Former Sri Lankan prime minister Ranil Wickremesinghe has been sworn in as the country’s president and has promised to form an all-party government capable of securing a multibillion-dollar International Monetary Fund bailout.
Wickremesinghe’s victory followed the resignation of President Gotobaya Rajapaksa, who fled to Singapore after hundreds of thousands of Sri Lankans marched across the capital on July 9, overran the presidential palace, picnicked on the lawns and even swam in the president’s pool.
However, Wickremesinghe is also unpopular with many of the protesters given his close ties with the Rajapaskas. He served as prime minister under Gotabaya and despite promises that he would form an all-party government, most of his appointments in the new cabinet have been chosen from the ranks of Rajapaksa loyalists.
The Rajapaksa family ruled for 17 years and is widely blamed for bankrupting this country, with debts totaling $51 billion and foreign reserves of just $1.7 billion. The central bank says it needs $7 billion for debt obligations and to sustain Sri Lanka for the rest of this year.
Ganeshan Wignarjara, a senior fellow at the Institute of South Asian Studies at the National University of Singapore, said the crisis had been predicted at least four years ago but the Rajapaksas did not want to listen and initial approaches to the IMF in April had come much too late.
“The Sri Lankan economy is at risk of crashing after it defaulted on its debt. Growth is at -4 to –6% in 2022 and inflation is between 50 and 70% this year and there is three-quarters of a million poor people that has been created through this crisis.
“So it’s a terrible situation in Sri Lanka,” he said, adding that Wickremesinghe needs time to get his country’s finances in order.
Officials from Colombo are expected to meet with the IMF in August and negotiations are expected to include Sri Lanka’s top three lenders – Japan, the Asian Development Bank and China.
At the recent meeting of G-20 financial officials in Indonesia, U.S. Treasury Secretary Janet Yellen, urged China to help restructure Sri Lanka’s debt, telling journalists, “Sri Lanka is clearly unable to repay that debt.”
“And it’s my hope that China will be willing to work with Sri Lanka to restructure the debt – it would likely be both in China and Sri Lanka’s interest,” she said.
Wignaraja also said China must play a positive role in resolving the crisis but added that fear of a Chinese debt trap had been exaggerated as Beijing holds just 14% of Sri Lanka’s total debt.
“China gave Sri Lanka $13.2 billion since 2006 for infrastructure projects. These projects have had mixed results; some good projects, some bad projects.
“The total debt burden is something like $7.6 billion. It suggests a rising debt to China but does not indicate that Sri Lanka is yet in a Chinese debt trap,” he said.
Any IMF deal could be months away and Sri Lankans still need to contend with hyperinflation, acute food and fuel shortages, and power blackouts. Schools remain closed and many people work from home.
Shortages of medicine prompted doctors to warn people would die, particularly in the remote countryside, where distribution of essential items, including rice, has ground to a halt as the country has run out of fuel.
Protesters and politicians from all political parties are also demanding an independent investigation into the Rajapaksa family, their wealth and allegations of corruption.
Sri Lankan investigators have previously claimed that more than $2 billion had been transferred to bank accounts in Dubai, held by people close to Mahinda Rajapaksa, brother of Gotabaya, when he served as president, more than seven years ago. Mahinda dismissed those claims as "nonsense."
Protest numbers have dwindled since Rajapaksa fled the country but ill feeling toward the government remains high, with many demonstrators deeply skeptical and attempting to maintain their tent camp outside of the presidential complex. However, the army and police began forcibly dismantling the camp on Friday morning leading to clashes and arrests.
“Our government, Sri Lankan government, they are killing the innocent people in the rural areas in this country. They have nothing to eat,” said Keith Gibson, a musician and protest leader.
“They only be drinking water – and this corrupted regiment, they are killing the people and they are not leading, and they have no solution for the country, you know, and the people are suffering,” he said.
His sentiments were echoed by Sulaimaan Saim, a medical student who recently returned from studies in Belarus. He said people who once drove luxury vehicles now ride in tuk-tuks, and people who once rode in tuk-tuks are now forced to walk.
“The government has been messing around too much. They’ve been playing around with our money. They’ve been taking people’s money. They’ve been basically stealing it,” he said.
“Now we’re down to zero, nothing, completely nothing, we’ve got nothing, our country’s really messed up. We don’t have fuel, we don’t have food, we don’t have gas. We don’t have medicine. People are dying. Waiting in queues for fuel for like four or five days, it’s really bad,” he said.