♪ >> this is al jazeera and these are the top stories. nato is going to bolster forces across europe and announce the biggest overhaul since the cold war. at a summit, leaders professed unwavering support for ukraine. vladimir putin says moscow will respond to any nato forces in sweden and finland, who have been formally invited to join the an alliance. >> there is nothing that

concerns us about becoming nato neighbors. but -- members. but nato -- for sweden and finland should understand they faced no threats before and now if nato threatens us, we will have to respond in kind. >> everything was going fine between us but now there will be tension. this is obvious and inevitable. i repeat, if they pose a threat to us. >> a french court has found 19 people guilty on terrorism charges attacks. 130 people had been killed in attacks across the french capital. thousands of people there the capital of ghana have gathered

for a second day of protests over inflation. activists say they are angry about rising taxes, fuel prices, and allegations of police brutality. columbia's truth commission says more than 450,000 people were killed during their long civil conflict. names they were on drugs as prolonging the conflict. r. kelly has been sentenced to 30 years in prison for sex trafficking and racketeering. the court says he committed the crimes for over three decades in the music industry. the news continues here on al jazeera after inside story. ♪

>> the worsening economic crisis in sri lanka. the government has restricted the sale of fuel, that comes days after the prime minister said the economy has completely collapsed. so what's caused the crisis, and what are the consequences? this is "inside story." ♪ hello, welcome to the program. i'm hashem. sri lanka is facing an unprecedented economic meltdown and people are suffering petrol pumps are nearly dry and the government has suspended the sale of fuel for non-essential

services while it looks for supplies from russia and qatar . it had already imposed electricity cuts to save energy and food and medicines are running short. people are angry, especially those who need fuel to earn a living, and despite pressuring a prime minister into resigning , workers and protesters want to know why the same government is still in place. >> this is a huge injustice. fuel is essential. without fuel, the country comes to a standstill. people elected this government with high hopes. it is because of the short-sighted policies of the government that people are spending days in line. people are helpless. people and their children cannot do their jobs or study.

this is a huge crime. >> i am at the petrol station. somebody needs to do something. >> our children don't have milk powder, there's no fuel for our husbands to do their job, we don't have gas to cook, women are in gas cues, the man of the house is in the fuel queue . children are in milk powder cues . how can we live? if the government cannot govern, please leave. hashem: we will begin our discussion in a moment. but let's look it how sri lanka got there. its vital tourism industry was already in crisis following the civil war that ended in the easter sunday bombings in 2009 and then the pandemic but at the

start of with oil and food prices rising it suffered a sharp drop in its foreign currency reserves, colombo defaulted on its falling debt, the government was unable to buy essential food and medicines and without fuel power cuts were imposed. the government saw the help of india, china, and most recently the imf, but with little progress. protests led to the resignation of the prime minister but the cost of living continues to soar. let's bring in our guests. joining us in colombo, executive director of the national peace council of sri lanka in nottingham is tamil ananta vinayagan lecture in the international human rights law at the university of nottingham in colombo chayo dam singer

economist at the frontier research. welcome to the program. jihan, when the prime minister says that the country's economy has completely collapsed what mean for -- what does that mean for sri lanka? has the economy become dysfunctional? >> we are already concerned that the prime minister's same the economy has collapsed but not what is going to be done about it. what is the plan forward? we expected this of him. when he was first appointed, a person with only one seat in parliament but has been prime minister five times in the past, we expected and the people expected that he would take us out of this morass that we are in with his experience of governance and his international connections, his knowledge about

parliamentary procedure and governance in general. but we have been very disappointed since then, because what we have seen since he took over is a progressive deterioration in the situation . the lines for gas are longer than ever. there is been no cooking gas for the last three weeks. it's are growing. the government has said government officials should work from home indefinitely. schools and universities are closed. it is shocking. so when you say the economy is collapsed, what does it mean? find a solution, not merely say it has collapsed. so we are upset and disappointed and people are angry. they expected much more from the government.

