Rebound or relapse: Debt restructuring in a time of crisis

Rebound or relapse: Debt restructuring in a time of crisis

A crossborder discussion on economic precarity and the impacts of ongoing debt restructuring processes and negotiations with the IMF in Sri Lanka, Pakistan and Bangladesh.

Over the past year, Sri Lanka has often been cited as a case study in economic precarity, and while headlines have been full of stories of poverty and the ongoing protests, there has been less dedicated coverage over next steps. The UN states that at least 5.7 million people within the country require humanitarian aid. With food inflation reaching 85.6 percent in October, 28 percent of the population face moderate to severe food insecurity.

These events have to be set against a global cost of living crisis; with reports of inflation everywhere from Pakistan to the UK, France, Kenya and Nigeria. As food and fuel prices rise, lower-income countries are disproportionately impacted, and the impacts of debt mismanagement become starkly visible.

In this edition of Southasian Conversation, we ask: how should governments negotiate complex debt restructuring processes What do examples from the region, and indeed globally, tell us about navigating debt restructuring, and how will this impact people's lives in the interim? We at Himal hope this will provide an opportunity to revise these questions and also serve as a platform for an open and timely conversation on what's next for Sri Lanka, Pakistan and Bangladesh.

• Jayati Ghosh (Professor of Economics at the University of Massachusetts Amherst, and member of the UN Secretary-General's High-Level Advisory Board on Effective Multilateralism)

• Naomi Hossain (Research professor (specialisation development politics) at the Accountability Research Centre)
• Ahilan Kadirgamar (A senior lecturer at the University of Jaffna)
• Farooq Tariq (A leader of the Pakistan Kissan Rabita Committee)
• Chamila Thushari (Programme Coordinator with the Dabindu Collective)

The full panel discussion is now available on YoutubeSoundcloudApple Podcasts, and Spotify


This is an unedited transcript from the panel discussion. Please listen to the corresponding audio before quoting from it. 

Raisa Wickrematunge: I think we can get started then. Roman, do you want to start us off by introducing the event?

Roman Gautam: Absolutely. I think it is perhaps unfortunately appropriate that Chamila is having to join us in the middle of a power cut. Because of course, those power cuts are caused in large part by precisely what we're here to talk about today. So thank you for joining us, regardless of the power cut. Thank you to all of you from so many places. Good evening to all those of you in Southasia. Good morning to all of you joining us from the Americas. Good night, good morning, and assorted good times of the day to everybody joining us from all over the world. It is wonderful that we get to do this remotely. Of course, it is always a pleasure to have everybody face to face. But it's still a big pleasure for us to be able to gather all of you together online. Definitely, I think an advantage to those of us who dream of a more interconnected world and especially an interconnected Southasia is that regardless of the craziness of our borders and governments and everything else, we can still do this.

Just want to very briefly also introduce Himal Southasian to those of you who might be joining a Himal Southasian event for the first time and might not be familiar with the magazine. Himal was started 35 years ago as a magazine looking at the Himalayas – very pointedly looking at it as a transnational region, a region that transcended borders. And from there, Himal grew into Himal Southasian, which is what it is today. We spell Southasian as one word. That's our little way of saying that we think that all of us are one, in a way. That's not to say we are out to destroy national boundaries. We are trying to connect people across the crazy divides that exist across our region. And we remember that history teaches us that there is a lot more that we have in common than uncommon, really. And that is why we are doing these conversations. I also invite all of you to please visit, our website, where you'll see a lot of good journalism, again explicitly looking at the region as a whole. I think we are perhaps the only publication, or at least one of the few publications, that is explicitly pan-regional and very determined to look at all of our problems and all of our people from that perspective. Also, please do follow us on social media channels. And also, if any of you would like to support our work, please remember that we have a membership programme at – it would be wonderful to have all of you join us as Southasians.

Before we go any further, I want to say a big, big thank you to our panellists today. An especially big thank you to Jayati for agreeing to moderate, but also to all of our very distinguished panellists. We have so much experience and knowledge in our Zoom room right now. And it's really a pleasure to have all of these great minds in one place to share with us. Also, a big thank you to Raisa and the Himal team. All of you guys have worked so hard to put this together. Thank you for doing it. I'm a relatively new addition to the Himal team. I joined as the Editor just about a month and a half ago. So a lot of the work for this particular event is their doing. And so please do, at least quietly, give them a round of applause and thanks. Also, a big thank you to Kanchana Ruwanpura, currently at the University of Gothenburg. It was a conversation with her really that got the ball rolling on having this event with this panel. So thank you so much, Kanchana.

The topic today, as all of you already know, is debt, debt crises and debt restructuring. And we've chosen to call it Relapse or Rebound. Because that's really the question before us now. Of course, the reason we're having this conversation now is because it's an issue that's facing so many of us as Southasians at present. The biggest story in all of this right now, of course, is Sri Lanka in negotiations to restructure its debt, explicitly as a path to an IMF loan and bailout. And of course, with all of that, a deep and desperate economic crisis. We see the crisis expressed very often in debt, in sums of money owed, but I think we should all also keep in mind that there is a very, very human cost to this. Just assorted facts and figures from last year, at least – in Sri Lanka, there was about a third of the population needing humanitarian aid, and a quarter of the population facing some degree of food insecurity, meaning just millions of people unable to put food on the table. Heart-breaking stories of malnutrition on the rise, of children losing consciousness from hunger in school, and a lot of kids not coming to school at all. So there's a generational cost to this as well. And in all of this, the main lifeline being held out right now is an IMF bailout. Again, dependent on those protracted negotiations with all of Sri Lanka's creditors. There is also, of course, the alternative path, which I don't think is getting enough attention, debt forgiveness, and a more critical look at the kinds of structural patterns and processes that put Sri Lanka in this position in the first place, which is not to absolve the Rajapaksa's and other assorted Sri Lanka actors of responsibility, but definitely something to keep in mind. And I'm sure something that our panelists today will also be speaking more about.

