It is expected that an all-party government will facilitate the country that decades of economic mismanagement have gone into financial ruin, leading to another election, the cost of which, ironically, can be afforded.
Wickremesinghe only last week outlined to parliament what the country is facing: a bankruptcy that has left it with no money to import food or fuel; An economy is shrinking, a negative five in his estimate, although according to the International Monetary Fund, the IMF, it was closer to a negative seven; There is no clear way to restructure the nearly $25 billion of debt by 2025, which is only three years away.
The sovereign default on any external obligation in May was the first in the country’s history. The dollar and renminbi are more likely to default on borrowings. This is a rapidly escalating crisis, as does the debt crisis, and it will take years to recover, with punitive consequences in the interim for the people of Sri Lanka. The humanitarian crisis is dire: dwindling foreign exchange reserves and a currency crisis have put essential medicines out of reach for even the island nation, so heavily dependent on imports for most supplies.
Inflation – running at 80% for food – and the falling value of the Sri Lankan rupee had halved people’s purchasing power, something that only partly explains the apparent anger that has driven rising crowds into the streets And kept them there. The day when troubles broke out on 9 May, when the whole world was shocked and astonished, the houses of 60 members of the ruling party were torched by mobs, who clearly had Rajapaksa and his political parties. , Ironically, they are the exact same people who heavily seduced Rajapaksa to power in 2021. For Rajapaksa, who has managed to finish his mandate gracefully, still more than two years have passed, the writing is all over the wall. Imagine that the mob surrounded him with his fate while he was in his official residence – Gotabaya survived the lynching; This does not leave him with many places in Sri Lanka that he can visit safely. His options seem to have been reduced to political exile. Yet it is becoming increasingly questionable whether he, or others in his family, who are believed to have independently occupied the market for themselves, can escape.
What are the options before the country? The World Food Program said last week that nearly a quarter of the 22 million Sri Lankan population did not know where their next meal would come from. The IMF was in talks with Wickremesinghe’s short-lived government. It has not found any immediate way to solve the forex crisis. Negotiations for bailout can resume only after the political crisis is resolved. Therefore, the first step would be for a figure acceptable to the people of Sri Lanka to lead the government, as it restores order, and work with foreign lenders and aid providers, necessitating immediate emergency and medium-term measures. Is. To fix political and economic crises. Who could he be?
With five days left for the nominations to end, main opposition party Samagi Jana Balvegaya leaders Sajith Premadasa and Ranil Wickremesinghe, whose legitimacy is in question, are in the fray. For example, consider the number of seats Ranil Wickremesinghe’s UNP won in the 2021 elections: zero. And yet, he agreed to become the Prime Minister as a nominated member. To his credit, he is considered a giant of sorts in Sri Lanka’s political scene, known in international circles because of his previous term as prime minister. The leader of the Janata Vimukthi Peramuna, Com. Anura Dissanayake, may throw his hat in the ring, as will former Army General Sarath Fonseka, who led the Sri Lankan army in dismantling the Liberation Tigers of Tamil Eelam (LTTE). The pity, as Sri Lanka negotiates the choppy waters, is that there aren’t many people of Ranil Wickremesinghe’s stature who can steady the kingdom’s ship. Given the current levels of instability and turbulence, can a government, at least in a pool of watchers, pull in multiple directions, meet the expectations of people who are soaring high with inflation? Although talks of a national government or an all-party government have been in the air for a few months now, a common minimum program that all can agree on has yet to materialise.
The risk is that the contingency system being worked on will wobble from the start. In a fluid situation, a stable, capable leader must be given the task of steering Sri Lanka in calm economic waters before the street mob argument can proceed.
New Delhi will keep a close watch on the developments.
It is not difficult to imagine the long-term impact of these conditions on Sri Lanka and its neighboring India to the north. Sri Lanka is not far from India; Dozens of swimmers, some of whom are school children, have crossed the Palk Strait. There are reports that a hundred Sri Lankans have already landed in Mandapam since March, facing the island nation off the coast of Tamil Nadu; The actual number will certainly be higher, perhaps even more than double. The buzz is that thousands are waiting to arrive in the northern parts of the island, and the only thing stopping them is the lack of fuel supplies. And these are Tamils, who have long been accustomed to a difficult life and poverty. If it is possible to swim across the Palk Strait, when push comes to shove, a boat might do the trick as well. External Affairs Minister S Jaishankar says that this is not a crisis. Technically he is correct. for the moment. petrol is sold 2,000 in urban Sri Lanka, and that too after several hours in the queue. In black, it sells for almost twice that amount. The conditions for smuggling are firm. Though fuel shortage has broken the back of Sri Lankan fishermen, Tamil Nadu fishermen carry surplus fuel during their fishing trips. It is only a headache for New Delhi to deal with the situation in Sri Lanka.
It is a fact that every crisis brings with it an opportunity and it is equally applicable here. New Delhi has watched quietly as Sri Lanka increased its defense spending and budget even after decimating the Liberation Tigers of Tamil Eelam, when their threat was more clearly imagined than real.
The conditions of chaos that are unfolding in neighboring Sri Lanka are not an overnight development. They have been festering over the years, accelerated by COVID-19, and rapidly disappearing foreign exchange reserves, the wipe-out of tourism, as well as the grinding halt of the textile and tea industries, which together comprise the three pillars. economy of the time. With export earnings disappearing, especially ill-conceived restrictions on imports of chemical fertilizers and similar ill-conceived tax cuts to slash fiscal revenues, triggers for insolvency were in place. But the crisis was prolonged, thanks to economic mismanagement by successive governments. Cheap infrastructure loans from China to finance commercially impractical projects, Rajapaksa’s constituency Hambantota has the largest port.
New Delhi has always watched helplessly as China wraps its nets around the island nation, like an octopus, the Neighborhood First policy being more of a pious intention than a reality. Yet, happily, in recent months, New Delhi has recently taken advantage of this opportunity, providing Sri Lanka with an unprecedented line of credit of about $3.7 billion in a very short time. Will it be money well spent? It will depend on what kind of diplomacy and coordination and leadership India tolerates as it supports and encourages conditions for economic and political stability to take root in Sri Lanka. It is a delicate and difficult task, which will test India’s diplomatic skills, as it celebrates various Sri Lankan players without any interference. It is a thin, almost non-existent line, that New Delhi has to walk if it is not to fall prey to accusations of interference and worse. The Chinese have been curiously conspicuous by their silence after the crisis unfolded. India cannot afford to sit back and watch the neighborhood settle. Both Beijing and Washington are farther from Colombo than New Delhi. New Delhi should give judicious advice to work over the phone, be it Brussels, or Washington, or Canberra, Tokyo, or especially Colombo, as it brings everyone on the same page as to the future of Sri Lanka.