SLPP MPs meet with top Govt officials
Sri Lanka’s new “diplomatic” PM starts foreign aid talks amid political...
ECONOMYNEXT – Sri Lanka’s newly appointed prime minister Ranil Wickremesinghe on Friday started discussions over foreign aids for the crisis-hit island nation’s economic recovery, his office said.
Wickremesinghe, 73, who was handpicked for the job by President Gotabaya Rajapaksa on Thursday, held preliminary talks with foreign envoys representing India, Japan, United States of America, Britain, and China on Friday and the discussions focused on rapid economic recovery in the next few months.
His office did not give any further details on the foreign aid consortium.
“He is trying to get some foreign funding through a donor conference,” an aide close to the prime minister told Economy Next.
Sri Lanka is facing its worst financial crisis since the independence from British colonial rulers in 1948.
It has already suspended its 51 billion US dollar worth foreign debt repayments from April 12 as the island nation has run out of dollars even to buy the essentials for its 22 million people.
Amid extended power cuts due to lack of fuel imports, the 84.5 billion US dollar economy’s people face acute shortage of fuel, medicines, food, cooking gas, and milk powder mainly due economic mismanagement by President Gotabaya Rajapaksa’s ruling Sri Lanka Podujana Peramuna (SLPP).
Wickremesinghe’s appointment came amid continuous protests by hundreds of people near presidential secretariat demanding Rajapaksa, his brother and then Prime Minister Mahinda Rajapaksa along with the SLPP government to step down.
Mahinda Rajapaksa resigned on Monday (09) after his supporters brutally attacked hundreds of unarmed and peaceful protesters near both presidential secretariat and Temple Trees, the prime minister’s official residence, who had been demanding the resignation of the both leaders.
Diplomatic Hiccups
Wickremesinghe’s appointment also came when diplomatic relations with many foreign countries have been severed time to time under Rajapaksa.
Senior government officials have told Economy Next despite repeated request by then foreign minister G L Peiris, many countries declined to respond to his calls after a series of “cardinal errors” in international diplomacy.
Then prime minister Mahinda Rajapaksa unilaterally cancelled 500 million US dollar East Container Terminal (ECT) project which was already signed among India, Japan, and Sri Lanka in 2018.
Similarly, President Gotabaya Rajapaksa unilaterally canceled a Japanese-funded 1.5 billion US dollar Light Railway Transit (LRT) project connecting the commercial heart of capital Colombo to suburbs even after the project was under implementation.
President Rajapaksa also canceled a 480 million US dollar grant from the U.S.-based Millennium Challenge Corporation (MCC) given for rural infrastructure projects. He rejected it on the advice of an expert panel report which said based on the current status of countries which had implemented the MCC granted projects, the fate of those countries is tragic. Sources from US embassy in Colombo, however, had said contents of the expert panel report on the MCC grant was exaggerated and based on unfounded facts.
Rajapaksa government’s close relations with China also led other countries to have a “minimum level” of diplomatic relations with Rajapaksas in the past, officials from the island nation’s foreign ministry have told Economy Next.
China helped Rajapaksas with billions of US dollars in loans for post-war infrastructure between 2010 and 2015 when Mahinda Rajapaksa was the president. But many of the projects yet to give a sizable return on investment to repay the loans, which many Western nations say as “debt trap” and contributed to the country’s debt burden.
However, President Rajapaksa has said China had never dragged Sri Lanka into a debt trap.
Political Maneuvering
The Rajapaksa government also had issues with the European Union on some commitment it had asked to fulfill in return of GSP plus, a trade concession which is annually worth over 500 million US dollars and helped the South Asian island nation’s top exports, garments.
The trade concession was signed in 2016 under the previous government, but Rajapaksa government was hesitant to implement some commitments including removal of four-decades old anti-terrorism law.
When the EU raised the issue, some members of Rajapaksa government publicly said the country cannot compromise the people’s mandate to continue the trade concession. However, the downfall in the economy compelled the government to engage with the EU and finally amend the anti-terrorism law.