But also important, I think, to zoom out beyond Sri Lanka to remember that Bangladesh, also in the process of economic reforms and an attendant IMF loan to tide them over in a giant balance of payments crisis. In Pakistan, a looming threat of default. I think with what happened in Sri Lanka with a default, set alarm bells ringing in the Maldives, in Nepal, because so many of our economies face similar pressures of trade imbalances, really steep trade imbalances, the impact of COVID, remittances, and tourism being such a large factor in so many of our economies. So much of this is shared, even though in many cases, there are specifics to each country's predicament. And of course, the threat everywhere is the kind of human suffering, as in Sri Lanka, I think that again, it is important for us to remember that these are much, much more than just facts and figures. So that's why this topic now, because we're headed into very painful and very new territory, I think, for Southasia. I don't think Southasia, as a region, has faced a collective debt crisis of this magnitude before. And again, the IMF seems to be seen as the main source of relief across the multiple countries that are in negotiations with the IMF. But of course, we know from past experience, from places such as, very prominently Latin America, the kind of long-term pain that IMF loans and the structural adjustments typically attached to those loans can have. Of course, there are the demands for loan forgiveness, and there is an entire tradition of thinking and activism that backs that path out of the crisis, but that is being sidelined.

So in all of this, I guess the questions are, how did we get here? What's in store? What do we do? We need to resolve this. We need to limit the human suffering as much as possible. But what can we do in terms of our understanding? What can we do as citizens of our individual countries? But what can we also do as Southasians? Where does solidarity come into play? What can we teach each other? What can we learn from each other? And what can we learn from the rest of the world? Because at the end of the day, with all the debt restructuring, structural reforms, bailouts – all of this has to be a path for us to rebound rather than relapse. And we have really an incredible selection of panellists to tell us how best we can get there.

So I'll stop there. I will hand over to Raisa so that she can introduce each of our panellists. But once again, thank you to all of you for joining and a special thank you to all of our panellists for being here today.

Raisa Wickrematunge: Thanks, Roman. Before I kick off, just a quick overview of the structure we're going to take for this discussion. For an hour, we'll have the moderator interacting with the panellists. And after that, we'll have half an hour for a Q&A with the audience. So if anybody who is listening either on Zoom or on Facebook has a question that they want to ask the panellists, please drop your question either in the chat box for Zoom or in the comments on Facebook, and we'll convey it to the moderator for the Q&A session.

I'm now just going to quickly introduce all the panellists and the moderator. We're very fortunate to have Jayati Ghosh, who is a Professor of Economics at the University of Massachusetts Amherst and a member of the UN Secretary General's High-Level Advisory Board on Effective Multilateralism, who is going to be moderating the session today.

Our panellists include Naomi Hossein, who's a Research Professor, with a specialisation in Development Politics at the Accountability Research Center. She'll be talking about Bangladesh, but also, we'll have a bit of a crossborder perspective because of her work on food and fuel protests. We have Ahilan Kadirgamar, who is a Senior Lecturer at the University of Jaffna, who will be talking about the Sri Lankan perspective. We also have Chamila Thushari, the Programme Coordinator with the Dabindu Collective, who will be talking about Sri Lanka as well, and specifically the role of the Free Trade Zone workers. And we have Vishmi Varanachapa, from the Asia Flow Wage Alliance, who will be helping us with translation. And from Pakistan, we have Farooq Tariq, who is a leader of the Pakistan Kissan Rabita Committee.

Thank you so much to everyone who's joined us today. I'll hand over to Jayati to take the discussion forward.

Jayati Ghosh: Thank you so much, Raisa. And thank you, Roman, for that really excellent introduction to the issue. I am also really excited to hear all these panellists, because I know that we are going to get a very interesting perspective from the ground of what is going on in our countries.

I'm going to just ask each of you for some opening comments. But within this broad question, which is that this is not the first time that all of your countries are facing debt crises. In fact, all of you have been to the IMF multiple times. I was trying to remember a period when Pakistan has not been on an IMF programme. For Sri Lanka, it's the 17th now that is been negotiated. Bangladesh also, at least four times, to my knowledge. So these are countries that have been to the IMF many times. Why does this keep happening? What's the latest one about? Is it different from the earlier ones? Is it more due to external causes than the internal cycles that these economies seem to be going through? And what is the current state? I mean, we know that in many countries it is still being negotiated. Certainly, in Sri Lanka it is being negotiated. I think in Pakistan, the government has just announced that they will go and agree to all conditions. Anything you say we are willing to sign on, they just announced yesterday, which seems interesting. And I know many eyebrows were raised at why Bangladesh even went to the IMF this time because you don't have such an immediate crisis.

So maybe I can just begin by asking all of you, what's the current context? And I'm going to begin with Ahilan because I know that he's due for a power cut very shortly. So while we can still see you, Ahilan, we're going to ask you to start off.

And if you want to also add a little bit specifically about Sri Lanka, you and I both signed a statement – 182 economists globally signed a statement saying that you have to write off some of this debt. And you can't go in for the terrible conditions that are typically associated with IMF loans. So how do you feel about how that particular statement has been received, whether it is seen as valid, and what's going on there? Also, why is Sri Lanka's negotiation for debt so complicated? Is it because of private credit? What's going on there?

Ahilan Kadirgamar: Thank you, Jayati, and many thanks to the Himal team for organising this event. Yes, I think this statement, which has gotten a lot of attention, I've also endorsed it in the local newspapers here, it's created an opening. Until now, over the last 12 months, in my view, Sri Lankans have been told a big lie. They've been told that once we go to the IMF, it's the magic bullet, and all our problems would be solved. So let's just take the bitter medicine and move forward.

Actually, we have been implementing the IMF's recommendations for the last nine months, I would say, since March 2022. And since then, we are seeing the consequences. Last year, our economy has probably contracted by 10 percent – a tenth of our economy. And we are seeing the devastation. Food inflation hit almost 90 percent because all the devaluation of the rupee, from 200 rupees to a dollar to 360 [LKR], was transferred to the consumers. There was no thinking about how people are going to feel this. Businesses are collapsing because interest rates went from 6 percent to 15.5 percent – the Central Bank's policy rate. This means even small businesses, and livelihoods, are in disarray. And I think that is the context for the tremendous suffering, and as Roman rightly pointed out, we're going to lose a generation.

