ECONOMYNEXT – Sri Lanka is in the process of electing its ninth president poll for the next five years among a record 38 candidates as the island nation is looking to come out of unprecedented bankruptcy declared in 2022.
The election comes two years after President Ranil Wickremesinghe was elected as the 8th leader of the country through the parliament in an unprecedented manner after his predecessor Gotabaya Rajapaksa fled the country fearing for his life in July 2022 amid mass protests across the country following an economic crisis.
Wickremesinghe, since then, had to implement a raft of hard economic reforms committed to the International Monetary Fund (IMF) including tax hikes and new laws to ensure the economic recovery under an IMF programme.
Wickremesinghe’s policies have started to help the economic recovery, but they have created confusion and division among the public if those policies are right or wrong. Usually Sri Lankans elect leaders based on unproven campaign promises for short term benefits, where the longer term effects are not initially evident.
Wickremesinghe’s critics including two top presidential candidates – opposition and center-right Samagi Jana Balavegaya (SJB) leader Sajith Premadasa and Marxists Janatha Vimukthi Peremuna (JVP)-led National People’s Power (NPP) coalition leader Anura Kumara Dissanayaka, have campaigned saying that the current leader has not taken enough action on corruption.
Analysts see Dissanayaka, Premadasa, and Wickremesinghe as the top three candidates, but none of them is likely to get more than 50 percent votes, which will lead to an unprecedented second preferential vote counting.
Here are five key political risks the island nation is facing after the upcoming presidential polls regardless of who will be elected:
Political Stability:
The parliamentary group which backs Wickremesinghe has the majority in the legislature. He has the backing of more than 100 parliamentarians whereas Dissanayaka of NPP has three MPs while Premadasa of SJB has around 70.
Wickremesinghe, if wins, will have the choice to continue the current parliament until August 2025 with the majority in the legislature. In the event of Dissanayaka or Premadasa winning, parliament will have to be dissolved given both of them have no majority in the parliament and difficulties in passing laws required for economic reforms and corruption-busting policies each of them has promised.
Sri Lanka has committed a raft of reforms under the International Monetary Fund (IMF)-led bailout efforts which are crucial for the country to complete the debt restructuring process. Though Wickremesinghe’s government had in principle agreed for both bilateral and commercial debt restructuring, they are yet to be finalized, signed in paper, and completed.
Any political instability and possible drag in enacting required laws for IMF-led economic reforms, including the Proceed of Crimes legislation, could delay the pace of Sri Lanka’s economic recovery. Analysts also see a hung parliament in the event of Dissanayaka or Premadasa calling for an early parliament election in the event of one of them winning.
Economic Stability:
Sri Lanka still faces significant economic challenges despite Wickremesinghe government’s gains through IMF-led policy reforms. It has returned to positive economic growth, lower single digit inflation, primary surplus in current account, and higher tax revenue due to tough policies under IMF.
The central bank which has gone against the usual ‘overvalued currency’ claims that sharp rupee appreciation has brought some benefits of stability to the people.
But the island nation has yet to complete external debt restructuring formally with both bilateral and private commercial creditors/sovereign bond holders. Wickremesinghe this week announced that there was an agreement “in principle” with private commercial creditors/sovereign bond holders. However, this is not the finalized and completed deal.
Sri Lanka has a bad reputation of policy inconsistency from one government to another and sometimes within the same government in the past mainly to sustain electoral wins.
Still the island nation’s political leaders are struggling to agree on key policies. Both SJB and NPP have publicly said they want to amend commitments Wickremesinghe’s government has agreed with the IMF while there are contradictions over the Wickremesinghe administration’s policies within the coalition partners of the government.
Such undecided policies could impact external creditors and new investors. Wickremesinghe tried to ensure policy stability through parliament approvals such as the proposed Economic Transformation Act. Uncertainty could return if Dissanayaka or Premadasa attempts to amend or abolish this Act in the next parliament.
Inconsistent policies could hit economic stability as well as the ability to seek external funding as well as investments for future economic development. They could lead to another economic crisis, which means more social unrest and political instability.
Geopolitical Influences:
Sri Lanka’s strategic location in the Indian Ocean makes it a focal point in regional geopolitics, with competing influences from major powers like India and China. Balancing these major powers has a significant impact on political stability.
Under Wickremesinghe, China has been maintaining a lower profile though it has won crucial deals like Sinopec fuel distributor stations and the rights to build a $4.5 billion refinery in the deep Southern port district of Hambantota with their own funds.
India, on the other hand, has been very active in the island nation’s domestic politics and economic recovery. India helped with loans amid a delay from the IMF to finalize the bailout package deal while other countries halted loans after default.
However, political analysts and legislators who see unprecedented Indian influence in a number of Sri Lanka’s strategic policies including defence, energy, and economy fear the re-kindling of dormant anti-Indian sentiment.
Analysts also say India’s backing for one presidential candidate in the September 21 election could also have future consequences as in the past. However, many political analysts see India as a key strategic partner in Sri Lanka despite its role in intervening in some crucial domestic policies.
Wickremesinghe government leaders have acknowledged the Indian concerns over the regional security against high Chinese influence in the past.
However, they say, India’s hard push for some projects has left the government in difficulties. These projects include Adani’s renewable energy projects, unique identity card deal funded by India, and key connectivity projects like electricity grids, along with gas and oil pipelines between the two neighbours.
