Copenhagen (13/11 – 37.5)
When Ranil Wickremesinghe took over as Sri Lanka’s president in July after a popular uprising ousted his predecessor, the South Asian island nation was engulfed in its worst economic meltdown in 75 years.
Since then, President Wickremesinghe has managed to a keep a lid on mass protests, improve supplies of essentials and on Monday, secured a nearly $3 billion bailout from the International Monetary Fund (IMF) that opens the door to restructuring about $58 billion of debt and receive funding from other lenders.
On March 20, the IMF approved a $3 billion Extended Fund Facility (EFF) to support Sri Lanka amid its economic crisis. The approval is expected to pave the way for other financial institutions to extend support to the bankrupt South Asian country.
He has done that despite a deeply unpopular government, his own party commanding just one seat in the 225-member parliament and having to rely for support on the party of the man he replaced.
Hours-long power cuts and queues for fuel that led to the downfall of former President Gotabaya Rajapaksa are gone, thanks partly to a fuel rationing system. Tourists are returning, remittances are recovering and foreign exchange reserves are rising, though the economy is still contracting. But due largely to significant hikes in income taxes and power tariffs that were needed to get the IMF on board, the government of the 73-year-old is no favourite of the people. According to a “Mood of the Nation” poll run in February by private think-tank Verité Research, the government’s approval rating was 10%, the same as in October but higher than an all-time low of 3% in June, when Rajapaksa was in power. Only 4% were satisfied with the way things were going in Sri Lanka, down from 7% in October but higher than 2% in June.
There are no known approval ratings for Wickremesinghe as president. “He’s ready to face the people’s anger in the short term, to ensure long-term stability and growth in the country,” said Dinouk Colombage, Wickremesinghe’s director of international affairs. “Even though the president only has one seat in parliament, him carrying forward his agenda, bringing forth the reforms, once the results start showing, I think the people will come out in open support of him.”
Born into a prominent family of politicians and business-people with large interests in the media, the lawyer and six-time prime minister has little support beyond wealthy urban voters. His ability to make policy depends to a great extent on the support of the Sri Lanka Podujana Peramuna party, largely controlled by the Rajapaksa family.
For now, Wickremesinghe is enjoying that support, and he said on Sunday that his country was on the right track There’s fuel now, there’s electricity, there’s fertiliser and by April, there will be enough rice and other foodstuff,” he said at an event in Colombo. “We will no longer be declared a bankrupt nation, but a nation that can restructure its debts.”
The bailout is expected to catalyse additional external support, with funding expected from the World Bank and the Asian Development Bank to the tune of $3.75 billion, the IMF said in a statement.
In recent months, Wickremesinghe successfully negotiated economic support from top lenders China, India and Japan, culminating in the IMF bailout. He flew to Japan in October to apologise for the cancellation of Japanese-funded projects under Rajapaksa, which convinced Tokyo to back Sri Lanka’s request for the IMF bailout.
The Paris Club of creditors, which includes Japan, earlier this year gave financing assurances to support the IMF deal. A Japan-funded $1.8 billion light-railway project, which was suspended in 2019, is among infrastructure projects that Sri Lanka is now trying to restart.
But Sri Lanka still needs to renegotiate its debt, a potentially drawn-out process where Wickremesinghe, who is also the finance minister, will have to deal with demands from China, India and other creditors. He still has to turn around the economy, which shrank 7.8% in 2022 and is expected to contract by 3% this year.
Implementing further reforms under the IMF programme, reducing record-high interest rates and controlling inflation will also continue to pose challenges for Wickremesinghe, who has faced trade union strikes after the tax and power hikes.
Critics say Wickremesinghe’s economy-first approach ignores political and systemic reforms – like stronger anti-corruption measures and more transparency in government decision-making – as demanded by mass protesters who banded together as the “Aragalaya” movement last year.
“One year on, there is no real structural change in governance or system change,” said Bhavani Fonseka, senior researcher at Colombo-based Centre for Policy Alternatives. “The president does take this line that his priority is addressing the economy over everything else, but you can’t have that silo-ed approach and think people are going to be okay with it.”
A crisis-weary public may still have to absorb years of continuing hardship as Sri Lanka tries to fix its economy during the four-year IMF programme, warned Jayadeva Uyangoda, a senior political analyst. “Wickremesinghe has managed to neutralise the Aragalaya and that was a major success, but the economic and social crisis goes on,” he said.
“Economic stability will take at least another couple of years.”