The seeming normalcy in Sri Lanka belies an unavoidable and inconvenient truth: an ailing economy that feeds public despondency and fuels distrust. For all the political signalling to the contrary, such as President Ranil Wickremesinghe’s expression of confidence at the June 30 annual general meeting of the Sri Lanka Institute of Directors towards being able to overcome bankruptcy by September, economic recovery would take some years and a complete overhaul to get out of the current abyss.
The resuscitation provided by a $3-billion bailout by the International Monetary Fund (IMF) in March was only a vital and urgent step to unlock the doors of multilateral lending agencies, and in late June, the World Bank approved $700 million for Sri Lanka. The public has begun questioning the prudence of sticking only to the IMF road, which will further increase external debt in the absence of revenue generation mechanisms, notwithstanding the government’s lofty claims.
The government recently shifted to internal debt restructuring, and there was no move to take the people into confidence barring the controlled narrative and media briefing. Wickremesinghe and his cohort may be too busy to engage. Still, on such critical matters, the 22 million people should at least have the basic information about what it entails and how it would affect them.
Sri Lankans were surprised when the island’s banking sector shut down on June 27 for an unprecedented five-day period, and the government obtained cabinet sanction to restructure the country’s domestic debt. On July 1, Sri Lanka’s Parliament held a full-day debate on the Domestic Debt Restructuring Programme, which passed with 122 voting in favour and 62 against.
The frenzied deadlines to overhaul the economic double bind are part of the reformist agenda drawn at the behest of the IMF as an attempt to dig the nation out of its biggest financial crisis. The urgency may be real, but people who were forced to absorb multiple shocks in the past 20 months, including a total economic collapse, extreme hardships and crippling taxes—all due to the failure in governance—have little patience and lesser trust. And the trust deficit in the country’s leadership is still quite high.
As things stand, Sri Lanka’s total public debt was a staggering $83.6 billion by the end of 2022, which is 28.3% of the country’s GDP. This comprises $41.5 billion in foreign debt and $42.1 billion in domestic debt.
Assurances notwithstanding, the government’s decision to exclude commercial banks from the domestic restructuring framework may trigger questions as to why the State stays focused only on restructuring treasury bills and bonds under the Central Bank, and retirement funds such as the Employees Provident Fund (EPF) and Employees’ Trust Fund (ETF), both also under the government.
However, the government’s response is that the banking sector needs to be cushioned as it has already taken multiple hits in the past several months. Wickremesinghe and the governor of the Central Bank of Sri Lanka have assured the public that restructuring efforts would not affect the banking system or their deposits, but the people are full of questions.
Meanwhile, the government needs to expedite economic restructuring ahead of the IMF review in September, while pursuing short- and long-term solutions to the debt crisis, and also keeping the nation afloat.
While the economic reforms process continues pell-mell, on all other matters, except some urgent efforts to control freedom of expression and assembly, it’s largely business as usual for the country’s disgraced political tribe. The decision to introduce new laws, clearly a top priority for the Wickremesinghe administration, smacks of authoritarian needs to prevent public expression.
The government has indefinitely stalled the elections, with the reason of lack of funds being the flippant response to public outrage. New laws are being drafted to contain public debate on critical issues, and a counter-terrorism bill has been prepared to replace the draconian Prevention of Terrorism Act (PTA)—all pushed with an inexplicable sense of urgency and without a consultative process. In his effort to consolidate power, President Wickremesinghe is making a huge mistake by crushing dissenting voices and aiming to control critical social media through regulations and arrests, a trend since he assumed office.
This sense of false normalcy generated by the country’s ruling elite can be easily disrupted and carries a sense of doom.
Wickremesinghe, a man who loves to quote history selectively, may not mind comparisons being made between him and Lord Torrington, an unpopular British governor who had no governance strategy and eventually had to be recalled. He slapped taxes on shops, rafts, boats, horse-driven carriages, bullock carts and even dogs—anything he thought was taxable—to raise revenue for the Crown. His rule resulted in continuous public outrage, but his arrogance would not allow him to relent. Eventually, the governor’s tax policy and his arbitrary and harmful rule resulted in a massive public revolt in 1848, also known as the Matale Rebellion. His response was to impose martial law, and people were shot at and killed, including heroic men such as Puran Appu and Gongalegoda Banda.
The comparisons don’t end there. And an autocratic regime can’t reduce the 2022 public revolt to a knee-jerk response of “angry young people when denied basic supplies”. It runs way deeper, and the core of it is Sri Lanka’s unaddressed governance crisis. It cannot be only answered with economic reforms and by introducing laws and regulations to gag the population.
The dark shadow of the Rajapaksas is still omnipresent. Wickremesinghe has chosen not to address the allegations against them and continues offering a protective cover for the disgraced political family.
Seventy-five years after independence, Sri Lanka’s only nonperishable saving is the accumulated grief due to poor governance, which reduced an island of plenty to a shattered nation destined to remain poor for years.
Colombo’s serendipitous appearance may reflect momentary peace, but it is a call to brace for a possible public revolt.
The ruling elite continues to ignore the reality that embers of dissent can be easily ignited, and people feel outraged. The business-as-usual politics, disregarding public sentiments, can prove disastrous and may disrupt whatever reforms are currently underway. Political arrogance, especially if it is devoid of legitimacy, can prove toxic and harmful.
Dilrukshi Handunnetti
Award-winning journalist and lawyer. She is a founder and director of the Colombo-based Center for Investigative Reporting (CIR)