India is also pushing to take control of one of the world’s most strategic natural ports in the Eastern port district of Trincomalee on a long term lease similar to how China got the Hambantota port in 2017.
These projects, which could be beneficial for the country, are likely to face delays because of the hard push by India and protests by Sri Lankans, government officials say. India, however, has denied claims of intervention and its hard push for projects.
An Indian effort to take control of a cobalt-rich crust in the Bay of Bengal is also becoming a diplomatic issue between the two South Asian nations, Sri Lanka’s Foreign Ministry officials have said. Sri Lanka is in talks with a United Nations body and International Seabed Authority (ISBA) over cobalt-rich crust in the Bay of Bengal where India has made a submission against the island nation’s request, Foreign Ministry said. Sri Lanka claimed the area of this cobalt-rich crust in the Afanasy Nikitin Seamount in May 2009. However, India has objected to this claim by Sri Lanka in October 2022 and said it would explore the seamount. Sri Lanka has objected to Indian exploration efforts.
Beijing, on the other hand, has been irritating India through sending its research ships to Sri Lanka time to time for port calls, senior government officials say. On repeated strong Indian protests, Sri Lanka banned Chinese research vessels coming to Colombo for research purposes in 2023 for one year. That time span ends in December 2024. India has said that such ships could compromise its and the India Ocean’s security.
Sri Lanka cannot antagonize either India or China along with other strategic international partners like the United States, Japan, Russia, the United Kingdom, European Union countries, and Iran amid its slow recovery from the unprecedented economic crisis.
Any future government will be compelled to navigate through the concerns of these international partners when dealing with strategic investment policies. The island nation’s current simple non-aligned foreign policy may not be adequate for such navigation, analysts say.
Wickremesinghe’s administration has handled such concerns with compromises and political instability could arise if a future government deviates from the current stance, analysts say.
Governance and Corruption:
Concerns still persist about governance issues, corruption, and lack of transparency, which erode public trust in state institutions. Such concerns could lead to protests or political instability. One of the key demands of millions of 2022 protesters who forced former leader Gotabaya Rajapaksa to flee the country was to deal with corruption and NPP leader Dissanayaka’s main election pledge is to control corruption in the country.
The 2022 protesters have articulated that past corruption led to the economic crisis and have demanded strong actions against those corrupt leaders and bureaucrats and to recover stolen assets owned by them both within and outside Sri Lanka.
Wickremesinghe’s government has come up with an Anti-Corruption Act and proposed a strong Proceeds of Crime bill. However, the public perception on the deep rooted corruption under successive governments has not changed. If Sri Lankan policy makers delay the implementation of corruption-busting policies and punish those involved in past corrupt deals further, it could contribute to instability and public disenchantment of ruling governments.
Concerns over Human Rights/Economic Crimes:
The country’s human rights record, particularly concerning allegations of war crimes and accountability issues related to the civil war, remains a contentious issue both domestically and internationally.
Sri Lanka has only taken baby steps to address the past allegations of human rights abuses. These steps include setting up offices to deal with missing people and reparation. However, victims and immediate family members say the government is not doing enough.
Many political leaders still believe demand for accountability on human rights could disappear with time. Instead, the island nation’s political leaders, military officials, and bureaucrats are still facing sanctions like travel bans from third countries.
In its latest report, the Office of the United Nations High Commissioner for Human Rights (OHCHR) noted the nexus between impunity for past and current human rights violations and broader demands for accountability in governance. The report also has made recommendations for action by both Sri Lanka and the international community to advance reconciliation, accountability and human rights.
Another OHCHR report has recommended targeted sanctions on officials responsible for disappearances in Sri Lanka since 1970 and has called for justice outside the country for the families of victims.
A limited number of Western nations have already imposed targeted sanctions, including travel bans for some Sri Lankan political and military leaders, after finding credible information about human rights violations. The United States has imposed a travel ban on former Army Chief Shavendra Silva and his immediate family members, former Navy chief Wasantha Karannagoda, and some others citing human rights violations. Canada last year announced financial sanctions to freeze the assets of former Sri Lankan presidents Mahinda Rajapaksa and Gotabaya Rajapaksa citing rights abuses. This list is expected to expand with Sri Lanka’s denial of addressing the past rights allegations.
The OHCHR has urged the international community to engage with Sri Lanka due to an accountability gap at the domestic level with victims urging prosecution in a third State due to “widespread impunity in Sri Lanka.” With the alleged economic crimes, some new actions including asset freezing are expected in the near future, global analysts say.
The 2022 economic crisis has also renewed interest in Sri Lanka’s international partners on whether assets were bought from money siphoned off through corrupt deals. International analysts say Sri Lankans who are alleged to have misappropriated public funds and properties may also face questioning on the assets owned by them in other countries in future.
The key concern has been most of the alleged human rights violators and economic criminals are yet to face any local investigation or lawsuit. President Wickremesinghe has been accused of protecting miscreants though he has pledged that he will act according to the law and is strengthening an anti-corruption body including through an IMF program. Those involved in corruption could become a liability for any government in the future unless they are cleared by an independent judiciary. Having such accused could bring some elements of political instability and public unrest. (Colombo/September 21/2024)