The Rajapaksa government also backtracked three renewable energy projects granted to a Chinese firm in the Northern islands after Indian raised security concerns. The Chinese firm was chosen via an internationally accepted bidding process. However, Rajapaksa government unilaterally withdrew the project awarded to China, also unilaterally which resulted in China having reservations on financially assisting Rajapaksa government.
Sri Lanka’s conduct in human rights also has raised international concerns.
Former Finance Minister Basil Rajapaksa gave a liquefied natural gas (LNG) project to a US-based New Fortress Energy in an unsolicited manner while the authorities had received international bids through an internationally accepted process.
As a result of all of these diplomatic hiccups, many countries had hesitated and reservations to financially assist Rajapaksa amid many corruption allegations.
“Diplomatic PM”
Retired Sri Lankan diplomats said the new prime minister stands out in his diplomatic ways of handling the issues.
“He is a diplomatic prime minister. He knows whom to access internationally for what and when,” for retired career diplomat told Economy Next.
“This is why you see all these diplomats meet him just within 24 hours.”
Wickremesinghe in 2002 proved his ability in managing a crisis hit economy.
The island nation’s economic growth contracted in 2001 after Tamil Tiger rebels who demanded for a separate state within Sri Lana destroyed the only airport and complete fleet of state-owned SriLankan Airlines.
Wicktremesinghe became the prime minister after winning snap polls in December 2001 and approached international partners to help the country’s economy to recovery.
His long term efforts helped him to organize ‘Tokyo Donor Conference’ on June 10, 2003 which saw the participation of 51 countries and 21 international organizations.
At the end of the conference, Wickremesinge who personally participated in the event got pledges of over 4.5 billion US dollars for reconstruction and development of the entirety of Sri Lanka.
Sources close to Wickremesinghe said the plan was to have some immediate funding to ensure essentials which are in shortage for the public now.
“Once that is dealt with, his plan is to focus on the debt restructuring and IMF programme,” he told Economy Next asking not to be named.
However, many analysts say it may not be as easy as Wickremesinghe thinks.
Undiplomatic Politician
The new prime minister is seen as a stubborn and elitist leader by his own center-right United National Party (UNP) members.
Already most of the opposition political parties have said they will not support his leadership in the parliament as majority of them consider it as against the people mandate.
Some critics also see his appointment as a way out for Rajapaksas to buy time for them to evade possible prosecutions demanded by most people over the corruption charges and wealth accumulation.
Wickremesinghe’s UNP for the first time in its history failed to win any seat at the 2020 parliamentary polls. He also personally got defeated. However, he entered the parliament through a bonus seat in the 225-member legislature.
Many opposition parties including Samagi Jana Balavegaya (SJB), the Marxists Janatha Vimukthi Peramuna (JVP)-led National People’s Power, and Sri Lanka Freedom Party (SLFP) have declined to back him in the parliament and rejected his request to accept cabinet ministerial portfolio.
President’s SLPP has pledged support to Wickremesinghe, but political analysts say the new prime minister may need support of some opposition members for parliamentary majority.
Many parliamentarians see him as a leader who does not want to listen to their views, some opposition law makers have said.
Wickremesinghe wants the parliamentary majority for a new budget including some tough economic, fiscal, and public sector reforms to ensure a loan from the International Monetary Fund and to go ahead with foreign debt restructuring plans. (Colombo/May14/2022)
UK advises against Sri Lanka travel as soft-peg collapse triggers violence
ECONOMYNEXT – The United Kingdom has advised against non-essential travel to Sri Lanka as the worst currency crisis in the history of the island’s central bank triggered social unrest and violence killing at least nine and angry mobs torched property of ruling party officials.
“The Foreign, Commonwealth & Development Office (FCDO) advises against all but essential travel to Sri Lanka, due to ongoing political and economic instability,” UK citizens were told on May 13.
“This advice does not apply to airside transit through Sri Lanka’s international airport.”
