Wednesday, September 27, 2023

How can Sri Lanka move forward?

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Sri Lankan President Gotabaya Rajapaksa resigned by email on Thursday, after a massive popular power movement fueled by anger over corruption and massive inflation overthrew his government. While it is a major victory for Sri Lankan activists, Rajapaksa’s resignation raises existential questions about how the country’s political structure, economy and protest movement that toppled him will move forward.

Gotabaya fled the country earlier this week, reportedly first to the Maldives and then onward Thursday on board a flight of Saudi Arabian Airlines to Singapore, show flight tracking data. His resignation was a major demand from protesters, but it is far from the political overhaul that many see as crucial to getting the country back to function.

The rampant corruption and disastrous economic policies of the Rajapaksa government culminated in months of sustained, nonviolent action by hundreds of thousands of Sri Lankans from across the country, from a wide variety of ethnicities and backgrounds – a testament to the gravity of the economic and political disasters. , including unsustainable debt, staggering inflation, and general, overwhelming scarcity that Gotabaya, his brothers, and his cronies brought across the nation.

“All the countries of South Asia considered Sri Lanka to be the place with the highest development indices – definitely the highest literacy,” Tamanna Salikuddin, director of South Asian programs at the American Institute of Peace, told cafemadrid in an interview on Saturday. “It is clearly a much smaller population than its neighbors – India, Pakistan or Bangladesh – but it has always had a high GDP per capita, a high standard of living. Colombo was such a modern, chic city with the nice restaurants and all that.”

Now people wait in line for days to buy fuel; inflation was 54.6 percent in June according to the Central Bank of Sri Lanka; and the government owes its various creditors $51 billion after defaulting on refunds for the first time in May.

Gotabaya won the presidency by a large majority in 2019, but he was not the first Rajapaksa to hold the office. His brother, Mahinda, previously held the office of 2005 to 2014 when he was voted out. Under Mahinda, the government took out billions in loans to fund flashy infrastructure projects, ostensibly to create jobs, but instead helped plunge the country into the worst economic crisis of its existence as an independent nation as The Guardian’s Hannah Ellis-Petersen reported last week. Gotabaya, with Mahinda as his prime minister and their brother Basil as finance minister, continued a disastrous economic policy.

Successive crises — including the Easter Sunday 2019 terrorist attacks on churches, the Covid-19 pandemic and the Russian invasion of Ukraine in early 2022 — shut down Sri Lanka’s tourism industry. That marked the end of a major economic engine and source of foreign currency, which the government used to import basic necessities such as fuel and food.

The government subsequently failed to raise taxes, ask for help from the International Monetary Fund (IMF), or change its policies to contain the problem, causing inflation to spiral out of control and its foreign exchange reserves to drain until citizens were no longer able. had access to the goods they had. need. Then, in 2021, the government banned chemical fertilizer imports to preserve the dwindling supply of foreign currency, decimating the agricultural sector and forcing the government to spend more import supplies than it saved on fertilizer imports.

With Gotabaya out of office, Ranil Wickremesinghe – an ally of the Rajapaksa clan and six-time former prime minister whose last term began in May, when Gotabaya was appointed prime minister after Mahinda’s resignation, is the acting president and finance minister. He could probably be the interim president, should his Sinhalese nationalist party, founded by Basil RajapaksaSri Lanka Podujana Peramuna (SLPP) maintains unity in parliament.

“According to the constitution, he is acting president until they hold elections, so today they will meet in parliament and start the vote for a new president, and that will probably happen next week on the 20th,” Salikuddin said.

Wickremesinghe’s election as interim president is not exactly certain – there are some dissenters in the SLPP and an opposition candidate, Sajith Premadasahas come forward, promising responsibility for “those who looted Sri Lanka”, which Premadasa de . told Associated Press “must be done through proper constitutional, legal and democratic procedures.” However, the SLPP retains a majority in parliament and there is a strong impetus to strengthen leadership quickly so that the country’s economic ship can be restored.

Sri Lanka’s Economy Needs Help Now – And It Needs a President

While the potential for continued favoritism and corruption in Colombo is still quite high, the pressure is on to form a new government so that IMF negotiations, the last round of which concluded at the end of June, can continue and Sri Lanka can begin. with the process of getting out of his $51 billion debt.

“I think appointing a president means starting the process over right away; I think that will be at the top of the list,” Salikuddin told cafemadrid. “[The interim government] pressure from many different countries that give them aid,” including Australia, the US, Japan and India, also known as the Quad, “to move forward with the IMF – to restructure their loans, to try to to come up with a program. So you will probably see real movement in September. I don’t know if they’ll finish a program that quickly, but I think you’ll see real movement,” she said.

