By Ajit Kumar Singh*
The rising economic emergency in Sri Lanka has now spiralled into a political catastrophe. At the time of writing, the government has more or less collapsed in the country, with the whereabouts of the head of the state, President Gotabaya Rajapaksa, unknown.
On July 9, 2022, Parliament Speaker Mahinda Yapa Abeywardena confirmed in a video statement that President Rajapaksa had informed him that he would step down from his post on July 13, 2022: “The decision to step down on 13 July was taken to ensure a peaceful handover of power. I therefore request the public to respect the law and maintain peace.”
Earlier on July 9, violent demonstrators demanding President Rajapaksa’s resignation stormed his official residence in Colombo, as the Army and Police were unable to hold them back. However, Rajapaksa is believed to have left the residence a day earlier, as a safety precaution, ahead of a planned weekend of demonstrations.
Prime Minister Ranil Wickremesinghe, has also offered to resign and Tweeted, “To ensure the continuation of the Government including the safety of all citizens I accept the best recommendation of the Party [United National Party, UNP] Leaders today, to make way for an All-Party Government. To facilitate this, I will resign as Prime Minister.”
Later in the night of July 9, he added, “This country is gripped with fuel and food shortages. There will be an important visit scheduled by the WFP [World Food Program] next week, while crucial talks have to be continued with the IMF. So if the current government is to quit it must be replaced by the next.”
On July 9 itself, violent demonstrators demanding Wickremesinghe’s resignation set fire to the Prime Minister’s private home in Colombo. Wickremesinghe had earlier moved to a ‘safer location.’
At least 102 people, including two police officers, were injured during the protests on July 9. However, a tense clam was restored.
Since the economic crisis engulfed the nation in March 2022, protests have become the norm. Sri Lanka has been forced to suspend repayment of about USD seven billion in foreign loans due in the current year, out of USD 25 billion to be repaid by 2026. The Sri Lanka Finance Ministry disclosed that Sri Lanka had only USD 25 million in usable foreign reserves. The country is thus left without the wherewithal to pay for the import of basic necessities, let alone repay billions in debt.
The situation started to deteriorate at the beginning of 2022, with several developments finally culminating in the July 9 disorders. Prominent among these were:
March 31: Hundreds of angry protestors marched to President Gotabaya Rajapaksa’s house in Colombo late in the night, after the island experienced a 13-hour-long power cut.April 1: A state of emergency was declared.April 3: The entire Cabinet of Ministers resigned, though the then Prime Minister Mahinda Rajapaksa remained in office.April 9: Protests escalated, with sit-in demonstrations outside the president’s office calling for his resignation.April 19: As protests continued Police shot dead one man, identified as Chaminda Lakshan, and injured another 10, in the first fatal clash with demonstrators.May 6: Thousands of shops, schools and businesses closed and commuters were stranded as workers went on strike, demanding the resignation of the President and the Government.May 9: The then Prime Minister Mahinda Rajapaksa resigned following widespread clashes between pro- and anti-government protesters, which left 10 people dead and about 300 injured.May 11: The Defence Ministry ordered Security Forces to shoot anyone causing injury to people or damaging property. Mahinda Rajapaksa was moved to a naval base for his safety.May 12: Wickremesinghe was sworn in as the new Prime Minister.June 22: Wickremesinghe declared that the economy had ” completely collapsed” and the country was unable to purchase imported fuel, even for cash, due a USD 700 million debt owed by its petroleum corporation.July 5: Wickremesinghe announced that the Government would stop printing money, as inflation was expected to reach 60 per cent by the end of the year.July 8: Police imposed a curfew in Colombo, which was later lifted after lawyers and opposition politicians denounced it as illegal.
Meanwhile, in a letter to President Gotabaya Rajapaksa, Parliament Speaker Abeywardena appraised him about the decisions taken during a meeting of the leaders of Sri Lanka’s political parties. The letter stated that it had been decided that both the President and the Prime Minister had to resign, subsequent to which Parliament will be called to session within seven days to select an acting President.
The letter further read, “Under the acting president the present parliament can appoint a new prime minister and an interim government. Afterwards under a set time an election can be held for the people to elect a new parliament.”
The solution though is not that simple. Bhavani Fonseka, a prominent human rights lawyer in Colombo, noted, “Just two resignations alone will not satisfy the demands, the demand of a system change, but at least this is a start if the president and the prime minister depart. There has to be a peaceful transition of power which is yet to be seen.”
