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Ranil Wickremesinghe Appointed Acting President of Sri Lanka; Biden's Controversial Visit to Saudi Arabia; Sri Lanka Protesters Break into State TV Premises; Sri Lanka Declares State of Emergency as President Flees. Aired 5-5:30a ET

Aired July 13, 2022 - 05:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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UNIDENTIFIED MALE (voice-over): This is CNN breaking news.

MAX FOSTER, CNN ANCHOR (voice-over): Hello, a warm welcome. I'm Max Foster in London, bringing you up-to-date on the latest from Sri Lanka. The political crisis in leadership is changing rapidly. We learned that Prime Minister Ranil Wickremesinghe has been appointed acting president of the country.

This comes after Gotabaya Rajapaksa fled to the Maldives hours before he was due to formally resign today as president. Earlier the Prime Minister had declared a state of emergency for the Western province, which includes the capital. Police fired tear gas and clashed with protesters outside his office.

They've been demanding both his resignation and that of the president for months now amid the financial collapse. CNN's senior international correspondent Will Ripley is following developments for us.

It does seem as though from the protesters' point of view it's been terribly handled by the leadership but they did not want the Prime Minister to have more power. They wanted him out.

WILL RIPLEY, CNN CORRESPONDENT: This is from the protesters' point of view, horribly mishandled governance for quite some time. Right now because these are the people on the ground out protesting four months peacefully, only to have their demands basically ignored.

And the reason why they are out there is because they do not have the basic essentials that they need to live, food, fuel, access to medicine. They do not even have access to money because the financial system in the country is collapsed as a result of a series of bad financial decisions made by the president and by his brother, the previous Prime Minister and previous president going back to 2005.

This Rajapaksa dynasty that made a lot of bad deals with China and got Sri Lanka more than $50 billion in debt. So when they stormed the president's Palace over the weekend, the presidential residence, it was because they were so fed up and so angry that their pleas have been ignored. So what happens to the president, he is protected by the military.

They whisked him to safety. They took him to a naval vessel and then they flew him on a military aircraft to the Maldives just hours before he was set to formally resigned.

Keep in mind he promised he would resign today. That was what he said. The Prime Minister also said he would resign relatively soon, so that the protesters will go home so they can establish a new all-party government, to reestablish rule of law in the countries, try to start to turn the country around.

But instead what you have is now president in exile in an island paradise in the Maldives with no formal resignation tendered and you have the Prime Minister now saying that he is not going to resign, at least not right now. He is now become the acting president, sworn in as the leader of the country.

And what is he do, he orders a state of emergency and imposes a curfew on the district that includes Colombo where the mass vast majority of the demonstrations are taking place and he orders police and military police to crack down on protesters, which is why you now see them deploying water cannons and tear gas and with orders to arrest people who resist.

And so instead of a peaceful transition of power with the parliament set to resume on Friday, you have a rapidly deteriorating situation that could be very volatile and we frankly do not really know what is going to happen next, either on the ground or in the ranks of government.

Other than that the Prime Minister now is the acting president and the president himself has not formally resigned and is just basically hiding out outside the country.

FOSTER: It is a frightening cocktail of energy right now because from what we have seen up until now, these are not protesters that are likely to adhere to a curfew, they're pretty angry.

And the military which will respond if they do not follow that curfew. So we don't know how it will play out but it is a scary situation for many people on the ground.

RIPLEY: It certainly is. I mean you have fears about what could potentially be a really violent suppression of these protesters by the military, something that did not happen over the weekend when they stormed the president's house, when they set the Prime Minister's official residence on fire.

There was a lot of concern this weekend that we might see bloodshed as a result of this activity. But instead basically, the people were allowed to occupy the president's house, which they still do at this hour. They're still there swimming in the pool.

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RIPLEY: We've seen images of them working out in the gym, the barbecue pit, playing the piano. You know it is all a moment of levity if you will. But this is after a long period of struggle and hardship for people in their everyday lives. And this is because you did not see the military move in crack down.

But now with a new acting president and with, at least for the moment orders, to impose this, enforce this curfew and to impose the state of emergency, we could see the situation turn from levity to brutality very quickly on the streets of Sri Lanka.

