The government is making every effort to attract foreign investments to Sri Lanka in a bid to secure financial independence and get rid of the debt burden within the earliest possible time frame. The President, however, faces a myriad of problems regarding his re-election. Does he command most people’s popularity and confidence? This is the critical question that has arisen in his near fifty-year political journey.The President, the leader of the UNP and a massive political entity that brought many social reforms to the country, was reduced to a single member of parliament at the last general election after the UNP broke into two factions right from the middle following the defection of many recognised UNPers, in tow with his deputy Sajith Premadasa. It was a massive blow to Wickremesinghe, after his party dwindled to a solitary member at the last general election and that too from the national list. After many months of inter-party jockeying and discontent about the nominee for the vacancy, Wickremesinghe manipulated party and power to enter parliament. This was despite his pledge, before returning to power in 2015, to step down as UNP leader in 2023. The declaration was made to pave the way for the younger generation to take over the party reins and was a sequel to the unrest brewing within the party ranks against his leadership. Except in 2001, the UNP has suffered a series of electoral defeats since 1994. When Wickremesinghe was catapulted to the post of Prime Minister and then President by default in 2022, he had done nothing but drawn the wild card and also changed the trajectory of the country. The people attributed Gotabaya Rajapaksa’s spectacular failure just month’s into his presidency to his close allies. It zeroed his popularity. ‘I find it infructuous to talk about the massive mess it was in’, quipped one bureaucrat. People now wonder how he accomplished the duties of a successful defence secretary when he failed on so many issues after he became president. The massive tax cuts he introduced brought the country to its knees since capital expenditures were unavailable and eventually, a few bureaucrats drove the country to bankruptcy. This forced Gotabaya Rajapaksa to flee his presidential abode due to burgeoning protests led by civilians who sieged his official bungalow. The tri-forces remained aloof from what was happening on the ground, triggering protests from parliamentarians to probe the unconvincing role of the army commanderShavendra de Silva, at that time. Additionally, there were several debates within the government about the role of the police that turned a blind eye to what was happening in the aftermath of the May 9 incident at Galle Face Green. Ruling party parliamentarians alleged that police inaction caused immeasurable damage to their houses and property. The Inspector General of Police was summoned before MPs to answer questions about arson cases. He said more than 80 per cent of officers in charge had not been appointed in accordance with accepted criteria but on the basis of political influence exerted by politicians all over the country. He said most OIC appointees were not qualified to hold those positions.Parliamentarians questioned the army commander’s role in the inaction of troops under his command. This was specifically in relation to the May 9th incidents that led to then President Gotabaya Rajapaksa’s forced removal on July 9. As a follow-up to their protest against the inaction of the armed forces, many parliamentarians, including several ministers, petitioned the Court of Appeal, demanding a proper inquiry about the role the commander played during the crucial stage of the people’s struggle when President Gotabaya Rajapaksa was forced to flee the country. However, on Monday, the same parliamentarians moved to withdraw the case after the government undertook before the Court of Appeal to initiate a proper inquiry in terms of the law into the high incidence of violence following the Galle Face attacks on May 9, 2022 and take into consideration the findings on it by the Board of Inquiry headed by a former Navy Commander Wasantha Karannagoda, which apparently rapped the Army Commander. Karannagodahimself is replete with a blemished record of alleged human rights abuses which led to a travel ban slapped on him recently by the US government. Needless to say, these actions of the government, further erodes it’s credibility and integrity and its purported inquiries end up being viewed a sham.
Nevertheless, Shavendra Silva objected to any inquiry based on the report of the committee headed by Karannagoda. The Karannagodacommittee was appointed by former President Gotabaya Rajapaksa to determine whether allegations made by parliamentarians had any basis. De Silva argued that it was more or less a fact-finding mission and not an inquiry that would have legal consequences. In addition, Silva, through his lawyer, informed the Court of Appeal on Monday that he is disputing the findings of the Karannagoda Committee. He alleged the committee did not have the jurisdiction to inquire into the incidents and that its appointment was not in the best interests of the law. President’s Counsel Faisz Mustapha, appearing for Silva, told court his client disputes the Karannagoda Committee findings on both factual and legal aspects. He contended the committee was not one appointed under the law. Mustapha said it was a committee appointed by the former president to report to him and reiterated that he does not accept the validity of the inquiry. Faiz Mustapha raised further objections to a fresh inquiry relying on the Karannagoda Committee’s findings. He alleged that the Karannagoda Committee report had been released to the media to tarnish his client,based on unfounded allegations. He raised objections to the withdrawal of the application on the promise to initiate a fresh inquiry if it was based on the Karannagoda Committee report. President’s Counsel SanjeevaJayawardena, appearing for the petitioners, including several ministers and parliamentarians, submitted that at no point whatsoever had Mr. Mustapha’s client challenged the Board of Inquiry report of the military leaders and that in any event, that would not be final and conclusive, as the minister has now undertaken to additionally conduct a full investigation in terms of the law, and as such, any persons involved in the conspiracy that took place would be finally revealed at such a proposed investigation.
