A few months ago, Sri Lanka witnessed a popular uprising to oust the Rajapaksa family from power. It squandered the resources of the country, which found itself bankrupt. The new government is led by a friend of the same family…
The very poor economic management of President Gotabaya Rajapaksa
Sri Lanka’s economy really started to collapse a long time ago, when Gotabaya’s brother, Mahinda Rajapaksa, was president between 2005 and 2015. After the civil war in Sri Lanka ended in 2009, direct investments foreign and portfolio flows from global capital markets have flowed into the country. Sri Lanka was able to borrow easily, especially from China.
Useless projects for a poor country
The government of Mahinda Rajapaksa (brother of Gotabaya) carried out large-scale infrastructure projects such as highways, an airport in the south or the purchase of unnecessary planes. During this period critics of the president were intimidated and journalists were killed or disappeared, generating widespread fear and a climate of self-censorship.
A slight improvement from 2015
When a new government was elected in 2015, freedom of expression and human rights improved. The years 2017-2019 saw a brief period of fiscal reform, so despite droughts and rising global interest rates, Sri Lanka was able to have its first surplus in 60 years in 2017 and achieved another in 2018. Although the country, under the coalition formed between Maithripala Sirisena and Ranil Wickremesinghehas moved away from the isolationism that has plagued Sri Lanka’s economic and foreign policy over the past decade, it has not done enough to reverse protectionism or fight corruption.
A constitutional coup organized by the Rajapaksa
The Rajapaksa family, then in opposition but claiming popular legitimacy and a right to power, rose up against reforms such as taxes and a fuel pricing formula that were essential to economic stabilization; they used the Easter attacks to mobilize fear among minorities and claimed that only they could bring the perpetrators to justice and restore national security. Much of their legitimacy stemmed from the fact that Mahinda Rajapaksa and his brother Gotabaya Rajapaksa, then Defense Secretary, ended the civil war in Sri Lanka in 2009, despite allegations of war crimes.
In 2018 and 2019, long before the arrival of COVID, the country was already in a difficult macroeconomic situation
A long history of poor export performance and declining revenues since the 1990s (with policymakers continually exempting the wealthy and corporations from taxes) meant that Sri Lanka was simply not earning enough to repay its loans in dollars. Between 2015 and 2019, 89.8% of new debt contracted by the government was used to repay interest on outstanding loans accrued at the end of 2014.
A relative of the family is elected president in July 2022
Sri Lanka’s new president, Ranil Wickremesinghe, has appointed a new cabinet made up of allies of the country’s ousted leader, Gotabaya Rajapaksa, despite earlier promises to form a unity government with opposition members. The Rajapksa family can rest easy.
The population and the opposition want new elections
It is normal for a democratic election to be organised. Leaving a president and ministers close to the Rajapaksa family risks setting the country on fire again. However, the government refuses to organize elections under the pretext of a lack of money.
Sri Lanka’s Supreme Court has issued an interim order against the country’s finance secretary and attorney general, preventing them from withholding funds allocated by the 2023 budget for the 2023 local government ballot.
In the meantime tourism is progressing slowly
Sri Lanka will be represented at ITB Berlin 2023. Tourism is an invaluable source of income for the country.