FOSTER: OK, Will, back with you with any updates.

Ganeshan Wignaraja is an economic analyst who has been writing about Sri Lanka's economic crisis for months now. He joins us from Colombo.

GANESHAN WIGNARAJA, ECONOMIC ANALYST: Thank you for having me. Sri Lanka has been suffering since defaulting on its debt in mid April where we have a dollar crisis now and there is a shortage of U.S. dollars. So the country cannot import food, fuel and medicine.

In addition, we have inflation which is fighting at 50 percent and food and fuel prices have shot up dramatically. And there are also shortages. And from my window I can see long queues, 3 mile long queues, of people waiting for fuel. And they've been waiting for three nights in that cause.

So this is a very dismal state of affairs. And we had something like three quarters of a million poor in Sri Lanka, new poor, who've been affected very badly as a result of this. And many people are living on one meal a day and their children also suffer malnutrition.

So this is a really terrible state of affairs. So what you are seeing on the street is really, you know, a lot of anger and frustration at government, which is sadly mishandled this crisis.

But I think hopefully when we get through the next couple of days, we can begin to move in a slightly positive direction with the new president being elected by parliament on the 20th.

FOSTER: At the moment, the current president isn't resigning. He's simply appointed the Prime Minister, working very closely as the acting president. So parliament will have to step in.

How will the transition take place if you think that there going to be one?

WIGNARAJA: So what we heard on the new from the speaker is that the president resign at 8 pm tonight once he has reached his final destination, which we do not know where that is.

So there was a delay because I think he wanted to keep his position as president so that he enjoys immunity from prosecution and immunity and able to use the pause of the state.

The Prime Minister has been appointed acting president, as is the case in the constitution. And there was the spirit of a week before they were going to select a new president and parliamentarians I think are horse trading amongst themselves as to what is happening.

I personally think this one week was far too long. We should have had the president leaving the country today and a new president in power for the next two years, helping the balance of Rajapaksa still.

And I think that would be helpful for the people and a new cabinet phone with a lot of new faces so that the country can then move on getting political stability.

So you can really tackle what the difficult issues of the economic restructuring to an IMF program which is to come.

FOSTER: Yes, so central to that is this $50 billion worth of debt the country currently has. That led to the first default since the country became independent in the middle of the last century. That's how bad the situation is.

They've got to negotiate something with the International Monetary Fund. That's the only way they can get out of this. But actually that is quite a long term project.

WIGNARAJA: I guess -- debt restructuring is a complicated business. You have to talk to different creditors. And half our debt of that 50+ billion number -- and I think that is an understatement, by the way, about that figure because the way things were captured.

The real figure is probably slightly higher than that. Half of that is held by private creditors. And they are difficult now to negotiate with. They've lawyered up.

And secondly 7.6 billion of that is owed to China, which is another tricky customer, because China does not want to give us their debt moratoria or forgive some of our debt because it worries the effect it will have on other countries that are also having failing belt and road projects.

So this is quite a tricky thing. We have begun to lawyer up ourselves and get an adviser.

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WIGNARAJA: And they will submit a report. And that is needed for an IMF program, which hopefully will come in the next six months. So that is some time to go. And the worry that I have is people on the street may be very frustrated.

So Sri Lanka needs bridging finance in the interim to have humanitarian assistance, to finance food, fuel and other essential imports. And India has been a very important first responder by providing $3 billion to $4 billion of aid.

And we hope that the international community will also step in, including the US, to help Sri Lanka get through this very difficult next six months.

FOSTER: The government -- is this purely to gain or has it been successive governments because this has been building up for some time. There have been tax cuts, which economists like yourself I'm sure argue wouldn't be the right way to go.

But at the same time they been trying to juggle this growing poverty in the country effectively.

WIGNARAJA: This has indeed been a long-standing problem. We had a weak economy coming at the back of a 30 year old civil conflict, which we did not really manage opening it up to foreign investment and trade.

And we had a very large government spending in relation to the taxes that we earned. And we also had a lot of imports coming in, in relation to the exports. And so the so-called twin deficits made a very weak economy.