Jayawardena went on to say that ‘there is no case for filing objections, as this was a crucial matter as several official governmental institutions and installations were attacked and overrun’. He further said that there was even a physical threat to parliament’s security and that the masterminds behind these attacks must be duly investigated. Both parties made these remarks when the writ petition filed by 22 government parliamentarians representing the Sri Lanka Podujana Peramuna (SLPP) and several others came before the Court of Appeal.The Court finally allowed the petition to be withdrawn. The people may have to wait with their fingers crossed until the conclusion of a comprehensive inquiry, as pledged by the government. This inquiry has yet to start. The inquiry must be initiated under the president’s warrant.
In the meantime, President Ranil Wickremesinghe has embarked on an official tour of Japan. He has already had a meeting with Japanese Prime Minister Fumio Kishida on bilateral issues with the aim of increasing Japanese investments in the country. Additionally, he will meet with other senior Japanese leaders and the business community to attract more investors. Japan is likely to consider the abandoned light rail project under Gotabaya Rajapaksa’s presidency and the proposed terminal of Bandaranaike International Airport that was stalled due to a bribery issue involving a minister. Japan may also discuss the construction of the Eastern Terminal of the Colombo port in partnership with India. This project was stalled due to heightened trade union action by port workers. Many political analysts point out that Wickremesinghe’s visit to Japan signifies a shift in Sri Lanka’s foreign policy towards the West. It also signifies a gradual drift from China, Sri Lanka’s largest bilateral creditor. However, China has not given up on its interest in the Eastern province, with Yunnan Province showing a significant interest in the Eastern Province. India is eager to consolidate its position as it claims a stake in the Indian Ocean region. India filled a big vacuum in 2021 by lending nearly four billion US dollars to crisis-ridden Sri Lanka and, at the same time, playing a crucial role with the West in arranging a 2.9 billion dollar bailout package from the IMF. India, Japan, and the Paris Club also invited all creditors to restructure talks, while China participated as an observer. The Sri Lankan government was reluctant to take the Chinese offer of more loans to pay debts. However, it did not work the way China wanted, and Sri Lanka instead chose a tougher path for economic recovery with the IMF.
The IMF concluded its visit to Sri Lanka on the 23rd of May after a nearly 11-day stay. The IMF mission, led by Messrs. Peter Breuer and Masahiro Nozaki, conducted a staff visit to Colombo from May 11 to 23, 2023. At the conclusion of the visit, Messrs. Breuer and Nozaki issued the following statement: ‘During the visit, we discussed recent macroeconomic and financial sector developments. Following strong policy efforts, Sri Lanka’s macroeconomic situation is showing tentative signs of improvement’.
This is with inflation moderating, the exchange rate stabilizing, and the Central Bank rebuilding reserve buffers. However, the overall macroeconomic and policy environment remains challenging. “We welcome the authorities’ ongoing efforts in meeting key commitments under the fund-supported program. Performance under the program will be formally assessed in the context of the first review of the Extended Fund Facility arrangement, which is expected to be undertaken in September 2023. The mission discussed additional fiscal efforts that will be critical to revenue mobilisation. We also discussed progress on debt restructuring, noting ongoing discussions with both foreign and domestic creditors. Achieving timely restructuring agreements with creditors in line with the program targets by the time of the first review is essential to restoring debt sustainability. Keeping up the reform momentum and ensuring timely implementation of program commitments, including ensuring Central Bank independence, improving governance, and protecting the vulnerable, are key for Sri Lanka to emerge from the economic crisis. “The team met with the President and Minister of Finance, Governor Weerasinghe, Secretary to the Treasury Siriwardana, senior government officials, members of the opposition parties, CSOs, think tanks, trade unions, the private sector, and development partners. We would like to thank the authorities for the open and collaborative discussions and look forward to our continued close engagement.“Nevertheless, the IMF has painted a bleak picture of Sri Lanka’s debt sustainability. The IMF‘s assessment is that debt sustainability is a big challenge in Sri Lanka. Commenting on Sri Lanka’s growth trajectory, IMF representative Krishna Srinivasan said the country had made a mild recovery after a contraction of 8.7 per cent in 2022. This was followed by a 3 per cent contraction in 2023.”But the issue will be for Sri Lanka to implement the program well so that debt can be made sustainable, which is a big difference from previous programs, and the country can be put on the path to prosperity,” he said. Recalling that Sri Lanka’s debt was assessed by the IMF to be unsustainable, Srinivasan said before the program could be approved by the IMF board, Sri Lanka had to embark on a “path towards restoring sustainability”, which includes restructuring debt of all creditors—private creditors, official creditors, and to some extent, domestic debt—for the simple reason that debt sustainability is quite a big challenge in Sri Lanka. “But when you restructure domestic debt, you have to safeguard financial stability. These are issues on which the government is currently working to flesh out a strategy, hopefully soon. That’s the next step,” he added. The Central Bank Governor has already guaranteed financial stability and will not affect the local banking system.
Against this backdrop, the government is working hard to attract foreign investments to Sri Lanka’s business sector. The latest is the signing of an agreement with Chinese Sinopec granting them a twenty-year license to operate in Sri Lanka. This is to enter the retail petroleum market with one hundred and fifty fuel stations now operated by Ceylon Petroleum Corporation. In addition, it is investing in fifty upcoming fuel stations. Similarly, the government expects Japanese and Indian investments to follow. The Chinese-funded Colombo Port City is also expecting several investments that could help Sri Lanka rejuvenate its ailing economy. In these circumstances, it is difficult to fathom the political nuances of the Sri Lankan government. It is difficult to fathom whether it would want to remain neutral and make maximum use of it.