The IMF agreement, though this is the 17th, it's different this time because they really have a stranglehold over us. Because for the first time in our history, we've defaulted on our debt and they hold all the cards in terms of normalising our international relations, particularly in relation to our finances. So I think that's why it's different. I would say that this particular crisis has been long in the making – from the late 1970s, in 1977-78, Sri Lanka was the first country in Southasia to go through liberalisation. And that came with two IMF agreements in late 1977 and 1978, what we call Structural Adjustment Policies in Sri Lanka, they commonly call open economy reforms, or globally the neoliberal turn. And since then we've been opening our economy based on IMF recommendations, trade liberalisation and capital account convertibility. So capital can flow in but also fly out. And we've seen these repeated balance of payment problems where we would go for yet another IMF agreement, and then borrow more from donors. So this has been the cycle.

During the long civil war, 26-year-long protracted war, the governments could not take these reforms as aggressively. It was at the end of the war in 2009 that Sri Lanka went through a second wave of neoliberalism. And that was started by our 15th IMF agreement in July 2009, which gave a signal to international capital, to capital markets that Sri Lanka is the new blue-eyed kid in terms of borrowing internationally. And a lot of the debt that we are unable to pay now started then. And that's when we really went off in terms of commercial borrowing, what are called international sovereign bonds. And so our debt stock kept increasing. These are dollar-denominated bonds but had very high-interest rates (an average of 7.5 percent), which means effectively, interest payment in 10 years (most of these bonds are 10-year terms) would be equal to the principal. So it was unsustainable. We saw this crisis coming, but we were told no, the way to go forward is more in the same direction.

In June 2016, we went for our 16th IMF agreement when the current President, Ranil Wickremesinghe was Prime Minister. It was for USD 1.5 billion in June 2016. In July 2016, we floated USD 1.5 billion of international sovereign bonds. So that tells you the story of debt. We were encouraged by the IMF to go in this direction. We were encouraged by the World Bank, which had projects to expand our Sri Lankan capital markets and our stock exchange. So this has been the history. But this time we are really facing the consequences, because we are caught in what I would say is not just Sri Lanka's crisis. This is a global crisis and we are possibly on the cusp, in my view, of a global shift. Now which direction that's going to take is the big question.

Thank you, Jayati.

Jayati Ghosh: Yes, that was fascinating, Ahilan. And I think you're absolutely right that Sri Lanka is really the canary in the coal mine for the global debt crisis, that so many other countries in Africa, we've seen happening now in Ghana, in Ethiopia and a bunch of other countries following a very similar trajectory that went for these global borrowing in the bond market and are paying the consequences now.

But I want to pick up on something you said about food prices and the 90 percent inflation in food. I know, Naomi, that you have been working a lot on the impact of food prices on the poor and on women in particular and what's going on there. I wonder whether you can actually tell us something about the human costs that Roman mentioned, in terms of what is happening, certainly in Bangladesh, but also widely in how is it impacting people, how is it impacting within households, women and girls? What are the kinds of protests that are happening around that and what impact is that having? I think you wrote about this in a previous issue of Himal Southasian, you wrote about this sort of moral economy of food in a way and the legitimacy of governments in terms of being able to ensure this basic necessity of life. Do you think that's going to play a role in how the governments actually respond to the crisis and ensure access to food?

Naomi Hossain: Thank you so much. And thank you so much for inviting me. I feel a little bit that I'm here under false pretences because I'm not a macroeconomist and I confess I don't fully understand the debt issues. It's very, very complex. What I do understand, and I do feel that I've been working on a long time, is the way in which these crises impact on, as you say, people's everyday life, but also on the political, if you like, the relationship between the state and the citizen, when it comes to the fact that many people cannot meet their most basic needs, and we're not talking about fancy food or big cars, we're talking about not being able to afford enough rice or enough dhal or whatever it is.

So yes, I've done quite a lot of work since the last global crisis actually, since the food, fuel and financial crisis, which I seem to remember Jayati, you yourself, coined the triple F crisis phrase for that. And since then, I have off and on been working on these issues. We looked at a lot of food and a lot of food riots and then later at energy protests, which is something really that has come up a lot in the last, I'd say, 15 to 20 years and which we really don't know a great deal about because there hasn't been much research about today. And yet we saw in the last year in 2022, as I did a piece of work for the Friedrich Ebert Stiftung and just published a study of the food and energy protests of 2022, it is very striking, I think, probably unprecedented numbers in the world history of protests, certainly of those recorded. We found more than 12,500 protests and we quite narrowly defined what we selected as a food protest or an energy protest. And 12,500 around the world in 148 countries. Now Southasian countries were at the very top of the list. Of the top 25 countries (and this may just be an artifact of population size, it's true) Pakistan, India, Nepal, Sri Lanka and Bangladesh, in that order, had hundreds of protests. In Pakistan over 1,300 or something like that. About food and energy prices, cost of living and also shortages; power cuts, load shedding and this sort of thing. So people are really struggling, people are struggling with the cost of food, but in particular, the cost of energy. And if you look at the global energy price indices compared to the global food price indices, they rose so steeply in the wake of the invasion of Ukraine by Russia. Really, the response that we found to most of these protests is people complaining that they just couldn't meet a decent standard of living. And it was all kinds of energy: electricity, fuel, cooking oil, cooking gas, gas for running your fishing boat, gas for running your irrigation system, if you're a farmer, and all sorts of protests. And as I say, Pakistan, India, Nepal, Sri Lanka and Bangladesh, are the top of the list there.

One of the things that are so striking is that in this era where we hear a lot about political polarisation, actually what we found was a great deal of commonality. And unlike in 2008, the previous triple-F crisis, where it was mostly food and predominantly located in low-income countries, mostly in Sub-Saharan Africa, these protests were found in all countries, all around, all kinds of regions, all levels of development, all types of political systems. So you have them in France and Germany, you had them in Bangladesh, you had them all across the Middle East, of course, Lebanon in particular, a great many. And Central and South America, Ecuador and many other countries, Chile had many of these protests. And some of these were very momentous. Governments were ousted, governments were unelected, and so on.

What else was very common is the way people talk about these things. So you know, it's a moral issue because you cannot live a good life, you cannot live a decent life. And at the same time, what you see is that governments are cutting subsidies of the basic things that you seem to need. And I understand that they are very good economic and other arguments against, in particular fossil fuel subsidies. But at the point of impact, this is really not at the top of your mind. This is really not the most important thing when you can no longer afford to get to work. So people feel this very strongly. They feel very strongly that governments, national governments – it's a global crisis, many people know this – but they turn to national governments everywhere around the world, to national governments, to say, OK, sure, partly this is Russia's fault, partly its global economic stuff, but we expect you to protect us during this crisis, not to make it worse by cutting subsidies.