And then you have a couple of external events. You have the economic hit from COVID-19 which contracted this economy in 2020, -3.6 percent. And just as the economy was coming out of it, you had the Ukraine- Russia conflict, which brought in high inflation of fuel and food prices reached over 50 percent.

And then there were these missteps that were talked about, the tax cuts in 2019 were not wanted by the business sector but gave us much reduction in our revenue, which was a major problem when COVID-19 came.

We switched overnight from chemical to organic fertilizers and that hit farmers who were unprepared for this dramatic change and there were no supplies of organic fertilizers.

We tried to defend the currency by spending those few reserves we had on keeping an exchange rate unrealistic. And then Rajapaksa appointed the wrong advisers. People said do not go to the IMF. We have these so-called homegrown solutions of closing the economy, growing more food, import substitution for domestic industry.

And this is all proved to be a disaster. So you know, much of the blame can be put on economic policymaking during the Rajapaksa administration but there were external events as well, that played a major part.

FOSTER: OK. We're following all these events. Thank you very much.

Also coming up, Israel is rolling out the red carpet for Joe Biden. What he hopes to accomplish on his first trip to the Middle East as president.

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(MUSIC PLAYING) FOSTER: Update you about breaking news, Sri Lanka's political turmoil and leadership of the top changing rapidly, running Ranil Wickremesinghe is now being appointed the acting president of the country. He was the prime minister.

This comes after Gotabaya Rajapaksa fled Sri Lanka for the Maldives hours before he was due to formally resign today as president. Earlier a state of emergency was ordered for Sri Lanka's western province, which includes the capital. Police fired tear gas and clashed with protesters in Colombo. We will keep across it for you.

Joe Biden is scheduled to arrive meanwhile in Israel in just a few hours in his first visit to the Middle East as US president. He plans to meet with the new Israeli prime minister, Yair Lapid, and get a briefing on the Iron Dome missile defense system.

On Friday, Mr. Biden will visit Palestinian president Mahmoud Abbas in the West Bank. After that he travels to Saudi Arabia for the most controversial leg of his trip. As a candidate for president, he planned to make Saudi Arabia a pariah for its role in the murder of journalist Jamal Khashoggi.

Now to Jerusalem. Elliott Gotkine is with us.

Obviously Biden has been to the region many times before, met many of the key players but it is different this time because he is in the top job.

ELLIOTT GOTKINE, CNN CORRESPONDENT: This is his 10th visit to Israel. He has met every President and Prime Minister of the country going back to Golda Meir in the early '70s. He has also met with Yair Lapid before as well when Lapid was Israel's finance minister.

Under government headed up by Prime Minister Netanyahu at the time and Joe Biden was vice president. This time, they both have the top jobs, Yair Lapid and the president of Israel Isaac Herzog will be meeting at the airplane as he disembarks in roughly 3 hours time.

As you say he will get a briefing on the Iron Dome missile defense system and also a new defense system called Iron Beam, which is a laser missile-defense system. The idea that it will be better able to protect Israel from threats, particularly Iran and its proxies, but also help protect its allies in the region, old and new, such as Morocco, Egypt, the United Arab Emirates and even Saudi Arabia, which brings us to one of the other main items on the agenda, which will be Israeli-Saudi relations.

Now no one expects there to be any breakthrough in terms of normalizing relations between the two. But perhaps some baby steps toward ultimately one day normalizing relations.

So we're expecting that Israeli flights will be able to fly over Saudi airspace after this trip and that Muslims flying from Israel will be able to fly directly to Saudi Arabia to take part in the Hajj pilgrimage. For the Palestinians also an issue here. President Biden will be

visiting and meeting with Mahmoud Abbas, the president of the Palestinian Authority.

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GOTKINE: Again, do not expect any breakthroughs in terms of trying to resuscitate the moribund peace process. But around the edges some confidence building measures. We heard about a few of them last night, rare building permits being issued for the Palestinians in the West Bank, a new border crossing, more work permits for Palestinians living in the Gaza Strip and the like.

And also the Biden administration likely to announce $100 million toward a hospital in the West Bank to improve health care for the Palestinians as well.

Of course Iran very much on the agenda as well and also related to those other issues and Israel will be maintaining its stance that it is dead set against the U.S. rejoining the Iran nuclear agreement as Biden had pledged during his presidential campaign.

