concerned that a lot of rural folk who do have electricity now are going to be disconnected from the grid. Not only that, they want to break up CEV into three major entities and then into multiple entities for generation, transmission, and distribution. And then they're saying that they want to make it cost-effective and sustainable, market pricing of energy, whether it is fuel, but also electricity. What does this mean? That when there is a shock and when the public utility cannot handle it, the move will be to go for privatization. And so I think that the amount that they plan to repay the creditors, they're not going to be able to do it as it is. So what they're probably depending on is to be able to repay the creditors with income derived from privatization. And that is how they might also show the primary surplus because they need additional income. And when an economy is collapsing, as I mentioned, 8% negative growth, you're not going to generate much tax revenue. Some of us have been saying that what Sri Lankan really needs is a robust wealth tax, a wealth tax where there's redistribution. Because during a crisis, income, which is a flow, isn't declining. But wealth, and there's a huge wealth inequality in Sri Lanka, which has been accumulated over the years and over the decades, can be redistributed. So let's take the example of what they plan to do with domestic debt restructuring. Now, all of us have had to learn about their restructuring because it's the first time in our history that Sri Lanka has defaulted on its debt. And so it's not clear to the people. But what they have done is that the IMF has a target that Sri Lanka's debt repayment in a few years should be on the order of 13% of GDP. So that's the amount of money that should be repaying. Of that 13%, 4.5% is external debt, but they've also put a straight jacket on how much Sri Lanka should be rolling over in terms of domestic debt. So the domestic debt comes to about 8.5% for a total of 13%. Now to bring that figure down to 13%, the central bank is going to absorb a lot of debt and take ahead, which will be recapitalized later. But the very problematic concern is that 0.5% of GDP of retirement funds are going to be cut. In other words, the interest that the government should be paying because all the retirement funds are invested in government bonds, they're going to reduce it by 0.5%, which is what over 16 years would lead to almost like a 47% reduction in the retirement funds. So 0.5% of GDP every year is about 3.3% of our budget. Now what I have argued in my columns is that 0.5% or 3.3% of our budget could come through a wealth tax for example. Instead of making the working people who have worked so hard for decades to be able to save for their retirement, they have no other retirement. Instead of them having to take the hit, why not have the wealthier classes in this country pay for that? But there's no thinking like that on the part of the government or the IMF. So they're trying to push through these. But I don't think these are sustainable. I think we know from Sri Lanka's history that labor will and the working people will react at some point. But the pace at which these changes are being brought about is very hard for people to understand what the government is actually doing. And I have a question also regarding the emergence or not the emergence, the situation of the right wing in Sri Lanka so to speak. Because again last year a lot of people had talked about this being a moment of unity, etc., etc., of course even at that time there were very powerful critiques made of that narrative of unity. Talking about the past in Sri Lanka especially the civil war and issues around that. But right now how do we, how has this cry, how is the far right which is quite powerful in Sri Lanka? How is it, how is it being affected by this crisis? Is it gaining ground? Is it able to appeal in a different way to people? Yeah, that is a real concern because in the absence of a much stronger progressive force taking on these sort of economic issues that people are facing, it is also in the interest of various actors to slowly start mobilizing on a chauvinist platform. And we are seeing some of those assertions. And in fact, the opposition to the IMF agreement is also coming from the Singhala Buddhist nationalists, right? And this can be then diverted in an anti-minoritarian direction as well. Sri Lanka, the way in which international actors, whether it is the international financial institutions like the IMF and the World Bank and the sort of austerity they are pushing on Sri Lanka, the kind of support that Western actors are providing the IMF program and Ranandikramasinha, I think Ranandikramasinha is due to visit India in a few days. All of this is a dangerous trend where there can also be a xenophobic reaction from certain forces in Sri Lanka, blaming the West, blaming India, blaming the IMF for the problems in Sri Lanka. But often that xenophobic reaction then turns inward in an anti-minoritarian direction as well. And I'm really concerned that that kind of situation could arise in Sri Lanka. So, unless the progressive forces take on the class question, take on this IMF program and start to move forward an alternate path in the next few years, we stand the danger of either actual gain another struggle and a movement and a progressive path forward or a very authoritarian chauvinist and even fascist direction that Sri Lanka could take. And the lot is going to depend on what the masses of working people do as the crisis moves forward. Thank you so much, Ahilan, as always for giving, I think, a very comprehensive analysis, bringing together, I think, both the political, economic and social aspects, which are very interconnected, of course, of this current crisis in Sri Lanka, very important, I think, for people across the world to keep watching because Sri Lanka is, of course, I think one instance of a number of countries in the global South which are facing very similar crisis and for very similar reasons like you pointed out. Thank you so much for talking to us. And so, you've seen Ahilan Katharagama talk about the extent of the crisis in Sri Lanka one year after the mass uprising, very important, like I said, to keep note because often moments of upsurge, moments of people gathering in large numbers provoke a lot of attention. But very few people go back a year later or six months later and look at what the situation is in the country after that. Meanwhile, the IMF and agencies like that continuing to keep, you know, keep their grasp, continuing their clutches on countries like Sri Lanka across the world. These are crises we continuously track at People's Dispatch, we write about them, we make, we do interviews with experts on such topics and we'll keep doing so. So, do visit our website, peoplesdispatch.org, follow us on all the social media platforms of your choice and keep watching.