The other thing that we hear a lot of across these protests is when governments fail to respond, we often hear that these turn from bread-and-butter issues to political grievances. So it becomes a matter of our political elites not listening to us, not responding to us because there is collusion and because there is corruption. Now, as we know, many energy systems in particular are ripe with different kinds of bad practices and corruption. So this is not just popular discourse, there is some basis to this, very much so.

The final thing we find really is that when governments really don't act and they can't often because they are constrained by institutions like the IMF and their conditionalities, those governments tend to lose some legitimacy. It becomes legitimate for people to protest. And most of them will face electoral challenges if they are electoral if they are multi-party systems, and other kinds of challenges if they are not. The costs are very high. I haven't seen a great deal of impact evidence so far from this current crisis, but we know from 2008, 2011 and 2012 how very bad it was. And it's one of those things that, especially now, especially I think about in Bangladesh, most people are not on the very, very brink of survival. They're living reasonably well, eating reasonably well. There's a lot you can do to cope. Coping strategies are something that the World Bank and other organisations are very keen to find out about. Coping strategies and resilience in this context just mean people are living much less well, eating less well, cutting down, cutting back, less nutritious, and maybe bulking up more. So the nutrition issue comes up very large. Ultimately, all of these costs that people on low incomes pay, that women pay in particular and children also pay because of the nutritional costs and educational costs which you mentioned into the next generation. I can go on for hours, but I'll stop there.

Jayati Ghosh: Thank you so much, Naomi. I'm so happy you brought out, I think Ahilan also did, but you also brought out very sharply the distributional effect of what's going on there.

Farooq, you have been working with agricultural communities and you're associated with the Farmers' Union. We know that, as I said, Pakistan has just announced that it will do anything the IMF wants, but over the last year, it has already been cutting down on energy consumption, right? Because the IMF has told it to. And it has done a bunch of other measures which impact farmers in particular. So how difficult is it now for agricultural communities? Are they organising? Yes, there are riots, and perhaps, there are responses, but is there a way that they are mobilising? Also, one of the things that also will impact certainly Sri Lanka, Bangladesh, and India, but certainly has already impacted Pakistan, is climate change and you've had massive floods. So I know that Pakistan has been asking for reparations for the flood damage that has been done, which again has not been forthcoming. Just wondering how central these kinds of responses should be when Pakistan does actually deal with the IMF.

Farooq Tariq: Okay, first let me say that the IMF word is very unpopular in Pakistan. There is no illusion that the IMF can take Pakistan out of its present economic crisis. On the contrary, whoever wants to fulfill the conditionalities of the IMF, loses politically. That the IMF has become sort of a damaging aspect rather than a beneficial aspect for the governments. So the present government says that they will fulfill all the conditionalities. They have not done that for last seven to eight weeks, which they have been asked. They have been saying this earlier as well, but they are unable to fulfill the conditionalities because that means a political cost.

Now there is a political crisis in Pakistan. Out of four provinces, two provincial assemblies are no more, and there are going to be elections for the two assemblies. And this is Imran Khan, who was in power, and Punjab and Khyber Pakhtunkhwa assemblies. And he's been pushing for the elections and he uses this tactic now to force the government. Now let me say that there is no illusion about Imran Khan either in Pakistan. Although there are youths who say that he may be able to solve something. But Imran Khan and the present prime minister both have been following the IMF, and both paid the price. Particularly, the present government when they fulfilled unconditionally the conditionalities of the IMF when they came into power in April last year, lost the by-elections, and that meant that they lost their government in Punjab, so the largest province went out of their hands. And now they're saying, we want to save Pakistan and we have paid the price, and we will pay the price, but we will save Pakistan. So it has come to the extent that the government understands that fulfilling IMF conditionality is very unpopular. It has a lot of impacts already. A lot of price hikes in every aspect of life.

Now what the IMF says at this time is that you should withdraw the subsidy on oil and on gas and on electricity and raise the prices of these three products. It has been raised tremendously earlier, last year as well. The present government is hesitant to do that, although they say they will fulfill it. So they're in a dilemma. If they fulfill the conditionality, they lose political support. If they don't do it, they don't see any other way apart from the IMF. All the political parties, including Imran Khan and People's Party and Muslim League Nawaz, don't see beyond the IMF's aid. So all they can offer Pakistan is what the IMF asked them to do. And that meant a very, very difficult economic life in terms of price hikes particularly.

Two or three things came together, which has accumulated in the present economic crisis. And that was not just the capitalist crisis of the economy, which was already there, but also on top of that, the climate disaster which took place last year. And I have visited the area several times. We are in process of providing relief today. And basically, even food, up till now, has not been available to most of those who are on the road still in this very cold weather, which is around one, two, three, four [degrees] at this time in most parts of Punjab and Sindh. And so the climate disaster has impacted almost 33 million people. And most of the roads, over 4,000 kilometres of roads were lost. Over 17,000 schools had lost their buildings and so on. So it was a tremendous loss to the Pakistan economy. I was at the COP27 in Sharm el-Sheikh and we pushed hard for loss and damages and reparations. So there was some agreement on loss and damages. And recently in Geneva, about USD 10 billion has been promised to Pakistan. And as you know very well, promised does not mean implementation. Most of the promises are never implemented.

Yesterday in 10 cities, the Pakistan Kissan Rabita Committee had demonstrations calling to tax the rich, not the poor. So we also raised this very sharply – if you receive money, don't waste the money on paying the foreign loans. And we're also demanding from the IMF and World Bank to suspend Pakistan's debt. There is no way they can pay back. There's only USD 4 billion left in the foreign reserves. It's on the brink of default. People have lost their lives in every term. I have seen the most poverty, extreme poverty in Sindh particularly. I can't really put into words the poverty I've seen. They own two, three or four things altogether. They have the total property of their life in maybe one suitcase – that's all they have. And this is what ordinary people's life in Pakistan is like at present time. So I would end here by saying that it's very difficult for the ruling class, for the government to implement conditionalities. But they see no other way apart from implementing it. So it's a dilemma for them and let's see how far they can go in implementing it.

Jayati Ghosh: This is both devastating and fascinating, your account. Yes, I think you've given a very graphic picture of the kind of suffering, and we've heard that also from Naomi and Ahilan. But I think you've also raised a very important point about alternatives, and I want to come back to you all about this, about the ideas, the lack of imagination that we seem to have in terms of addressing this particular crisis that just go to the IMF, and the IMF also has no imagination also tells you to do the same thing.

