Tag: Lanka

  • Sri Lanka chooses new leader aligned to ousted former president

    Sri Lanka chooses new leader aligned to ousted former president

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    Sri Lankan lawmakers chose six-time Prime Minister Ranil Wickremesinghe as president Wednesday to succeed the ousted leader who fled the country, in a vote that risks reigniting political turmoil in the troubled South Asian island nation.

    Wickremesinghe said he has spent 45 years of his life in parliament and is happy it has given him the honour of becoming president. “I need not tell you the status our country is in. Now that the election is over we have to end this division. We had 48 hours to stay divided but from now on I am ready to have a dialogue with you,” he said, asking other political parties to work with him.

    Former president Gotabaya Rajapaksa appointed Wickremesinghe as prime minister in May, hoping to bring stability to a country engulfed in its worst economic crisis in memory. Wickremesinghe became acting president after Rajapaksa fled the country last week and resigned by email.

    Wickremesinghe, 73, is a seasoned politician with wide experience in diplomatic and international affairs. But he is unpopular among voters who view him as a holdover from Rajapaksa’s government. Protesters outside the president’s residence were chanting “Go home, Ranil” after his election.

    The vote of 134 lawmakers put Wickremesinghe ahead of former government minister Dullas Alahapperuma, who received 82 votes. The Marxist candidate had three.

    People watch parliamentary proceedings being shown on a giant screen on the lawns of the Presidential Secretariat on Wednesday in Colombo, Sri Lanka. (Abhishek Chinnappa/Getty Images)

    Wickremesinghe will serve the remainder of Rajapaksa’s term, which ends in 2024. Rajapaksa fled the country and resigned by email last week after protesters furious over the country’s economic collapse stormed his official residence and took over key state buildings.

    As president, Wickremesinghe now has the discretion to appoint a new prime minister.

    Presidents in Sri Lanka are normally elected by the public. The responsibility falls on parliament only if the office of president becomes vacant before a term officially ends.

    That has happened only once before in Sri Lanka when then-Prime Minister Dingiri Banda Wijetunga was chosen by parliament uncontested in 1993 after former president Ranasinghe Premadasa, father of the current opposition leader, was assassinated.

    Shortages of food, medicine, fuel

    The economic crisis has left Sri Lanka’s 22 million people struggling with shortages of essentials including medicine, fuel and food while the government negotiates a bailout with the International Monetary Fund. And the resulting political crisis has left worries about whether a new government will be enough to fix the economy and placate a public furious at its politicians’ failures.

    Serving in a double role as the finance minister, Wickremesinghe has been leading the crucial IMF talks. He has delivered weekly addresses in Parliament cautioning that the path out of the crisis would be difficult, while also pledging to overhaul a government that increasingly has concentrated power under the presidency.

    Security personnel stand guard in the premises of the parliament building in Colombo, as voting begins to elect the new president on Wednesday. (Adnan Abidi/Reuters)

    The public, however, sees him as a holdover from the Rajapaksa government that led the country into economic catastrophe.

    Only a few lawmakers had publicly said they would vote for Wickremesinghe given the hostility against him. Dozens of lawmakers loyal to Rajapaksa whose homes were burned down by protesters in May were said to be backing Wickremesinghe on the assurance that he would severely punish the perpetrators and maintain law and order.

    All 225 members of parliament including the speaker were eligible to vote on the ranked-choice ballot. Two members abstained and a few ballots were declared invalid.

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  • Opinion – The Demise of the Rajapaksa Dynasty and Prospects for Peace and Justice in Sri Lanka

    Opinion – The Demise of the Rajapaksa Dynasty and Prospects for Peace and Justice in Sri Lanka

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    On 9 July 2022, Sri Lankan President Gotabaya Rajapaksa agreed to step down from the presidency amid widespread protests in Colombo. On 13 July he fled to the Maldives on a military jet and went to Singapore on the following day. In Singapore he tendered his resignation first by email and then by diplomatic post. Prime Minister Ranil Wickremesinghe was sworn in as acting president on 15 July. The Sri Lankan parliament is set to elect a new president on 20 July to serve for the rest of the current term. Sajith Premadasa, Leader of the Opposition, is expected to run for the position. Rajapaksa’s departure effectively represents the end of a 13-year (2005-15; 2019-22) regime held by his family.

    This is the culmination of rising tensions which have been building up over years (not months, as explained below). Before this pivotal moment in July, the government had declared the state of emergency on 1 April and, after the resignation of most of the cabinet, Mahinda Rajapaksa (Gotabaya’s elder brother and former president in 2005-15) had resigned as Prime Minister on 9 May.