Indeed, calling the situation “dicey”, political analyst Kusal Perera observed, “If a clear transition is not put in place the president and prime minister’s resignation will create a power vacuum that could be dangerous. The Speaker can appoint a new all-party government, but whether they will be accepted by the protesters remains to be seen.”
The present crisis is essentially a consequence of appalling mismanagement by the Rajapaksa family that controlled virtually all key portfolios in the Government. Sri Lanka is far from a poor country, with a GDP per capita in 2019 touching a high of over USD 4225.11 in 2019, though it has since been on a decline. This made Sri Lanka the richest country (in per capita terms) in the region, with the exception of the Maldives. By comparison, India’s per capita GDP in 2019 was USD 2100.75; Bangladesh, USD 1855.69; and Pakistan, USD 1284.70. The Rajapaksa stranglehold on Government, rampant corruption and a range of irrational policy decisions contributed to a rapidly escalating economic meltdown, with a heavy-handed pattern of authoritarian rule stifling all criticism, both withing Government and from the Opposition.
Among the most disastrous moves in this context was the abrupt and arbitrary decision in May 2021 to declare Sri Lanka ‘fully organic,’ banning all use of chemical fertilisers and pesticides. Gotabaya Rajapaksa boasted to the world that Sri Lanka would be the model for other countries to emulate, but there was little planning or consultation with the scientific and agricultural establishment. The result was massive crop losses, with estimates of up to a 50 per cent decline in major crops. Including tea, which accounts for nearly 10 per cent of Sri Lanka’s exports, as well as prized a range of spices for which the country is a preferred source. Former Central Bank Governor W.A. Vijaywardana described the ‘fully organic’ policy as a “dream with unimaginable social, political and economic costs,” and warned that “Sri Lanka’s food security has been compromised.”
Worse, the COVID pandemic led to a collapse of the travel and tourism industry, another mainstay of the country’s economy and the third largest source of foreign exchange. According to the World Travel and Tourism Council, this sector contributed 10.5 per cent to Sri Lanka’s GDP in 2019. In 2020, as the pandemic swept across the world, the sector contributed a bare four per cent of GDP, and fell further to 3.1 per cent of a contracting GDP in 2021.
In the meanwhile, President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa had embarked on a wasteful and ill-conceived project of infrastructure development, far out of proportion to the country’s projected needs and capacities for utilization. The grandest – and most irrational – of these projects were under the aegis of China’s ‘Belt and Road Initiative’ (BRI), and were executed under unequal and exorbitant terms that pushed Colombo into massive debt, prominently resulting in the in their surrender under long-term leases, to the Chinese, as was the case of the Hambantota Port, or massive complexes, such as the Rajapaksa Airport and a massive Conference Centre, that remain unused since their completion.
Worse, ahead of the 2019 presidential elections, Gotabaya Rajapaksa promised drastic tax cuts, which most experts dismissed as an election gimmick, warning that, if the proposals were, in fact, implemented, the country would go bankrupt. Unfortunately, the proposals were not election gimmicks, and Rajapaksas went ahead with the promised tax cuts, drastically curtailing state revenues. Much commentary also suggests the Rajapaksa family’s rampaging corruption as a cause of further national indebtedness.
As the cumulative deficits mounted, a cycle of the falling international value of the SLR (currently listing at SLR 363.63 to the USD, down from roughly SLR 178 to a USD in 2019) and rising domestic inflation pushed the country into a full-blown crisis, which rapidly escalated after international petroleum and food prices spiked in the wake of the war in Ukraine.
It is useful to recall that over three decades of widespread terrorism, graduating to the scale of a civil war, failed to do the damage that the Rajapaksa family has done to the Sri Lankan economy over just the past roughly two-and-a-half years.
Indeed, the Rajapaksa’s derived much of their political authority and popularity from the crushing defeat inflicted on the Liberation Tigers of Tamil Eelam (LTTE) in 2009, when Mahinda Rajapaksa was President, and Gotabaya Rajapaksa was Minister of Defence. Hubris, nepotism and an acute proclivity to authoritarianism, however, led them to a succession of policy debacles that have yielded the present and grave catastrophe. While the Rajapaksas’ political futures appear to be virtually sealed, the people of Sri Lanka will continue to pay the price of this family’s folly for years to come.
*Ajit Kumar Singh
Research Fellow, Institute for Conflict Management