But I want to go to Chamila. I mean, I know you're sitting in darkness. Thank you so much for joining us despite that. And I want to ask you about what's going on specifically with women workers in the export processing zones because I know you've been working with them. I've had a visitor just recently from Colombo who was telling me the other day, she's from the elite, but she said the situation is back to normal in Colombo. Obviously, it's not back to normal for most people. The elites have somehow managed to get back – the power shortages are not as extreme. They're occurring, but they're more phased. The absolute lack of availability of fuel has been dealt with. So there's some degree of normality, but there is obviously an ongoing human crisis. And what is going on actually with the women workers in the export processing zones? Even if it's not immediately visible, what kinds of job loss, what kinds of massive declines in real income, in livelihood, are we seeing? And what are the concerns of the workers? Also, the fact that you know, there's still a COVID-19 pandemic ongoing – are the workers still being forced to go and work in these factories independent of any kinds of safety precautions, etc?  Are they concerned? Is anything being done to protect them? What's the overall situation, specifically with women workers?

Chamila Thushari (translation by Vishmi Varanachapa): When considering the situation within the free trade zone with the pandemic, the crisis worsened the labour rights of workers overall and the women workers specifically within the zones. So workers were at risk and under lockdown women workers were in the context where the garment sector was considered an essential sector in the country, they had to continue working. So regardless of the import income increase, when considering the Central Bank reports compared to how it was in 2019 during the pandemic period, the export income had increased in the country. Many workers were impacted during this time period. They were not able to access proper medication methods and the quarantine procedures were militarised all over the country. And in this situation, for the past three years, the salaries of the workers have not increased at any point. Their right unionise has been violated and there are no regulations on the working conditions that these women workers undergo. I represent the lowest level of the country and in this crisis situation, they've been severely affected. Small and medium enterprises have been suffering. The tax on these citizens has increased. And also, this has overall affected the situation of free trade zone workers. And it has come to the point where from three meals a day it has dropped to the point where they just have one meal a day. So we have to find alternate methods to help these workers find other income streams, and we have to implement things like community kitchens to support these workers in the meantime, to help them get out of this crisis.

Most of these factories have closed over this time period because of the impact of the crisis. These factories produce for top brands around the world. And it has come to the point that workers have to work only four days and most of the man-power workers have lost their jobs. And because they have had to reduce the workforce, that means the remaining workers have a higher target to cover when it comes to covering their production targets. So the Central Bank has been able to show that these increases in export income are because of the overtime these workers have put into cover these targets. And it has come to a point where these workers have been pushed towards the use of drugs as well to get their targets on time. So this has caused rifts within the families as well for these workers. Brands, governments, the board of investment, they all bear the responsibility in ensuring that these workers have their rights protected in these situations of crisis. So government has not brought about any concessions for the workers, regardless of these workers being considered the backbone of the Sri Lanka economy. It is important that in situations like this, at the international level brands are held accountable to ensure that the producers for their brands, the suppliers for their brands are also in good working conditions.

Jayati Ghosh: Thank you. That was again very moving and very disturbing. I think this is a really graphic account of what is going on in Sri Lanka in the moment and how it's playing out.

I want to pick up on a couple of the questions, the points that came up in your discussions already in terms of why we are lacking another way out. Yes, everywhere, the message that seems to be coming across all these countries is we have no option but to go to the IMF. The government tells us they will do all these terrible things that impact ordinary people so very severely. The people can only protest at the specific impacts, but they can't put forward an alternative programme. This is actually picking up on a point that has already come up in the chat. I think Ashish Mago has said it would be great if speakers can talk about specific policy recommendations for combating the crises.

I just want to highlight two aspects which I think really strike you, and Farooq Sahib, you mentioned one of them, about taxing the rich. This is a call that has come up more and more. Right now, in Davos, there is that big meeting of the World Economic Forum. Many organisations have written letters, have come up with statements about the obscene increase in incomes of the rich and assets of the rich over the last three years, and saying we have to tax them. It's very interesting that the IMF programmes never ask to tax the rich. They think of all of these ways of raising revenues from the poor, raising electricity prices, raising fuel prices which impact all of the other prices of necessities. We somehow accept that. We say, oh, the economy was overheating and we spent too much. We didn't spend too much. The poor did not spend too much. The poor actually did not gain from the boom and yet are being made to pay for the crash. So what are the options available in your different countries and what is the kind of, shall we say political mobilisation around these different options? Let me begin with Ahilan, and we'll do the same order if you like.

Ahilan Kadirgamar: Yeah, I think one, if you look at in the lead up to the crisis, what we did not do. I mean, we saw this crisis coming for a long time. We went ahead with liberalisation so that the affluent classes could import their luxury vehicles, the investment in the beautification of Colombo – so, completely wrong priorities. At a time, when in the case of Sri Lanka, direct taxes were somewhere around 18 percent of our total tax revenues. The rest of it indirect taxes, which are completely regressive, was 82 percent, particularly the value added tax. So we never tried to do that. Our revenues were very low comparative to other countries. Something like even before the election of Gotabaya Rajapaksa, something on the order of 12 percent and at best 14 percent of GDP. So you can't run a country like that, but there was no move to increase taxes on the wealthy to be able to even come close to balancing a budget. But once the crisis deepens, they say, well, now we have no choice but austerity – so cut spending and then cut social welfare, then the poor suffer more and more.

We also have to look at what wasn't done. So one, we could have restricted our luxurious imports, luxury cars. If you look at the city of Colombo, it's changed over the last 10 years. So many Mercedes-Benzes and BMWs on the streets, while now people don't can't even afford fuel, or we are even having to ration fuel. So why didn't we restrict those imports? Why didn't we prioritise our imports, is one question. Why haven't we, even after we saw the crisis, even today, why haven't we moved on a wealth tax, for example. Because when the economy is contracting by 10 percent, our budget came out in November, and there was no wealth tax in there, they assumed that they can somehow get the tax revenues. And last week, the government comes out and says they've instructed all the ministries to even cut their recurrent expenditure by 5-6 percent. Because there's so much on this part of fiscal consolidation, which is one of the IMF conditions, so even salaries of state employees might get cut, or they're trying to increase taxes to suit that. There was no move to address the revenue problem.

