Sri Lanka president seeks to reunite, revive bankrupt nation

SRI Lanka’s president Ranil Wickremesinghe said that the bankrupt country has taken difficult measures, and is pushing closer towards securing an International Monetary Fund (IMF) loan to address the worst economic crisis in its independent history.

Wickremesinghe laid out his policies for recovery while calling for unity during his so-called Throne Speech at a new session of parliament on Wednesday (Feb 8). The session marked the 75th year of the country’s independence from British rule, which it commemorated on Feb 4.

“We have now reached the final stage of negotiations with the IMF. We have no other way but this process,” the president told parliament.

Since coming to power after former president Gotabaya Rajapaksa resigned in May following weeks of street protests, Wickremesinghe has been pushing towards the US$2.9-billion IMF loan programme to help the island-nation out of its economic malaise. Western lenders on Tuesday stepped up pressure on China to stop playing solo and join the international effort to provide debt relief to Sri Lanka, amid growing fears that Beijing’s unilateral positioning might delay and complicate the financial rescue of the South Asian nation, as in the case of Zambia.

“We are in direct discussions with China,” Wickremesinghe said on Wednesday. “We have received positive responses from all parties. We are now working towards unifying the approaches of other countries and that of China.” 

The president has also made some efforts at political reforms to curb sweeping powers granted to the president, in a bid to calm public anger that climaxed with the ousting of Rajapaksa. He has called for unity among political parties to foster reconciliation, given that it has been more than a decade since the end of the island’s long-drawn war with the Tamil Tiger rebels.

Wickremesinghe summoned an all-party conference on Jan 26 to discuss implementing a so-called 13th amendment to the constitution that calls for devolving powers to the provinces – a bid to promote reconciliation and appease the international community.

“We expect to devolve power within a unitary state,” he said in his speech. “There will be no division of the country,” he said.

In his 2023 budget, the president, who also doubles as the finance minister, sharply increased taxes and pledged to curtail spending to narrow the fiscal deficit, wean the economy away from populist policies, and unlock the IMF funds.

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Sri Lanka’s foreign currency reserves have been below US$2 billion for months. The nation has relied on repurposed funds and aid from friendly countries, to ease crippling shortages and stay afloat amid issues such as a deep recession, inflation of above 50 per cent, and borrowing costs that jumped 950 basis points last year.

“Due to the measures taken, we have been successful in reducing the burden gradually. Now there is stability in the economy. However, it is not yet over,” the president said.

While Wickremesinghe has been credited with bringing about some normalcy to the country, he has been criticised for aligning with the Rajapaksas and clamping down on protests. 

The leader depends on the support of lawmakers in Rajapaksas’ still-in-power Sri Lanka Podujana Peramuna party. The administration will face a crucial test of its approval when the nation holds local government elections on Mar 9.

Opposition factions and protesters have also been calling for presidential and parliamentary elections to vote in a government with a fresh mandate. BLOOMBERG