“A State of Emergency has been declared and an island-wide curfew is in place.”
Violence broke out after loyalists of ex-Prime Minister Mahinda Rajapaksa attacked peaceful protestors at a seafront in Colombo on May 09.
At least nine persons including two policemen died in a violent backlash that saw over 100 properties of the ruling Rajapaksa family and party members destroyed.
“Further incidents could take place,” the UK advisory said. “If you are in Sri Lanka at this time, or considering travel, you should avoid all protests and follow the advice of local authorities.”
People are angry after the island’s intermediate regime central bank printed money for two years to target an output gap (Keynesian stimulus) driving inflation to 30 percent, and botched float with a surrender rule sent the rupee careening down from 200 to 380 to the US dollar so far.
The 2022 currency crises came on top of currency crises in 2015 and 2018 which was also triggered by money printed to target an output gap.
Analysts have blamed the International Monetary Fund for teaching the island’s Latin America style central bank to calculate an output gap, triggering a series of currency crises and eventual default.
Though interest rates have been hiked, monetary stability has not yet been restored due the botched float and forex shortages continue, disrupting big ticket imports like fuel and cooking gas.
President Gotabaya Rajapaksa imposed emergency rule, which is set to expire next week unless Parliament approves. The curfews are also being gradually relaxed. (Colombo/May19/2022)
Akila, Ruwan, Sagala, Palitha, & Vajira to lead Ranil’s Special Committees
Gota go home අරගලය
Sri Lanka exports up 14.7-pct, imports up 22.9-pct with tourism, credit
ECONOMYNEXT – Sri Lanka’s exports grew 14.7 percent from a year earlier to 1,092 million dollars in February 2022 while imports grew 22.9 percent 1,888 million US dollars, data showed as tourism returned, and credit to state enterprises also picked up.
Industrial exports soared 19.4 percent to 882.7 million US dollars in February 2022 from a year earlier as the country experienced the worst currency crisis in the history of its intermediate regime central bank.
The central bank printed 55 billion rupees in February 2022 after also printing money in January (partly to repay external debt).
When a central bank prints money, partly via state workers salaries, total domestic demand for goods go up above that is usually generated from exports, receipts, tourism receipts and remittances.
Imports grew 22.9 percent to 1,873 million dollars up from 1,524 million US dollars with an estimated 174 million US dollars in tourism receipts.
In the absence of money printing, a fall in tourism receipts leads to a fall in imports as tourism sector workers lose incomes, reducing imports.
The stock market also saw an inflow of 49 million US dollars. (Colombo/May13/2022)
US, India congratulate crisis-hit Sri Lanka’s new prime minister
ECONOMYNEXT – The United States and India congratulated Sri Lanka’s new Prime Minister Ranil Wickremesinghe who was appointed on Thursday to accomplish a tough task of bailing out the sovereign-defaulted country from the ongoing economic crisis.
The new prime minister’s appointment came at a time when both India and the U.S. are looking for more engagement with Sri Lanka amid concerns that Sri Lanka could drift towards China because of Beijing’s large volume of loans.
Wickremesinge, 73, was appointed to the post for for the fifth time in the last three decades. He has been in the parliament since 1977 and leader of center-right United National Party since 1994.
“I look forward to working with Ranil Wickremesinghe. His appointment as prime minister and the quick formation of an inclusive government, are first steps to addressing the crisis and promoting stability,” U.S. ambassador Julie Chung said in her twitter feed.
“We encourage meaningful progress at the IMF and long-term solutions that meet the needs of all Sri Lankans.”
Look forward to working w/ @RW_UNP. His appointment as PM, and the quick formation of an inclusive government, are first steps to addressing the crisis & promoting stability. We encourage meaningful progress at the IMF & long-term solutions that meet the needs of all Sri Lankans.
— Ambassador Julie Chung (@USAmbSL) May 12, 2022
Sri Lanka is facing twin crisis of debts and balance of payment crisis. The island nation under President Gotabaya Rajapaksa has failed to address the economic concerns, aggravating the already existing crisis.