Then if we take the essential goods, food – we're looking at a food crisis. Why were any kind of subsidies on food, cut? And then the rupee depreciates from LKR 200 to LKR 360, then you transfer all that to the consumer, whether it's milk powder, whether its wheat flour used for bread. No wonder food inflation is hitting 90 percent. So what we need is a public distribution system, and at least in terms of these essential food items, the state has to take control. And it's not just 90 percent in many places, we've seen it triple for the fact that then the traders start to hoard as well because they continue to assume the market is going to work, even when the economy is collapsing. So we need a public distribution system. We need subsidies in terms of food. Otherwise, I think in Sri Lanka, it's a very worrying situation. We are looking at possibly a famine over the next year or two if we don't address this very seriously.

Even farmers who produce have stopped producing for the reason that they might as well hold on to their cash to be able to buy food, because everything is so volatile. There's no subsidy even for the petrol or the diesel they need to plough their fields. Small fishermen, they need kerosene oil, but the price of kerosene oil has quadrupled from a year ago. So a lot of the things that Naomi said about the energy price hikes, we are seeing that very much here in Sri Lanka. We've had this sort of great boon that 99 percent of our country, people have connected to the electricity grid. But now already electricity price has doubled. It's possibly going to rise up further. In a few years, a lot of the people probably may not be connected to the electricity grid again. So this backward movement in the name of taking an economy forward is really worrying.

Thank you.

Jayati Ghosh: This is a powerful indictment. But what is also, I think, very powerful in what you say is that this is not a necessary tragedy. You could have avoided, now you can still take a different route. You can still avoid cutting down on these essential services, raising the price of essential goods, and you can tax the rich to generate the money you need. Cut the inessential imports is basically what you're saying.

There is another part of this. And I think it's also come up in a question that, why in fact are we insisting that the entire debt has to be repaid in full? And this was a point that was made in the Sri Lankan statement on debt that you mentioned and both of us have signed. But it's something that Farooq Sahib has also talked about. And I think it's implicit in what Naomi and Chamila are saying. These are debts taken on not in good faith. We can talk about corruption and so on, certainly. But the point is that they were not given in good faith either. That is to say, those involved in providing the credit knew full well that there were risks associated with this, particularly the private bondholders, and they charged a much higher interest rate precisely because they were seen as riskier. Now when you are charging a higher interest rate, you can't then say, well, I'm not going to accept that risk. I'm not going to agree to a haircut or a reduction in that debt. Debt restructuring happens, and debt write-offs happen all the time in capitalist systems. They're happening in the United States and the UK as we speak. They're happening in India, every day, every year in India, trillions of rupees get written off of private corporate debt. But it's never talked about because it's just kind of standard practice. When it comes to government, suddenly everybody gets very uptight and says there's no way we can reduce the debt.

Farooq, I want to ask you, you mentioned this. I don't want to call it debt forgiveness, I think it is just straightforward debt restructuring, which happens all the time, as I said in capitalist systems. But yes, there is a different moral case also for debt reduction in Pakistan because of your climate crisis, because of the catastrophe you have already experienced. For private debtors, there is actually a possibility of saying force majeure, events beyond my control, and therefore I can't repay. That is not extended to sovereign debtors. Sovereign governments are not allowed that leeway that, there was this catastrophe that was beyond our control. So, force majeure, we don't have to repay the debt in full. How would you respond to that?

Farooq Tariq: For the first time, some of our political leaders are using the terminology we had been using for decades like debt trap, climate justice, reparations, loss and damages. They were not saying this earlier, but now they are forced to say this because of the climate disaster which has taken place in Pakistan. And we are happy with that. But the issue is that in Southasia, apart from Nepal to some extent, all the political governments and the opposition are committed to a neoliberal agenda. They can't see any life out of the implementation of a neoliberal agenda. So it's the government and opposition, both. It's not just one. So it's a political question and there's a right-wing wave across Southasia. There are right-wing governments committed to IMF and the World Bank, there are right-wing governments committed to capitalism to an extent that they don't see that there is any need for any radical reforms. And they can't really think of challenging the hegemony of the financial institutions. They just want to go along. And that's the tragedy and paradox we have at the present time in Southasia. Look at India, look at Bangladesh, Pakistan and the Maldives, everywhere is the same story. Maybe to some extent Nepal with this communist party has a mass base and they are to some extent doing some reforms. But in Pakistan at present time, there are over thousands and thousands of containers stuck at the port of Karachi because there's no money to pay to the shipping companies and shipping companies are saying we will not come to Pakistan. Yesterday a new bond has been launched in Pakistan with 5.5, 6 and 7 percent. How are they going to pay that money back? So it's a very difficult option for the government to raise funds. Only USD 4 billion in the coffer, and they are they are saying and assuring people that Saudi Arabia will come to rescue them, and UAE will come to rescue them. Even Saudi Arabia's foreign minister yesterday said that we are taxing our people, you should also tax your people.

Apart from direct taxation, they only want to do indirect taxation. I totally agree with what Ahilan said about Sri Lanka. It's a worse situation in Pakistan, in that only 2 million people are directly paying taxes out of 230 million. So now you can imagine the direct taxation in Pakistan. The government announced a scheme, traders go on strike, and the scheme has been taken back. It's always concessions to the rich, not to the poor. For instance, there was UNDP research last year by Hafeez Ahmed Pasha, who has been a finance minister earlier. He said that over PKR 27,000 billion in concessions were given to the rich class in one year alone during the third year of the Imran Khan government. So they want to please the rich all the time, and the rich always receive them. Imran Khan's main priority was construction, not industrialisation. So all the concessions were given to the land mafia. So now we have land mafia everywhere, land grab everywhere. We see land taken over by barrier towns and all other rich land mafias in Pakistan, and there is a fight back against that.

The priority of these right-wing governments is not to really challenge anything which is radical. They want to go along. They want to deceive themselves that they will come out of it. They want to deceive the IMF. They are manoeuvring and telling lies all the time. They know what the situation is but they say it will be okay.  Some of our TV anchors – I'm really surprised to see they are pushing the government to accept the IMF conditionalities. So commercial media is playing a part to continue the path for the IMF policies. And that's another tragedy we have in Pakistan.

