An ordeal?

62-year-old Venkat feels he has been lucky to get a job as a driver in a businessman's house in Colombo, with a salary of SLR 8,000, as not many are able to procure employment at all. "I have two daughters — the elder one worked at a store but has lost her job, and the other is in college. I was hoping to retire but it now seems a distant dream," he sighed.

Crisis-hit Sri Lanka aims to restore growth to the pre-crisis levels by 2026, with policymakers and bureaucrats intent on presenting proposals by the end of the year, which might help unlock an International Monetary Fund bail-out. The situation is not all black and white, as the country finds itself in the middle of an unfolding geopolitical cold war between China and Indian allies including other Quad nations – the US, Japan, and Australia.

In a recent conversation, I had with the Sri Lankan Prime Minister, Dinesh Gunawardena, about the increasing foreign debt of Sri Lanka, he expressed that his country has always maintained "a very neutral position" in relation to various powers that have been working to make use of Sri Lanka's geopolitical situation and its importance in the Indian Ocean. However, India's concerns are based largely on the growth of China in the northern and eastern provinces of the country, with a considerable investment in the infrastructure sector. Sri Lanka owes nearly 20 per cent of its total USD 35 billion external debts to China.

Looking ahead at the relationship with India, PM Gunawardena said that Sri Lanka wants to embrace "closer cooperation with the Indian Railways, specifically in relation to the investment economy" and possible Indian ventures that could jointly work with Sri Lanka, instead of just providing loans.

The island country is facing its worst financial turmoil since its independence from Britain in 1948, resulting from economic mismanagement as well as the Covid-induced pandemic that gravely affected the tourism industry.

In another discussion I had with the former governor of the Central Bank of Sri Lanka, Ajith Nivard Cabraal, I asked him if the economic crisis could have been avoided. He stated that it could have been avoided if: Sri Lanka didn't have humongous borrowing numbers between 2015 and 2019; if there was no Covid crisis; and only if tourists would have continued to come even during the pandemic.

Cabraal explained that if the government had stuck to the plan that it was pursuing at the time, then it would have had a better chance to avoid default and retain its credibility. Sri Lanka's 74-year-old history of impeccable debt servicing record could have been maintained.

"Had all these been pursued without jumping the gun and defaulting, we would have had those inflows coming in, but the moment you say you are not going to make payment, all those credit lines stop. You lose confidence," he told 'Millennium Post'.

Notably, in early July 2022, the then PM, Ranil Wickremesinghe, while addressing the parliament, admitted that the country was bankrupt, and warned that 2023 would be a tough year for Lankans.

Cabraal opined that announcing bankruptcy was not a wise move. He explained that with the inflows Sri Lanka had, payments could have been made and, even if there was a slight delay, it could have been explained to the creditors. "Creditors understand, even when I was there, there were instances where we would negotiate about the delay of a certain debt. You don't go and announce bankruptcy, which is a permanent slur on your entire credit history. Today, we have a default rating which means even our banks cannot borrow money from anybody else. So, you bring a country to its knees by doing that," he stated.

In another interview with the former finance minister, Basil Rajapaksa, I asked about the steps he had taken during his tenure to avoid the economic crisis. He promptly responded that several short-term and mid-term steps were taken and that if they had not removed him, the situation would not have escalated to this degree.

Short-term measures included getting some of his friends to help with credit, increasing exports, reducing imports, and focusing on tourism. "Reducing imports means that we try to grow whatever we can. But unfortunately, it didn't work. For example, 16 agricultural products were banned, there was an increase in the oil prices, our refinery broke down, and our rain power went down; we had to substitute it with other power sources to meet our energy requirement(s). We did a lot of things but sometimes it went well, sometimes it didn't," Basil said.

Several economists have been critical of Sri Lanka's strategy of money printing, but Cabraal said that in times of crisis, certain countries print money and, if done in a scientific way, it can be dealt with appropriately. "The central bank has all the tools, they have the knowledge, and you take a calculated call. If you are confronted with a situation of having to create new money through the issue of treasure deals because you don't have money to buy vaccines or to pay salaries, you do that then. I was also a party to that evil but we had to do that. If not, the repercussions would have been far more serious than what has transpired with regard to money printing," he stated.

The economic turmoil has led to political chaos in the country, with small protests sprouting occasionally, and people showing their unhappiness with the new presidency. "Of course, there has been a change, but whether that is a reflection of the will of the people remains dubious. But it reflects the will of the parliament. Now, whether the parliament reflects the will of the people is another question," Cabraal said. Several opposition leaders and residents are unhappy with the way President Ranil was appointed; they see it as a violation of their democratic rights.