but what we see is that it is politics as usual. we expected an all party government that was small and would govern for a short time but now we see a big government. we are upset. hashem: tamil, is it fair to expect the prime minister to fix overnight the structural problems and years of mismanagement in sri lanka? >> thank you for the question. i don't think so. because ever since post-independence like many other global south countries sri lanka is in the chokehold of a third world elite that has enriched itself but marginalized and completely impoverished the peoples and right now we are seeing the situation where the people have to pay the bill for

a range of issues such as the populist tax cuts, the ban on chemical fertilizers, but also for the worldwide decline of garment rubber and in the case of sri lanka, i'm exacerbating the situation, we have seen the pandemic that had some devastating impact but also the dwindling income through tourism after the easter bombings. this all contributes to a toxic stew in sri lanka that was very much instigated by a third world elite. the people at the helm have just contribution to a situation but have not explained what will happen now and i am not very positive the same people who created the problems will solve them in the near future amid an

international orchestra coming from the imf and world bank. i don't think it will be solved nationally. there needs to be an international and in particular regional effort in form of global assault solidarity among regional states. hashem: what would you expect the prime minister to do? when you look at the picture, you see a very somber economic reality. you don't have revenues, foreign currency reserves, you've been battered economically, the tourism industry has suffered, you are not generating revenues and do not have cash to pay for services. how to move forward in this vicious cycle? >> very much so. moving forward and the fact that sri lanka has fallen down to such a level our reserves effective numbers might actually be close to zero in terms of are

-- in terms of foreign currencies. [indiscernible] things are needed to bring in confidence and a resolution for the future and neither of those are happening. you need a budget and need to move fast from negotiations and to make sure things are functioning. the interim budget is expected in august when they should have had it in march or april. [indiscernible] it does not inspire confidence

to delay things. and the fact that people are calling for the president to resign for a change has led to a crisis of confidence in the economy. people do not have confidence in sri lanka and they are keeping money abroad. there is a breakdown of trust in the system and without action being taken, things are going to get worse. hashem: these are challenging times but they could provide clarity when it comes to the future. it was quite obvious since the start of this crisis that one of the fundamental problems with

sri lanka is that it relies heavily on imports, but ultimately does not have enough revenues to pay for these imports. last year you paid something like $20 billion for imports but don't have the revenue to do that anymore. >> you are right. this problem started long ago. it is not only this government that is responsible or that has blame for this. the problem started a long time ago when we went in for the free market system and detached ourselves from the earlier commitment to a more egalitarian society. we had a society that was more concerned about preserving social welfare but even at that time it was consuming more than producing.

instead of focusing on generating greater production, we went for more trade type economy. import, export, but importing more and always borrowing. and then consuming. and with that one big problem is the lack of accountability. and politicians and public servants engaging in corruption and not being punished. so along with borrowing, we misallocated our resources. we went in for grandiose projects airports without passengers, without planes coming in, ships without ports . the tallest tower in south asia without being able to open it . huge amounts of infrastructure

and along with corruption. and the chinese gave us large amounts of money without the necessary checks and balances that a private sector investment would have brought with it. so we did not use the money well and now we cannot repay all the loans we took. that is at the core. if you look at our roads, there are so many luxury vehicles, it's incredible. suvs, mercedes benz's, bmws, the gap between the rich and the poor has increased. so we have to restructure our economy the way we think we need a new generation and so that's a desire that this in fact that is epitomized in what the young protesters are saying, they said the president must go and also

all 225 parliamentarians must go. they are rejecting politics totally. hashem: the rajapaksas themselves, they have ruled over a political dynasty that pursued an aggressive policy but then we're getting indications that all those policies backfired to the point where in they decided 2019 to massively cut taxes which could have given the government something like two billion dollars a year they end up having something like 50 million and foreign currency today. which means they can't pay for anything they want to import. >> the previous speakers made good points. the third world elite in post-independence sri lanka is governed by dynasties and they have passed on power from one to the other and borrowed money from one to the other and

engaged in grandiose projects. it's like giving credit cards to his 16-year-old. that is the third world elite right now. and in cooperation or in collaboration rather with the international monetary fund and the world bank we have seen that there is a new liberal colonialism, a neo-colonial colonialism, and encroaching upon the people in sri lanka and the country. as one speaker mentioned, in the 1970's sri lanka was one of the first countries on the global assault that had opened up to a new liberal trading system and the majority elite sorry had used borrowed money in order to intoxicate its people by using also nationalist and religious extremism in order to enrich

