Sri Lanka: What Lies Ahead? – An Indian Viewpoint

Thus the Island nation continues to be surrounded by choppy waters ahead.

2 mins read
President Ranil Wickremesinghe leaves the ceremonial opening session of the Parliament in Colombo, Sri Lanka, on Wednesday, Aug. 3, 2022. [ Photo © Buddhika Weerasinghe/Bloomberg via Getty Images]

President Wickremesinghe and PM Gunawardena have started their rule with the inherited burden that brought down President Rajapaksa’s rule.

Mr. Wickremesinghe has been able to gain support from the Buddhist clergy and has installed a cabinet that is favourable towards his instructions and the naysayers have been eliminated.

But economic challenges facing Sri Lanka are immense. Sri Lanka’s inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) increased to 60.8 percent in July 2022 from 54.6 percent in June 2022. Economic relief to the people alone will wave Wickremesinghe

The year 2022 was marked by sustained political instability with initially opposition lacking the numbers to depose the government and the Rajapaksa brothers digging in.

Even with a dramatic turn of events, with a new Prime Minister and President, political flux continues along with fuel and food concerns.

The economy struggles to stay afloat. A semblance of political stability has returned but the situation continues to remain volatile requiring a close watch.

A President was sworn in as a National List MP of the United National Party (UNP) as the Party could not even have one elected member after split by the SJB.

But to the credit of Mr. Ranil he opted for the hot seat that none was willing to accept at a time of acute financial crisis which led to outpourings on the streets.

The SJB has assured issue-based support to the President but will not join the government. However SJB leader possibly suspects that the President wants to rebuild the UNP. The Leader of Janatha Vimukthi Peramuna (JVP) and National People’s Power (NPP) MP Anura Kumara Dissanayake have called on the people of the country to come forward to oust the current government. These parties had contributed the political muscle to the protests.

Over that there are reports that former president Gotabaya Rajapaksa, who fled the country last month amid public protest, may return home in September. He is presently in Thailand. If that happens protesting parties and organisations are expected to get a boost.

On the economic front discussions between representatives of the International Monetary Fund and Sri Lankan government authorities commenced on August 24 at the Central Bank premises in Colombo.

As per the local media objective is to make progress towards reaching a staff-level agreement on a prospective IMF Extended Fund Facility (EFF) arrangement in the near term.

Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the EFF program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored, the IMF said.

This is likely to be a very tough proposition as the debt is huge and is spread over multiple channels.

At one time President Wickremesinghe had highlighted dimensions of the debt thus, “In the economic crisis we are facing, the huge problem is the national debt. According to government statistics on public debt, the percentage of debt received from China is 10%. 13% from the Asian Development Bank, 9% from the World Bank, and 47% from sovereign bonds (ISB).  10% from Japan, 2% from India and 9% from all other countries.” Bringing all these lenders on the same slate will remain a challenge.

Much will depend on the agriculture harvest, energy imports with Russia being an option and related geopolitical issues, balancing support by India and China evident in the recent Yuan Wang 5 PLA’s tracking ship incident. Thus the Island nation continues to be surrounded by choppy waters ahead.

(Excerpts from the monthly review by Security Risks Research in Delhi based on the perspectives of Col R Hariharan with the editorial support of Harshita Panwa. Click here to read the complete assessment)

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