Basil Rajapaksa explained that the removal of the rightfully elected president, Gotabaya Rajapaksa, on the demands of protesters and the opposition, was a violation of the law.

"That is a violation and that, in turn, led to the appointment of the current president. They did the wrong thing, not us or President Ranil, as the constitution has a provision to appoint him. When they undemocratically removed the elected president without any elections, there was no option but to follow the constitution which states that the next president should be from the parliament," Basil said.

On the contrary, Venkat voiced his unhappiness with the way protesters were treated, as they continue their smaller protests even now, and complain of high inflation. "A day's meal could be done for 800 SLR but now it is 1,400 SLR for the family. The price difference is getting sucked out of our pockets, and there is no increment in salary. We already gave up red meat, now the struggle is for rice and pulses," he said.

Government officials said that the demonstrations that took place went out of hand, with the homes of 84 members of the

parliament being destroyed, including that of state defence minister Pramitha Bandara. He said that the government should have stopped the violent activities immediately.

Threats were given out to army soldiers and parliament members, and most recount it as a traumatic experience. "In a democratic society, the members of the parliament being targeted was a threat to democracy itself," Bandara said. One of the members of the parliament was killed while female members were targeted; some of them were inside their homes when they were attacked.

The protest lacked direction, and it affected all political party leaders, including opposition leaders. "There was chaos, there was no leadership. It had to be stopped. So, the government had to take stern action against the rioters and mobs. We did what we had to do. We understand the frustration, anger and shortcomings. We are going through a tough period in our history. This is the time we take hard steps for the betterment of the people" Bandara added.

Meanwhile, the SLPP is ready for the general elections in 2024. "We are ready for it, we are not for postponement. We would like to have an election. We don't want an early or late election. When it is due, we will have the elections," Basil said.

Venkat doesn't think it is wise for the government to spend so much money on an election when the prices of goods are skyrocketing, and the country is still not back on its feet.

"I don't think postponing will help us to increase the revenue but the danger already persists here anyway. They (the opposition) say we don't have a mandate but they can't prove it as we won the last elections. We are the official mandate of the people," Basil added.

The government has, since then, been restoring people's faith in democracy, and ensuring the fundamental rights of its citizens while managing the economic crisis side by side. The Prime Minister highlighted that there is more trust in the government following the democratic unrest which existed in the last few months. "We have restored completely, irrespective of whichever community they (protestors) belong to. We have been able to bring back our law-and-order situation which I think all our citizens had prayed for. There is tremendous trust in the government and we are working with the opposition also and particular groups within the opposition," he said, adding that there is no discrimination and biases against anyone.

"Some of the other issues that have been raised by the people of the north, or Tamil-speaking people, or Muslim people, have been addressed and we are in the process of addressing the new issues that had not been solved," PM Gunawardena added.

There have been talks about the downsizing of the army, on certain business forums. However, the defence sector has received additional support in the new budget. Bandara explained that the right-sizing of the army is needed, rather than increasing or decreasing it.

Around 88 per cent of the allocation is for recurrent expenses –– uniforms, salaries, fuels and welfare. The defence ministry has 26 departments, including disaster management, defence academy, university, hospitals, disaster relief centres, a multi-purpose task force, and a civil defence service, which are not really for "military purposes".

"There is a misconception that we are increasing it, in fact, it is less. We should be getting more. We have a modern army, navy and modern air force. So, as capital expenditure, we have been allocated only Rs 50 billion, which is not at all sufficient for the 26 departments under it," Bandara added.

Sri Lanka's strategic location in the Indian Ocean region has become a transit point for drug trafficking and human trafficking, and the Lankan navy is doing its best to counter it. The army has been cooperating with the regional countries –– India, Mauritius, and Maldives –– as the area is under the spotlight.

"We don't want the area to be a conflict or war region, nor should it be a playground for world military powers. So, we are very clear on that. We want this region to be an area of peace so we work with everyone, are friends with everybody, and are enemies of none. We can't afford to have enemies. We are engaging as well as exchanging intelligence and information. So, it's a joint effort. We exchange whatever information we have with our regional partners," Bandara added.

Far from all this, Venkat has been dreaming of retiring and going back to his ancestral house in Kandy but he's aware of the hard reality of survival. Restoration of peace is of utmost importance to him as well as a period of uncertainty prevails in Sri Lanka.