January 2023

Another annus horribilis?

Neville de Silva  looks back on a year of turmoil and suffering for the people of Sri Lanka – and perceives no end in sight

Not since the British left in 1948, handing over power to its former colony then known as Ceylon, has Sri Lanka suffered such economic calamity and political turmoil as in the year just ended.

Struggling to survive under ever weightier burdens heaped on them in the budget for 2023 by a mandate-less new president propelled to power –curiously –by his long-time political rivals, the people know only too well that last year’s dark days will spill over into 2023 and very probably well beyond, as the country continues to flounder amidst economic and political uncertainty.

With the public backlash against political mismanagement, unbridled corruption and chicanery continuing – though more chastened than in the early half of last year following the Ranil Wickremesinghe government’s more repressive action against dissidents – those who served in administrations over the last couple of decades are trying desperately to absolve themselves of responsibility.

Their plaintive plea that politicians should not be solely blamed for the catastrophic outcomes that saw Sri Lanka defaulting on foreign debt last April for the first time in its modern history is nothing but self-serving tosh.

Admittedly, among the rogues who plundered the country over the years are their relatives, business cronies, acolytes and those elevated to high office through nepotistic appointments. But at the core of Sri Lanka’s troubles liesthe political class with their close-knit families and class connections, who have robbed the country of its assets, made money out of state contracts and grabbed state lands and natural resources in mounting acts of self- aggrandisement.

Such connections cut across the political spectrum as ideological opponents scratch each other’s backs for survival while leaving the public to bleed. Sri Lanka’s public, driven to penury like the country itself, will not feasibly accept any other explanation for the rise, last July, of Ranil Wickremesinghe as the country’s president after its elected president Gotabaya Rajapaksa secretly fled the country to escape unprecedented public demands for his resignation.

Sri Lankan President Ranil Wickremesinghe
WITHOUT MANDATE: President Ranil Wickremesinghe

The current economic and political chaos in Sri Lanka – once dubbed one of Asia’s most stable and prosperous democracies – is largely but not entirely due to its being ruled by the Rajapaksa family, arguably the most powerful of the country’s political clans.

Although the Rajapaksas have governed Sri Lanka for over a decade, beginning in 2005, the genesis of the present crisis stems from more recent times. It begins in November 2019 when one of the younger family members, Gotabaya, won a convincing victory in the presidential election, in the aftermath of the Easter Sunday Islamic jihad terrorist attack that killed over 270 locals and foreigners.

Within a couple of days of the attacks, Gotabaya Rajapaksa announced his candidature for the presidency, promising national security, economic prosperity and safeguarding of national sovereignty from external threats.

The political class has robbed the country of its assets

A retired soldier who left the army at the height of the anti-secessionist war against the Tamil Tigers (LTTE), Gotabaya migrated to the US and returned to Sri Lanka in 2005 to serve as secretary to the defence ministry under his elder brother Mahinda, who served two terms as president. They were celebrated as national heroes for their roles in militarily defeating the LTTE in May 2009, in a near three-decade-long war.

In the afterglow of that military victory, when terrorism erupted again and unexpectedly, a politically callow Gotabaya was seen as the ideal leader.But with no experience in civil administration and governance – though determined to strike a new path – he surrounded himself with a band of highly over-rated advisers and another of serving or retired military men placed in key positions, whom critics claimed had little experience outside the battlefield.

That proved fatal. Within days of assuming power, President Gotabaya slashed taxes, leading to a precipitous drop in state revenue. Unable to meet government expenditure such as salaries and other perks for a bloated state sector, the Central Bank turned to frenzied money- printing.

Other rash and thoroughly ill-conceived policies followed.Gotabaya’s overnight decision to ban chemical fertilisers, pesticides and other agricultural necessities at a critical moment proved a horrendous error of judgment. The country’s agriculture virtually collapsed, with farmers abandoning vast tracks of cultivable lands, harvests dropping sharply and producers of plantation crops such as tea and rubber raising serious concerns. Although agricultural scientists, academics and agro-economists denounced the ban, the President steadfastly refused to listen to expert advice until it was too late.

Within days of assuming power, President Gotabaya slashed taxes, leading to a precipitous drop in state revenue

These two foolish decisions were sufficient to send Sri Lanka’s economy into freefall, causing public outrage even among the rural peasantry who largely supported the Rajapaksas.