    The immediate cause of the current turmoil in Sri Lanka is the worst economic crisis since independence. Because of fuel shortages, the government has had to ban petrol sales to private citizens, while prizes of food keep rising. On 10 June, the United Nations Office for the Coordination of Humanitarian Affairs (UN OCHA) even warned that the Sri Lankan government would risk “a full-blown humanitarian emergency” because of the lack of food and medicines. Although the accusation that China has employed ‘debt trap diplomacy’ in Sri Lanka is open to dispute, the borrowings incurred by the Chinese Belt and Road Initiative (BRI) infrastructure projects, especially those in the southern hometown of the Rajapaksa family, have worsened its already precarious economic situation.

    On 18 May 2022, for the first time in the country’s history, Sri Lanka failed to pay $78m in interest on two sovereign bonds. According to the International Monetary Fund, Sri Lanka’s foreign debt stands at $38.6 billion, of which 10% is owed to Chinese creditors. On the surface, the share is not high; however, the terms of Chinese loans are clouded by non-transparency with an estimate saying that the real share is 19.9%.

    The Rajapaksa regime has inflicted a more severe damage on the country: domestic peace and justice. The new government will have to deal with the longstanding problems of Sinhalese-Buddhist ethno-religious nationalism and the unresolved struggle for accountability for the crimes committed during the 26-year-long civil war (1983-2009) between the Government of Sri Lanka and the Liberation Tigers of Tamil Eelam (LTTE), commonly knowns as the Tamil Tigers. Sinhalese-Buddhists believe that they are Buddha’s chosen people, and war against others (e.g. Tamils and Muslims) to defend Sinhalese-Buddhism is legitimate. The Rajapaksa regime was indeed built on an ultra-exclusive form of ethno-religious nationalist and triumphalist rhetoric which glorified the government for putting an end to the civil war, without acknowledging the numerous war crimes committed at the time.

    The civil war was fundamentally anchored onto the longstanding discrimination against the Tamil minority, in the northern and eastern part of Sri Lanka. According to the Office of the United Nations High Commissioner for Human Rights (OHCHR), both sides to the conflict, especially the government army, had committed serious breaches of international law, allegedly amounting to war crimes, notably during the final stages of the war in 2009. The UN Human Rights Council’s Resolution 46/1, passed on 23 March 2021, called on the Sri Lankan government to fulfill its international legal duty to investigate any alleged human rights abuses committed during the war and prosecute any culpable individuals. These calls have, however, been largely ignored.

    The only glimpse of accountability that was provided by the Sri Lankan government was through the Lessons Learnt and Reconciliation Commission (LLRC), headed by Mahinda Rajapaksa. The LLRC, however, was faulty in its mandate and results as it only provided a partial account of the human rights violations committed during the war and actually praised the government for avoiding civilians, thus deflecting criticisms away from the government and the military by blaming the LTTE. This did not come as a surprise to external observers, because Gotabaya was then the Defence Secretary.

    Despite the appalling economic situation affecting all of the Sri Lankan population, in Tamil-dominated areas the major problem still lies in the lack of justice and the alienation of this group from the political life of the country. For fears of reprisals by Sinhalese-Buddhist, Tamils have therefore not joined the anti-Rajapaksa protests. Not only Tamils, Muslims have also become targets of intolerance and hate campaigns in recent years. The Sri Lankan population is therefore far from united and economic struggles are just one of the notable challenges facing the country. Impunity, widespread injustices, and the failure of providing the country with transitional justice are major obstacles to Sri Lanka’s search for durable peace and stability.

    While the most pressing concern for the next government is certainly economic recovery, the bigger question is whether the new leaders, like the Rajapaksas, will still rely on Sinhalese-Buddhist ethno-religious nationalism to rule the country or finally ensure postwar accountability. Besides the rise of individual autocratic political leaders, ethno-religious nationalism has led to illiberal populism and democratic regression in Sri Lanka.

    As Sri Lanka is seeking a bailout from the IMF rather than China, the international community has a role to play in pressing the new government to pursue inter-ethnic reconciliation and transitional justice. However, whether the new president is committed to it is debatable, as the father of Sajith Premadasa, Ranasinghe Premadasa, former President in 1989-1993, was believed to be assassinated by the LTTE.

    Further Reading on E-International Relations

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  • After Sri Lanka, Dozen Other Countries in Danger Zone of Economic Collapse

    After Sri Lanka, Dozen Other Countries in Danger Zone of Economic Collapse

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    Traditional debt crisis signs of crashing currencies, 1,000 basis point bond spreads and burned FX reserves point to a record number of developing nations now in trouble.

    Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse.

    Totting up the cost is eyewatering. Using 1,000 basis point bond spreads as a pain threshold, analysts calculate $400 billion of debt is in play. Argentina has by far the most at over $150 billion, while the next in line are Ecuador and Egypt with $40 billion to $45 billion.

    Crisis veterans hope many can still dodge default, especially if global markets calm and the IMF rows in with support, but these are the countries at risk.

    ARGENTINA

    The sovereign default world record holder looks likely to add to its tally. The peso now trades at a near 50 per cent discount in the black market, reserves are critically low and bonds trade at just 20 cents in the dollar – less than half of what they were after the country’s 2020 debt restructuring.

    The government does not have any substantial debt to service until 2024, but it ramps up after that and concerns have crept in that powerful vice-president Cristina Fernandez de Kirchner may push to renege on the International Monetary Fund.

    UKRAINE

    Russia’s invasion means Ukraine will almost certainly have to restructure its $20 billion plus of debt, heavyweight investors such as Morgan Stanley and Amundi warn.

    The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit.

    TUNISIA

    Africa has a cluster of countries going to the IMF but Tunisia looks one of the most at risk. A near 10 per cent budget deficit, one of the highest public sector wage bills in the world and there are concerns that securing, or a least sticking to, an IMF programme may be tough due to President Kais Saied’s push to strengthen his grip on power and the country’s powerful, incalcitrant labour union.

    Tunisian bond spreads – the premium investors demand to buy the debt rather than US bonds – have risen to over 2,800 basis points and along with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s top three list of likely defaulters. “A deal with the International Monetary Fund becomes imperative,” Tunisia’s central bank chief Marouan Abassi has said.

    GHANA

    Furious borrowing has seen Ghana’s debt-to-GDP ratio soar to almost 85 per cent. Its currency, the cedi, has lost nearly a quarter of its value this year and it was already spending over half of tax revenues on debt interest payments. Inflation is also getting close to 30 per cent.

    EGYPT

    Egypt has a near 95 per cent debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year – some $11 billion according to JPMorgan. Fund firm FIM Partners estimates Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024.

    Cairo devalued the pound 15 per cent and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) – an investor tool to hedge risk – price in a 55 per cent chance it fails on a payment.

    Francesc Balcells, CIO of EM debt at FIM Partners, estimates though that roughly half the $100 billion Egypt needs to pay by 2027 is to the IMF or bilateral, mainly in the Gulf. “Under normal conditions, Egypt should be able to pay,” Balcells said.

    KENYA

    Kenya spends roughly 30% of revenues on interest payments. Its bonds have lost almost half their value and it currently has no access to capital markets – a problem with a $2 billion dollar bond coming due in 2024.

    On Kenya, Egypt, Tunisia and Ghana, Moody’s David Rogovic said: “These countries are the most vulnerable just because of the amount of debt coming due relative to reserves, and the fiscal challenges in terms of stabilising debt burdens.”

    ETHIOPIA

    Addis Ababa plans to be one of the first countries to get debt relief under the G20 Common Framework programme. Progress has been held up by the country’s ongoing civil war though in the meantime it continues to service its sole $1 billion international bond.

    EL SALVADOR

    Making bitcoin legal tender all but closed the door to IMF hopes. Trust has fallen to the point where an $800 million bond maturing in six months trades at a 30% discount and longer-term ones at a 70% discount.

    PAKISTAN

    Pakistan struck a crucial IMF deal this week. The breakthrough could not be more timely, with high energy import prices pushing the country to the brink of a balance of payments crisis.

    Foreign currency reserves have fallen to as low as $9.8 billion, hardly enough for five weeks of imports. The Pakistani rupee has weakened to record lows. The new government needs to cut spending rapidly now as it spends 40% of its revenues on interest payments.

    BELARUS

    Western sanctions wrestled Russia into default last month and Belarus now facing the same tough treatment having stood with Moscow in the Ukraine campaign.

    ECUADOR

    The Latin American country only defaulted two years ago but it has been rocked back into crisis by violent protests and an attempt to oust President Guillermo Lasso.

    It has lots of debt and with the government subsidising fuel and food JPMorgan has ratcheted up its public sector fiscal deficit forecast to 2.4% of GDP this year and 2.1% next year. Bond spreads have topped 1,500 bps.

    NIGERIA

    Bond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year’s time should easily be covered by reserves which have been steadily improving since June. It does though spend almost 30% of government revenues paying interest on its debt.

    “I think the market is overpricing a lot of these risks,” investment firm abrdn’s head of emerging market debt, Brett Diment, said.

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