So we are demanding the abolition of foreign debt. We are asking the Pakistan government to say we don't need any new debt. Just don't take the repayments which we have to pay you, because that is where they have a problem.

There was a super tax announced by this government. And also, Ahilan spoke about the luxurious goods which are imported into Sri Lanka. This government, when it came into power in April last year, they banned all luxurious items. IMF came to ask them, to open this restriction. Don't ban the import of luxurious goods. And within two months that ban was lifted. So look at the priorities IMF had. Some of the politicians, the military generals, the highest judges, and the bureaucrats, all the different institutions of the state – have a very luxurious life. Totally different from ordinary life. Now we see all the time some of the estimations of how extreme poverty is growing in Pakistan. That has got to change because the present policies cannot really solve any of the basic challenges which the working class and working people are facing in Pakistan.

Jayati Ghosh: Again, very powerful statements. Hearing Ahilan and Farooq have makes me remember this relatively recent but now famous quotation from George Soros, the big global financier, that this is not just normal economic adjustment, this is a class war and we are winning.

Naomi, what do you have to say about this? There have been questions in the chat about immediate policy recommendations and so on. But I think you've been very telling about the food crisis and the food crisis. So clearly, I'm imagining that one of your recommendations would be to control those prices.

Naomi Hossain: Absolutely, I mean there's a lot to be said here. It's fascinating and horrible and terrifying to hear from Ahilan and Farooq as well. I'll just say a bit about Bangladesh, which is, in many ways, that Bangladesh has gone to the IMF with this precautionary package. It has been said many times recently that we are not like Sri Lanka. And you know five years ago that would have meant something very different but now that means we're not in a total crisis situation. It's tragic. But the reason for that is that Bangladesh has, ever since the 70s really, had a very cautious macroeconomic policy. Stability has been very important. Fiscal caution and fiscal responsibility in the Bretton Woods institution's language, have been very important. And still, I think Bangladesh has a relatively low debt ratio, even though that's risen very fast in the last few years. And like in other major Southasian countries and cities, construction is a big thing here. The city of Dhaka at least is almost unrecognisable to me.

But you know when you come to immediate policy recommendations, there's a couple of things there. One is the immediate thing that you can't do now which is when countries have these crises, and we are all, I think the reason I say Bangladesh is so important in this case is that it shows you, even when you have been very fiscally responsible relatively speaking, even when you have obeyed all of the prescriptions of the World Bank and the IMF, (apart from a few on fossil subsidies and banking regulations, and so on), even then you can be plunged into massive economic crisis because that is what the global economy does to countries that are dependent on the global economy, countries like Bangladesh.

And so then I think the question is why do we need to have all of these subsidies which are also in contradiction to other kinds of justice that people are seeking. Climate justice, for instance, energy justice, just transitions and so on. All of these justices are battling in a way with each other. And for me, the really big thing is that you have the subsidy programmes and packages because you don't have alternative kinds of social welfare systems. And that's also important because a lot of these subsidies are not very pro-poor, they're actually quite pro-rich. Somebody said to me in Dhaka the other day, you know helicopters have become so expensive recently. And I was like, oh, is that right? Helicopters have become expensive? So see, the rich are really suffering because they can't afford helicopters anymore! So this is something to keep in mind when we think about fossil fuel subsidies in particular.

Nevertheless, what Ahilan said I think is very important. We must find ways of de-commodifying the basics of everyday life. Can we do those in ways that are not hugely damaging to the environment? And I say this with what I think of as 'Dhaka disease', I can barely breathe, the air pollution is so bad here right now. These are the costs of unregulated economic growth if you like. But we must find ways of de-commodifying the basics of life so that people can live the lives that they think are good lives in their own context, eat the foods that they want to eat, and live the way they want to live without these crises coming.

The last thing I was going to say, just very quickly on the World Bank and the IMF and so on. The World Bank and the IMF, in the organisation I work – the Accountability Research Centre, one of my colleagues Rachel Nadelman and does a lot of work on this issue – they have these rules, they've come in quite recently, on citizen engagement, citizen participation in policy programmes. It seems to me that when the IMF makes these prescriptions like cutting fossil fuel subsidies, they don't actually go around asking many of the citizens what that should be about, or what should happen. And relatedly, when citizens, therefore, take to the streets, and government sometimes call out the tanks or the police, as has happened in many countries – over a hundred protesters were killed last year protesting exactly these issues, possibly many more in fact actually. When they do that, does the IMF take any responsibility for the fact that their prescriptions directly led to predictable protests and predictable repression by governments? I don't think they do. So I think they bear responsibility, and we should hold them accountable, at least to some extent, for the way people feel forced to take to the streets to hold their governments accountable for an economic crisis, and the ways in which governments, therefore, feel compelled – because they are required to follow the IMF prescriptions or the markets prescriptions – they are compelled to they feel compelled to repress them in these violent ways.

Jayati Ghosh: So much of what you said, Naomi, resonates so strongly, and it is so effective, you're absolutely right. I think particularly this whole issue about subsidies. Yes, fossil fuel subsidies are not good. Most of them actually go to production rather than to the ultimate recipient. In fact, prices of fuel in India, Bangladesh, are Sri Lanka among the highest in the world. They're so much cheaper in the United States, for example. So I think we really have to do what you're saying – ensure basic needs provision, public provision and access to universal, good quality public services and the minimum required for a decent life, like food and transport and things like that, which requires a different reorienting of everything. Going for public transport rather than private and so on.

I want to go to Chamila and ask what you would add to this discussion about what alternative policies are required right now Please go ahead Chamila.

Chamila Thushari (translation by Vishmi Varanachapa): So right now, Sri Lanka is about USD 50 billion in debt. And this is basically external debt. And mostly it's loans taken from India and China. But accounting for this debt is also 40 percent of it is from private lenders. So still, we are not in a position to find a sustainable solution for this issue. The IMF is still providing loans to governments that have proved to be corrupt over and over again. This action by IMF is also a way of saying that they support these corrupt governments by continuing to provide them with loans regardless of what the situation is. There needs to be measures in place to regulate laws, implement ILO conventions and to protect workers' rights and ensure their job security. Because we are continuing to be burdened by these increasing expenses, and most of the time it's the women who have to manage these household expenses, they are burdened with what they will spend for their child's education, everything they will have to forego to cover just the expenses to survive. So governments and brands have to be held accountable because this is in a context where even during the pandemic certain high-end brands try to cancel all that was supposed to come to Sri Lanka. So the infrastructure needs to develop to support the workers in the country. So there is also the decision on labour legislation which they are trying to do and this is something that should not be encouraged. All sectors in Sri Lanka have collapsed in this instance, which will bring foreign income into the country from the tourism sector and the plantation sector. So right now, it's only the garment sector that is practically bringing a large amount of foreign income to the country. So it's up to the government and the policy implementers to ensure that the job security of these workers representing these sectors are protected.