But now that does not seem to be moving. We saw the Iranians demand that the Revolutionary Guard be taken of the terrorist blacklist from the United States. This is something the Israelis were very concerned about and something that the Biden ministration also balks at in the end.

There is still distance between the US and Israel in terms of the way they approach the Iranians but right now Israel will be trying to re- persuade, if you like, President Biden rejoining that deal is not the right way forward. Max.

FOSTER: Elliot in Jerusalem, we will follow that through the day. Thank you.

Before he left for the Middle East, President Biden welcomed his Mexican counterpart, Andres Manuel Lopez Obrador to the White House. CNN's Matt Rivers has the details on that for you from Mexico City.

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MATT RIVERS, CNN CORRESPONDENT: Well, the last time we were mentioning both President Biden and President Lopez Obrador in the same story in the same headline was when Lopez Obrador chose to not go to the United States.

That would be, of course, when he snubbed then host President Biden who was hosting the Summit of the Americas in Los Angeles just as a few weeks ago. And Lopez Obrador chose not to go to that meeting.

This time, though, he did choose to go to the United States. This time going to Washington, D.C., under a cloud of what many people would call a frosty relationship between the United States and Mexico in recent years. Both men appeared together in the Oval Office with Lopez Obrador talking at length for an uninterrupted period of somewhere between 20 and 30 minutes, giving multiple repeated historical references and talking about the relationship between the United States and Mexico but also talking about more current issues, things like migration, for example.

We have seen huge numbers of migrants coming from all across the Western hemisphere going up through Mexico, arriving at the U.S.- Mexico border.

And Lopez Obrador said that one of the ways that he believes that migrant flows can be lessened, that there could be more orderly migration would be is if the United States provides more labor pathways.

He's basically talking about the United States increasing the amount of work visas it issues in industries not only in the agricultural fields but also in other areas as well. President Biden also acknowledging that he would want to increase work visas if he could.

But he said that it's a very difficult political issue in the United States, given how stymied the U.S. Congress can be on that issue. Another issue that both men were expected to have talked about human trafficking.

A senior U.S. official telling CNN that one of the things the U.S. wants to see is increased prosecutions here in Mexico, not just arrests of people who are involved in the massive human trafficking industry that plays such a big role in migration but also just moving forward with prosecutions.

That's something that Mexico has not done effectively over the years. So that too, a topic of conversation between both men.

President Lopez Obrador also talking about gas prices saying that gas is actually a little bit lower in Mexico, saying that they've seen more Americans cross over from the U.S. to Mexico in search of lower gas prices. We can only be seen as a small dig against the U.S. president -- Matt Rivers, CNN, Mexico City.

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FOSTER: Stay with CNN for more on the breaking news out of Sri Lanka. Protesters hit with teargas as the prime minister takes over as acting president and orders a state of emergency.

Plus Ukraine plans counter attacks on Russian held territory to the south as the death toll is still rising from a brutal Russian attack in the east. We're live in Kyiv for you.

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FOSTER: Breaking news in Sri Lanka. Prime Minister Ranil Wickremesinghe has been appointed the acting president of the country amid growing turmoil. This historic and rapid leadership change comes hours after Gotabaya Rajapaksa fled to the Maldives today amid massive protests against his leadership.

He and his wife flew out of the country on a military plane before he was due to formally resign. A state of emergency for the western province, which includes the capital, was also imposed today after police fired tear gas and clashed with protesters in Colombo.

Sri Lankans have been demanding the resignation of the country's top leaders for months now amid a deepening economic crisis. For more on that, let's bring in Padma Rao. She's a former bureau chief for "Der Spiegel," the German news magazine.

She is also the author of the book, "Sri Lanka: The New Country," which includes accounts of her time covering the country's civil war.

Thank you for so much for joining us. For many of us looking in to these scenes, extraordinary scenes, the way the Prime Minister's residence, the president's residence been taken over.

But this is after months if not years of anger building up.

PADMA RAO, FORMER BUREAU CHIEF, "DER SPIEGEL": Absolutely. And the latest headlines say the prime minister's office has been taken over. They've just managed to breach the walls from the outside all morning today.

The prime minister said he wasn't in the office.