2022: The World This Year

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2022: The World This Year
Sri Lanka: Political and Economic Crises

  Chrishari de Alwis Gunasekare

TWTW#196, 31 December 2022, Vol. 4, No. 45

 

What happened?

On 17 March, President Gotabaya Rajapaksa addressing the nation, on the current economic crisis claimed: “This crisis was not created by me. When those who contributed to the creation of this crisis are criticizing the government in front of the people today, I am attempting to immediately resolve this crisis and provide relief to the people... The root cause of current issues is our foreign exchange crisis.”

In April 2022, people took to the streets demanding the resignation of the President and the Government that was responsible for the economic crisis. These demonstrations of dissent eventually transformed into a large non-partisan people’s protest movement dubbed the ‘Aragalaya’ (People’s Struggle) that succeeded in ousting former President Gotabaya Rajapaksa from office. 

On 09 May, prime minister Mahinda Rajapaksha tendered his resignation. He tweeted  and urged the general public to exercise restraint.

On 10 May, Sri Lanka's president Gotabya Rajapaksa urged the people to remain calm and stop violence and acts of revenge against citizens. He added: "All efforts will be made to restore political stability through consensus, within constitutional mandate & to resolve the economic crisis." 

On 13 July, in a television briefing, Speaker Mahinda Yapa Abeywardena stated that President Gotabaya Rajapaksa had confirmed his resignation via a phone call. 

On 21 July 2022, Ranil Wickremesinghe was appointed as the President by the Parliament despite not having the people’s mandate. A new All-Party Government was formed under the leadership of President Wickremesinghe, of which the priority was to address the immediate economic woes of the people. 

What is the background?

First, the ongoing economic crisis in Sri Lanka. The slowdown of the Sri Lankan economy was predicted by experts as early as 2012 and it worsened due to the impact of the 2019 Easter Attack followed by the COVID-19 pandemic. However, the economic policies followed by Gotabaya Rajapaksa and his government including excessive tax cuts, the adoption of the Modern Monetary Theory which encouraged unrestricted currency printing, and the fixed exchange rate imposed by the Central Bank contributed to the acute shortage of foreign exchange reserves within the country. 

The domino effect of the forex shortage soon impacted the day-to-day lives of the citizens. Fuel imports came to a standstill which in turn affected power generation, leading to an energy crisis. Likewise, people had to experience a shortage of essential commodities including food and medicine due to import dependency while dealing with inflation that rose to double digits within a short span of time. Another factor that contributed to food insecurity was the complete ban on chemical fertilizers implemented in the previous year, which adversely impacted both the local food supply as well as export crops such as tea and rubber. Further adding to the economic hardships of the country was the unsustainable external debt caused through foreign loans that resulted in a disproportionate debt-to-GDP ratio and balance of payment issue that Sri Lanka has been grappling with for many years. Taking the above factors into account, by April 2022 the Sri Lankan economy was in dire straits, with headline inflation rising up to 28.9 per cent and the country having to temporarily default its external debt amounting to USD 51 million.

Second, the political crisis and the ‘Aragalaya’. As the economic crisis worsened, the people of the country responded through peaceful protests. However, as public dissent grew with no solutions in sight, the economic crisis spiraled into a political crisis as people lost faith in the country’s leadership, resulting in the former President Gotabaya Rajapaksa losing the majority support in the Parliament as Minister declared their independence from the ruling party. 

Initial attempts to repress dissent through the imposition of Emergency Regulations and military force failed and the people’s protest soon became an island-wide movement coined the ‘Aragalaya’ that demanded the resignation of the President and a need to reform the political culture of Sri Lanka. By July 2022, the Aragalaya was successful in ousting former Prime Minister Mahinda Rajapaksa and former President Gotabaya Rajapaksa from leadership as the people rose against the corrupt politics of the Rajapaksa dynasty. The ‘Aragalaya’ was a landmark moment for Sri Lanka, where citizens demonstrated that the mandate of the people could be revoked if the leaders of the country no longer serve the interests of the people.

Third, post-Aragalaya Sri Lanka and Ranil Wickremesinghe’s Presidency. In July 2022, Ranil Wickremesinghe took over as the Prime Minister and then the President of Sri Lanka. The legitimacy of Wickremesinghe’s Presidency is highly questionable as his initial position within the Parliament was secured through the National List rather than through the people’s mandate. Nonetheless, during the secret ballot held in the Parliament Wickremesinghe gained the majority and was elected President. 

The reaction to Wickremesinghe’s Presidency is twofold; for some citizens, Wickremesinghe was the ideal candidate to restore Sri Lanka’s economy while for others he was a remnant of the corruption, no different than the Rajapaksas. The latter view was given traction as Wickremesinghe began his Presidency with a crackdown on democratic dissent through military force and the arrest of key activists, essentially dissolving the Aragalaya movement. However, post-Aragalaya Sri Lanka is a nation undergoing changes under the direction of its new President. In September 2022, Wickremesinghe was successful in sealing a staff-level agreement with the IMF and is working actively towards economic rejuvenation by reimplementing taxes and budget revisions. Likewise, the 21st Amendment (initially drafted as the 22A) to the Constitution is in effect since 31 October, which reversed certain constitutional changes made through the 20A. However, most of the measures taken by the new government are considered temporary solutions as the country would require a significant economic and political overhaul to overcome its current circumstances.


About the author

Chrishari de Alwis Gunasekare is a Project Coordinator at the Sri Lanka Press Institute.

 

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