themselves. so what i am fearing right now is that the current government like previous governments are as mentioned earlier not accountable, and they won't be held any accountable in the national setting as of now but they are also dealing with an international framework, namely the international monetary fund , and the world bank. and like a great leader said once the origins of debt arise , from the origins of colonialism and those who lend us money are the same who colonized us before and they are those who are used to manage our stakes and economies. we have a domestic elite but also an international elite and neither are being held accountable. hashem: let's the diet -- let's

dissect the economic failure. defaulting on debt payment. and you cannot purchase fuel from abroad. your local fuel company is owed something like $700 million to the point where western companies are saying, you have to be careful dealing with sri lanka. >> yes. i think it started earlier than the 1970's. there was an important driven system not only with direct import consumption like fuel, but also raw materials. the recent government became in had local production as one of their priorities. that led to export access and

having issues and it did not lead to a lot of financing going into those activities but rather direct consumption [indiscernible] we are now seeing the consequences of industrialization. this is an conducive to growth or development. the foreign exchange fell so low because after 2019 and the tax cuts brought down the financial status and then the plandemic, sri lanka was downgraded. at that point it should have started engaging with the imf

instead of doubling down. [indiscernible] using up resources to pay debt, things that build production without financial benefit and we are now at that point [indiscernible] hashem: we have many other angles and i would like some brief answers, if you don't mind. the prime minister says the only option now is loans from international lenders and that is why they are talking with the imf now. and there are conditions that come with those loans. is that a good step forward? >> i think the way out for us is

relying on the goodwill of the international community. we have been sustained for the last two months through indian credit lines. india is not rich but we are really grateful they have stepped forward to support us at this time of need. ironically, the used to be very controversial in our country it still is to some extent, our people were told that if you go to the imf they will impose all sorts of conditions on you, they will cut the social welfare, they will make us sort of neo liberal, tie us with the west, but actually now people in a way we want the imf to come in, because we think that if the imf comes in they will ensure that the loans that they give that are given to us will be used properly, that need to not be

stolen. that's how bad it is. whatever foreign loans we get, they will be robbed and the imf would ensure that doesn't happen. japan said to first get imf and then we will come in. hashem: people are very divided about the notion about seeking international help from international lenders. 20% of sri lankans come from the middle class and had high hopes life would be much better than it could be taking part in the political and economic sphere . now they feel betrayed abandoned , by the political elite. what is next for them? >> history shows us that there will be an economic turmoil also for the middle class who had been hoping to see a greater

share in the well-being of the state and wealth of the state. history taught ■usfrom greece, argentina, peru, and you know eastern asian countries where , and there i have to disagree vehemently because academic research is pointing out to the devastating impact imf world bank have also in the middle class and also the most vulnerable, because i do think that structural adjustment programs will not only further the neoliberal ideology, but also cut more on the state, leading to more impoverishment among the people, and the way forward in my frank view is to forgive debt. we have surrendered us to the

imf world bank india china, they're not doing this out of good will and philanthropy, they're doing that because they want something and that is structural adjustment programs regional reasons. so i'm afraid for the middle class that they will see a downfall in the current economic structure. hashem: what does it mean when you have inflation for food hitting 57% currently now in sri lanka? >> the main reason for inflation in sri lanka is in the last two years the government decided the best way forward was to print massive amounts of money. trillions of rupees were printed. and the fact that it comes to such a low point means it is difficult to reverse the situation without massive

revenue raising measures. right now we can't have those, especially ones that bring revenue in the short term. it takes time and further inflation will come up [indiscernible] hashem: ok. >> [indiscernible] hashem: it would be a mammoth task to see the prime minister reverse those because when you look at it, debt is at $51 billion in the foreign currency reserves stands at something like 50 million. thank you all very much indeed. i really appreciate your insight . and thank you for watching. you can see the program again any time by visiting our website aljazeera.com, for further

discussion go to our facebook page that's facebook.com/ajinsidestory, you can also join the conversation on twitter, our handle is @ajinsidestory. for me and the entire team here in doha, bye for now. ♪

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