Jayati Ghosh: Thank you very much.

What is also very clear and is emerging from this discussion is that we really need solidarity among people because we are all struggling against a common force. And I think the calls that have been made right now about the accountability of the international financial institutions, in a sense the culpability and the accountability, is also a very strong and important comment.

And I think there is a really strong case when we're talking about debt reduction for these institutions also to be involved in that debt reduction because they were systematically involved in creating some of these problems.

I'm actually going to request each of you for a one-minute last point that you want to make. And let's go the other way round now let's begin with Chamila and then we go to Farooq, Naomi and then Ahilan at the end.

Chamila Thushari (translation by Vishmi Varanachapa): I think right now Sri Lanka, even though we are in this situation, as a whole Southasia is overall getting affected with this crisis situation. So all the countries, when you consider in the garment sector, Southasian countries produce for the Western world. So I think we all have to collectively move forward in finding a solution to these problems and to ensure job security and safe work conditions for our workers. So I want to thank you all for giving me this opportunity today to come with you all on this and find a way to collectively move forward and discuss on this.

Jayati Ghosh: Thank you. Thanks so much, Vishmi also for the translation.

Farooq Tariq: I think solidarity is very important among Southasians, which has manifested in the past. And I would also demand an immediate calling of SAARC heads of state meeting, which has not taken place since 2014. If they meet maybe some more discussions can take place about how they can help each other. And also, I support demands and suggestions about the opening of trade between India, Pakistan and other countries. And also, I think that the main issue at present time is really the climate challenge for Southasian countries. And that has become one of the greatest challenges. And it was Pakistan, it could be India or Bangladesh in the future. And that's where we have to put together all our energies to force the rich nations to pay loss and damages and reparations. There is no other way. And also, cancellation of debt and also taxing the rich and so on. Thank you.

Jayati Ghosh: Thank you very much, Farooq.

Naomi Hossain: Yes. All of these complex issues all coming together – it's very much reminiscent of 2008, 2010 and 2011, those crises. And it makes me feel a strong sense of déjà vu. Did we learn nothing? Did the financial institutions learn nothing? Did the Bretton Woods institutions learn nothing? One thing I've learned, I think is really important in this discussion, and we see this a lot when we look at who is organising protests that hold governments accountable for these crises, and that is that organised labour remains, has always been, and historically remains the main foundation really for progressive, people-oriented policies. And I think hearing Chamila talk about the garments industry in Sri Lanka, see the same in Bangladesh, this has really for me got to be the foundation, got to be where a lot of the energies have to be invested.

Jayati Ghosh: Thanks so much, Naomi. Ahilan, you have the last word.

Ahilan Kadirgamar: Yes. I just want to make two points, one on debt restructuring which you were talking about. As I mentioned, if you take the case of Sri Lanka, particularly these international sovereign bonds or what the bondholders have done over the last 15 years, with every 10-year bond, they've doubled the amount. The principal payment and the interest payment have been equal. If you do the compound interest of 7.5 percent dollar-denominated bonds, it's high time we default and not pay them back, because they've already made their money. And now they're asking for another pound of flesh. They've already taken a pound of flesh and they're asking for another one. But if you look at what the IMF is doing, and actually a former IMF official Peter Doyle says that they have set the target for Sri Lanka to have a primary surplus by 2026, in three years' time, of 2.3 percent. Our whole economy is collapsing and they want us to have a primary surplus of 2.3 percent. Why? So that Sri Lanka will be able to pay back the bondholders. That's what they're concerned about. This IMF agreement is pushing Sri Lanka to pay back the bondholders regardless of the cost to the people. So that's point number one.

The second point I want to make is about is that it's extremely important we have solidarity among our Southasian countries. But our Southasian elite, our governments – this is not the age of the non-aligned movement even – they are much more in solidarity with finance capital than they are with the people. So every working class in every country first has to come to terms with its own bourgeoisie, with its own capitalist class, which is working towards the interests of the financiers. Only after that can we actually think in terms of solidarity among our countries because our own states and our own regimes in power are not going to move towards solidarity because they are already in the pockets of the financiers. So we have to think because what we are seeing now with these all these debt crises is our governments are facilitating further extraction by these financiers. I think we have to be very clear about that even as we try to build a different order. This is the kind of crisis like the 1930s. There can be huge changes in the years ahead. But we should be very clear about changing also the hegemony of finance capital if we are going to have the kind of solidarity and a different economic trajectory.

Thank you.

Jayati Ghosh: Thanks, Ahilan. And that was a very profound point. I think that is absolutely true, that we need the solidarity of the people, which does not mean the solidarity of the elites, which is actually going against the interests of the people. And I think that point has come out very clearly with all of you.

When you were talking about the interest being greater than the principle, I was reminded, you know, all the British colonial debt commissions actually had that basic principle when they went about resolving the debt problems. They said, the interest cannot exceed the principle. That was the basic nature of the restructuring done by the colonial administration. That doesn't mean that we were better off under the colonial regime. We were not. But it does mean that we shouldn't replace that kind of colonisation with colonisation by global financiers.

This has been a really fascinating, illuminating, depressing discussion. But I think there have also come out a lot of recommendations for the way forward. So thank you all for this really intriguing and engaging conversation. And with that, I would like to hand it over back to Raisa and Roman.

Roman Gautam: Jayati, thank you so much once again. And thank you once more to all of our panellists for being so clear-eyed and so direct. I think really this is such an important number of perspectives, I think both the similarities and the differences that you bring together. But I think in terms of developing a lens on what's happening to all of us right now, we couldn't have asked for better. So thank you to all of you. And especially thank you, Jayati, for keeping us on track and on time. We really appreciate it.

Raisa, any last words before we close the session?

Raisa Wickrematunge: Just a final thank you to everyone, to everyone who joined us to listen, to all our speakers and our moderator. And do check out our work at Thank you, everyone!


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