The government will have to impose austerity measures on an already struggling population under an IMF program, Salikuddin told cafemadrid. “In a way, it’s good that this president is organizing new elections, because they’re going to have to cause a little bit of pain” — probably in the form of tax hikes to return unconditional funds to the state treasury, as well as additional IMF requirements.

“The challenge will be whether they can find a way to use both aid and money transfers to the poorest Sri Lankans to alleviate some of that pain,” Salikuddin said.

In addition, any IMF program will include requirements and benchmarks for economic reform, as well as assistance from the Quad. However, those will likely be incremental and won’t lead to the full system overhaul that protesters are looking for.

A crucial element clouding any discussion of monetary change is the huge amount Sri Lanka owes to China. “It’s very complicated, it’s very opaque,” Salikuddin told cafemadrid. “We don’t know many of the restrictions on those loans.” However, the challenge of restructuring or refinancing those loans is negotiating with China.

“China is of course a very important creditor of Sri Lanka,” Finance Minister Janet Yellen said. said in a press conference on July 14:

Sri Lanka is clearly unable to repay that debt. And I hope that China will be willing to work with Sri Lanka to restructure the debt – it would probably be in the interest of both China and Sri Lanka. But more broadly, we are really looking to China to strengthen their role in debt restructuring that is eligible for treatment under the common framework. We haven’t seen much progress and part of what I expect to do in the coming days is to urge our partners in the G20 to put pressure on China to be more cooperative in restructuring this unsustainable debt.

But there is a catch-22, Salikuddin told cafemadrid. “China is not going” [renegotiate Sri Lanka’s debt] until they do that with their western donors. Sri Lanka has loans from many different people, but China will not restructure or refinance anything until it sees what [Sri Lanka’s] other lenders do,” she said.

Can People’s Power Change Sri Lanka?

While a leaderless grassroots movement has managed to oust Gotabaya, protesters wonder: Rohini Mohan of the Straits Times put it: “What if nothing really changes?”

In the short term, Salikuddin argued, that won’t be the case. The government is moving “at an icy pace,” she told cafemadrid. “I think the question will be, how long will people stay united and focused on the goal? You might get new elections, you might get a repeal of the executive presidency that the protesters want, but will it go far enough in terms of reconciliation with minority communities?

The economic crime of the government and the suffering suffered by the people of Sri Lanka has in a sense been an equalizer. Now, instead of minorities such as Tamils ​​for whom no attempt at amnesty has ever been made after the brutal civil war that ended in 2009, or Muslims who have felt further marginalized after the 2019 terror attacks, Sri Lankans from all walks of life feel of the population, the government has failed to represent them and act in their best interests, Salikuddin told cafemadrid.

“The interesting thing about this protest movement is that it was representative of many ethnic groups and not just one community. And now you have the majority Sinhalese community who are just as angry with the government as they are with the economic and humanitarian crisis,” she said.

The devastating 30-year civil war between ethnic Tamils ​​and the majority Sinhalese came to an end under Mahinda’s rule in 2009, partly as a result of Gotabaya’s ruthlessness as Defense Minister. At his command, the army launched a brutal offensive against the… Liberation Tigers of Tamil Eelam who fought for a Hindu Tamil state in the northeast of the country. According to United Nations estimates, as many as 40,000 Tamil citizens were killed. Reuters reports:. The Gotabaya government has consistently pushed its way out of investigations into alleged atrocities during the Civil War, placing apparently complicit officials in positions of power and threatening individuals and institutions responsible for their responsibility. a United Nations report from 2021.

“I think all of that will come to the fore, if you don’t really get structural reforms and don’t address these things,” Salikuddin told cafemadrid. “And I have no hope that new elections will represent these groups in any real way.”

So far, the movement has been incredibly peaceful, from early March to mid-July. That means, as much as the government wants the protesters to disperse and the status quo return, they are limited in the tools they can deploy to make that happen, Salikuddin told cafemadrid. At the moment, barring violence and chaos on the part of the protesters, a real crackdown on the demonstrations is not really politically feasible.

What the Wickremesinghe government is likely to do, she said, is to try to wind down the movement, rather than work with them to achieve stability and a government that responds to the needs of the people. It seems they are already trying to do this by imposing a curfew and a state of emergency, like they did on wednesday. However, protesters feel that their demands have not been met – so there is no reason to go home. Creating a reasonable balance will “actually require engagement and resolution with the protest movement,” Salikuddin said.


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