The 84.5 billion economy has already suspended all foreign debt repayments from April 12 while a top delegation held talks with the IMF last month to seek assistance in facing the current crisis. However, the country has to deal with some debt restructuring on its foreign loans before seeking the IMF help.
Government sources have said Wickremesinghe’s appointment is expected to instill some confidence in the markets. That confidence is expected to increase foreign investment into Sri Lanka’s government securities and equities.
Despite he lost the 2020 parliamentary election personally and as a party, Wickremesinghe entered the parliament with a bonus seat his party got.
He has past records of handling financial crisis through foreign funds. However, this time, he is given the task of handling the financial crisis as soon as possible amid a geopolitical cold war between India and China in Sri Lanka’s territory.
“High Commission of India hopes for political stability and looks forward to working with the Government of Sri Lanka formed in accordance with democratic processes pursuant to the swearing in of Ranil Wickremesinghe as the Prime Minister of Sri Lanka,” Indian High Commission in Colombo said in its official twitter feed.
“India’s commitment to the people of Sri Lanka will continue,” it said.
High Commission of India hopes for political stability and looks forward to working with the Government of Sri Lanka formed in accordance with democratic processes pursuant to the swearing in of Hon'ble @RW_UNP as the Prime Minister of #SriLanka. (1/2)
— India in Sri Lanka (@IndiainSL) May 12, 2022
India has given nearly 3.5 billion US dollars so far this year mainly in credit including 1.5 billion US dollars to buy essentials and fuel
Sri Lanka’s worst economic crisis since 1948 independence has already led to a political crisis. Protests started two months ago when President Gotabaya Rajapaksa failed to handle the economy with wise moves. Now the protests have grown against Rajapaksa.
The protesters demand the resignation of President Rajapaksa and his brother, then Prime Minister Rajapaksa and the entire government.
Mahinda Rajapaksa resigned on Monday after his supporters attacked unarmed protesters in capital Colombo. The attack led into island wise violent clash which killed at least 9 people and injured nearly 300. (Colombo/May13/2022)
Ranil Wickremesinghe made Sri Lanka Prime Minister amid economic crisis
ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa appointed Ranil Wickremesinghe as Prime Minister amid the worst currency crisis in the history of the country’s central bank making it the sixth time he got the post.
Wickremesinghe pipped main opposition leader Sajith Premadasa of the Samagi Jana Balawegaya to the post, as he delayed insisting that Rajapaksa resign.
Premadasa wrote to President Rajapaksa hours before Wickremesinghe was sworn in saying he was willing to take up the post subject to four conditions.
Multiple Terms
Wickremesinghe was first Prime Minister under Ranasinghe Premadasa, Sajith’s father and steered the country after his assassination through an election that his United National Party lost.
Wickremesinghe returned to office in 2001, after a currency crisis which saw the rupee collapse and the economy contracted for the first time since records began.
Sri Lanka has an intermediate regime central bank set up in the style of Argentina’s in 1950s by a US money doctor and its currency has fallen from 4.70 to the US dollar to 380 so far in the worst performance among South Asian monetary authorities.
He gained credibility as a economic whiz after the economy recovered strongly with low inflation and a strong currency under a tight International Monetary Fund backed program and privatization.
However his party suffered in both opposition and after it returned to power in 2015 when two currency crises triggered by the central bank in the pursuit of output gap targeting triggered monetary instability and slowed growth.
One Member Party
A bomb blast in Easter of 2019 helped bring Rajapaksa’s back to power. Wickremesinghe’s UNP suffered a humiliating defeat failing to directly win any seat as the SJB brokeway and took most of its vote base. He came to parliament on a residual vote total.
Under Rajapaksa’s and extreme output gap targeting was pursued with large volume of money being printed and taxes cut. The country ran out of reserves and defaulted on its foreign debt in April.
Wickremesinghe’s appointment was slammed by Omalpe Sobitha, Buddhist monk and the country’s Catholic Cardinal, shortly before the appointment.