Over the course of last year I sketched the mounting turmoil facing Sri Lanka, the Rajapaksas’ fall from grace to disgrace and the unexpected rise of the discredited Ranil Wickremesinghe from zero to hero.

With the presidential mantle now fallen on 73-year-old Ranil Wickremesinghe – leader of the United National Party (UNP), decimated at the August 2020 parliamentary election, losing every seat it contested including his own – the Rajapaksas were hoping that the new man at the helm would steady the rudder until one of the clan was ready to assume national leadership in the years ahead.

But things do not look as smooth as mapped out in the political war room. The IMF, to which Wickremesinghe turned in earnest after some of President Gotabaya’s advisers arrogantly spurned seeking its assistance, arguing that domestic mechanisms were enough to rescue the economy, is demanding its pound of flesh and perhaps more.

Sri Lanka is seeking a bailout package of US$ 2.9 billion. In Colombo this was thought not to be too arduous a task, and that negotiations would be complete by the end of 2022, as some flag-waving government ministers and officials appeared to suggest.

Pic of aftermath of Sri Lanka’s Easter Sunday attacks and (inset) pic of Gotabaya Rajapaksa
CLEVER TIMING: Within a couple of days of the Easter Sunday attacks, Gotabaya Rajapaksa(inset) announced his candidature for the presidency

Pressured, perhaps, by some of the IMF’s major stakeholders, including the UK, at the end of the IMF staff-level talks last September the international lending institution insisted Sri Lanka stamp out corruption – a key cause of the country’s gathering mess – though it was euphemisticallyworded ‘reduce corruption vulnerabilities’.

This is one area political leaders on either side of the barricades have left mostly untouched, because they have all been fishing in the same pond – though some have benefitted more than others.

While various noises are made about new laws or more resolute action to nab the perpetrators – largely to satisfy an increasingly critical UN Human Rights Council and international bodies – not only has little been done but a Gotabaya-appointed Presidential Commission has exonerated some already convicted by the courts.

There is another stumbling block to finalising an IMF bailout deal. The IMF wants Sri Lanka to reach an agreement with its creditor nations and other international lenders over restructuring its huge debt so that it might be able to achieve repayment sustainability.

While many of the creditor nations such as Japan, India and others seem agreeable to helping Sri Lanka, Colombo’s ‘all weather friend’ China, a country that has hitherto been liberal with loans to the Rajapaksa family, appears to be dragging its feet. So no consensus appears to be on the cards just now.

Until then the IMF bailout package seems more distant – perhaps somewhere into the second quarter of the year – than first envisaged. This will leave Sri Lanka in a bind when payments become due and Colombo wants to build its foreign reserves.

For the economy is staggering. Having accepted the job of trying to rescue it, President Wickremesinghe, a long time politician who has served in cabinets from his young days and has the instincts of a technocrat, is aware of the enormity of his task.

In the third quarter (July- September) of 2022 the country’s GDP grew negative by 11.8%, with agriculture, industry and services declining by 8.7%, 21.2% and 2.6% respectively.Moreover, the IMF demand for reform of money-losing State-Owned Enterprises (SOEs) is facing opposition as public opinion does not support selling national assets, asa recent survey by the Social Scientists’ Association showed.

Addressing the Sri Lanka Economic Summit 2022,organised by the Ceylon Chamber of Commerce last December, President Wickremesinghe dropped a clanger. Those waiting anxiously to hear how he planned to reform the economy, lifting it by its boot strings, as he once described it, were in for a rude shock.

‘What reforms,’ he asked, ‘when we do not have an economy?’ And to queries about his plans for reform, he added candidly: ‘Frankly I do not have a plan.’

So he calls his programme ‘The Next 25 Years’. That is how long he thinks it will take to turn the economy around.

By the end of that time, most of Sri Lanka’s ageing population will not be around. Quite possibly, not even Ranil Wickremesinghe.

Neville de Silva is a veteran Sri Lankan journalist who held senior roles in Hong Kong at The Standard and worked in London for Gemini News Service. He has been a correspondent for foreign media including the New York Times and Le Monde. More recently he was Sri Lanka’s deputy high commissioner in London