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The uphill task that faces President Ranil

22 Jul 2022

By Shishir Gupta India has gone the extra mile to support Sri Lanka in the hope that its leadership would take tough decisions to resuscitate the economy, but it all petered out in political manipulations. Now Ranil Wickremesinghe will have to swallow the International Monetary Fund’s (IMF) bitter pill of restructuring the economy through hard reforms. Although the IMF wants to complete rescue talks with Sri Lanka as quickly as possible, the election of Ranil Wickremesinghe – a princeling of the pearl nation – as President indicates that things will go much worse for Sri Lanka before they start to get better. Ranil Wickremesinghe is deeply unpopular with the masses, who have been gripped by severe shortages of fuel, food, and other essentials after its foreign reserves dried up. So much so that he is often derided as “Ranil Rajapaksa” by the public, as he is seen as a front for the Rajapaksa empire, and as a five-time Prime Minister and multiple-times Finance Minister, is also seen by the public as a major contributor to the economic mess.  However, as someone who has dealt with the IMF in the past, Ranil also has an opportunity in this if he can ease the economic situation in the country and restore his credibility. This is easier said than done, as the public today has to wait three to four days for a gas cylinder and four to five days for fuel. While IMF Managing Director Kristalina Georgieva has stated that she wants negotiations with Sri Lanka on an economic rescue package to be completed as quickly as possible, the track record of Colombo with the Bretton Woods Institution is nothing to write home about. It has not been able to close negotiations with the IMF at least six to seven times in the past. Sri Lanka pre-emptively defaulted on its foreign debt for the first time earlier this year after the pandemic devastated its core tourism sector. Today, the country has high inflation, with $ 1 equivalent to Rs. 360, and depreciating at a rapid rate. Since the economic crisis began, India has contributed $ 3.8 billion to Sri Lanka without any quid pro quo. Despite contrary advice from its MPs, the Modi Government has chosen not to intervene in any way with the Sri Lankan polity except for providing support in the form of food, fuel, fertiliser, and medicine with the long-term aim of stabilising its neighbour.  This has not been the case with Sri Lanka’s other debtor China, which gave high-interest loans to the Rajapaksa empire to flaunt economically unviable “white elephant” infrastructure projects like the commercial port and airport at Hambantota, and contributed to the economic collapse of the country. One must not forget that if the disgraced Rajapaksas allowed entry of China into Sri Lanka, it was Ranil who gave the 99-year lease of Hambantota to Beijing. Countries like Pakistan, the Maldives, and Nepal are also headed in the same direction, and are falling into the Chinese debt trap. Japan, Sri Lanka’s other major debtor, has also refused to provide credit until such time a proper government is restored in the country. The West, beyond supporting Wickremesinghe, simply does not care, as it is embroiled in the never-ending war in Ukraine. It is quite evident that the public mood in Sri Lanka is against Wickremesinghe, as they set fire to his private home. His election as President is also a slap to the face of the public, as he is only a nominated member of the Sri Lankan Parliament and the only face of his party. The public may not take kindly to this political manipulation, and will get increasingly agitated if the economic situation is not addressed soon. But this is not possible without giving more pain to the public, as the IMF will set hard conditions in the form of rationalisation of taxes, job cuts, and lay-offs to shed the weight of the Government. With the IMF Chief clearly indicating that the risk of global recession has gone up with China heading for a “quite significant downgrade” from its 4.4% growth forecast in the institution’s April projections, the world is headed for uncharted waters, and countries like Sri Lanka and Pakistan will bear the brunt in terms of both economic and political uncertainty. President Ranil Wickremesinghe faces an uphill task in rescuing the Sri Lankan economy, with further political uncertainty looming on the horizon. (The writer is the author of “Indian Mujahideen: The Enemy Within” (2011, Hachette) and “Himalayan Face-off: Chinese Assertion and Indian Riposte” (2014, Hachette). He was awarded the K. Subrahmanyam Prize for Strategic Studies in 2015 by Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA) and the 2011 Ben Gurion Prize by Israel. This article was first published by Hindustan Times on 21 July 2022) ………………… The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.  


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