“This is not the change the country is looking for,” he said. Wickremesinghe has come under firm in parliament for being close the Rajapaksa family.
Sri Lanka will have to print money unless taxes are raised:...
ECONOMYNEXT – Sri Lanka will have to print money to pay state worker salaries unless taxes were raised, Central Bank Governor Nandalal Weerasinghe said as the country struggles with low revenues after taxes were cut for output gap targeting.
“State workers salaries are paid by money in the Treasury,” Governor Weerasinghe said. “The reason money was printed all this time is because there aren’t enough revenues.
“So revenues have to be increased.
“If there is not enough money the central bank has to monetize it. There is no bar to that. Under the Monetary Law Act we can do it. It is something that should be done.
“If money printing is stopped and salaries are not paid there will be a bigger crisis.
Weerasinghe said interest rates have been raised and 100 percent of the money has been raised from the market in recent weeks. Essential spending included salaries, pensions and domestic debt repayment.
“In addition, if there is an urgent need, we have told the Treasury it will be monetized only if it is essential, if not to delay it,” he said. “That is why the Treasury Secretary issued a circular asking non-priority spending to be stopped.”
“I can clearly say there is no worry of paying state workers salary and pension. Because we can give money which are paid in rupees. But we should do it with some responsibility and we should not do it like it was done previously and increase the inflation to around 40 percent.”
When money is printed under a pegged exchange rate (flexible exchange rate), dollar shortages emerge in a matter of weeks as the new money moves through the credit system and ends up in the forex market as imports or other outflows.
When money is printed over a longer period, boosting domestic credit and broader money supply, domestic inflation goes up, with asset prices (stock and property) also inflating as mal-investment takes place.
In Sri Lanka large volumes of money have been printed to trigger currency crises in the past including when tax revenues were expanding, with the economy also growing, to target gilt yields through a bond auction committee.
Market bids are rejected and money is printed to repay maturing bonds issued to finance deficits of past years. In 2020 and 2021, price controls were placed on bond and bill auctions to keep Treasury bill yields around 5.2 percent.
Disbanding the bond auction committee will take away the ability of the state to to pro-cyclically inject liquidity and fire currency crises by engaging in output gap targeting (Keynesian stimulus), analysts say.
Sri Lanka’s Treasury bill yields are now around 24 percent and large volumes of money is flowing into the market.
The first beneficiaries of printed money are those who receive the money first like state workers or borrowers of commercial banks who get newly printed money from rejected Treasury bill and bond auctions.
Later recipients of the money see higher prices as the currency falls and inflation goes up.
Sri Lanka printed large over two trillions of rupees over two years, while operating an intermediate regime (soft-peg) and ran out of reserves, losing the ability to maintain the peg at that interest rate.
An attempt to shift the broken soft-peg to a clean float has so far not fully succeeded and the rupee had fallen with forex shortages persisting.
A floating exchange rate, as found in advanced nations operate without any foreign reserves, with foreign exchange inflows and outflows matching each other outside the reserve money which remains stable and unaffected from changes made through central bank purchases and sales of dollars. (Colombo/ May 12/2022)
From war hero to target of angry crowds: Sri Lanka Rajapaksa...
ECONOMYNEXT – He was a demigod for tens of thousands of Sri Lankans. Some people in the North Central Sri Lankan district of Anuradhapura still keep his picture next to their Buddha statue.
He was revered to that extent.
Many of them are still thankful for the 76-year-old seasoned politician for his role in ending a 26-year war, for his government’s initiative of subsidised fertilizer, and the infrastructure drive in their rural area which had been neglected by successive governments since independence from British colonial rulers in 1948.
Rajapaksa, Sri Lanka’s president from 2005 to 2015 and four-time prime minister through 2004 to this Monday (09), built up one of Asia’s strongest political dynasties similar to the Philippines’ fallen dictator Ferdinand Marcos.
He was the most popular and ‘down to earth’ leader Sri Lanka ever had since independence. The common man’s touch he has with him helped him to connect anybody he meets – whether it is a public official or private sector CEO or a poor rural paddy farmer or a journalist.
Famous for his unique maroon family shawl wrapped around the neck, Rajapaksa the politician fought every battle to come out stronger, starting in 1988 when he took on the then mighty United National Party (UNP) government and went to Geneva alleging gross human rights violations committed under president Ranasinghe Premadasa – the father of current opposition leader Sajith Premadasa.
Not unlike the late Premadasa, Rajapaksa always presented himself as a pious Buddhist though his close allies now say he practiced Buddhism only for show.
War winner or war criminal?
In 2009, Rajapaksa cemented his legacy as a historic leader when Sri Lanka’s state military annihilated the separatist Liberation Tigers of Tamil Eelam (LTTE) which had fought for a separate state for ethnic minority Tamils in the island nation’s North and East in a 26-year war.
When he was informed of the climactic end of the war in the Northern lagoon of Nanthkadal, Rajapaksa was in a Middle Eastern country. He promptly flew back on a state-run SriLankan Airlines flight, and upon landing, he knelt on the ground and kissed it, in what became a much celebrated display of his love for the motherland.
“My country comes first; my country comes second; my country comes third,” Rajapaksa would repeat over the years that followed.
Political commentators say people were ready to even die for him after he won the war.
Less than a year later, Rajapaksa won his second term with a landslide thanks in large part to his popularity after winning the war. He ran and won resoundingly against the army general Sarath Fonseka who fought the war and led the army on the ground.
As much as he was revered as a demigod for winning the war by the majority Sinhalese, Rajapaksa was considered a war criminal by the Tamils and some international rights groups because of how he led the war, particularly during its final phase.
A report by a United Nation expert panel has revealed there could have been as many as 40,000 Tamil people killed during the final weeks of the war. Rajapaksa has never responded to calls to probe what happened to the Tamils who allegedly disappeared after surrendering to the military just before the war ended on May 18, 2009.
The UN Human Rights Council (UNHRC) is already probing past human rights allegations in the war during Rajapaksa’s first tenure.
Emotional leader with PR
Rajapaksa always has been a sentimental and emotional leader.
When the LTTE bombed a bus in North Central village of Kebithiigollewa, he went to the funerals of the people who were killed in the blast.
The father of a child killed in the attack said to Rajapaksa, in front of his child’s body: “Mr President, you have to eradicate this terrorism.”
Later that father’s statement was used frequently in state-run television to convince the public that militarily defeating the LTTE was the only solution to the conflict.
Rajapaksa is a master at engaging anybody constructively, with his ability to listen carefully and change his tone and manner in a way that will win over even his harshest critics. It was this approachability that led to his mass appeal, at least among Sinhalese Buddhists.
He also has a habit of never missing a family funeral of those who he knows well. When he was leader of the opposition, prime minister or even president, he was ever ready to sign as a witness at marriage registrations upon invitation.
The first thing he says whenever he meets just about anybody is “How are you? It’s been a while,” as he gently touches the shoulder of the person.
Rajapaksa’s public relations skills are the envy of Sri Lankan politicians. Observers say he may be a leading figure in this area even at a global level.
Family-first policy
Rajapaksa always loved his close family – the former first lady Shiranthi Rajapaksa, their three sons Namal, Yoshitha, and Rohitha, and his extended family.
During his second tenure, his family members in parliament were handling almost 70 percent of the island nation’s budget. When President Rajapaksa was also the Minister of Defence and Finance, his younger brother Basil was Minister of Economic Development minister, older brother Chamal was Speaker of Parliament. His younger brother was Secretary to the Ministry of Defence.
During his second tenure, he appointed his brother-in-law Nishantha Wickremesinghe to run the loss-making state-run airline, cousin Jaliya Wickremesuriya as the US ambassador, another cousin Prasanna Wickremesuriya as the head of the local Airport and Aviation firm, nephew Shashindra Rajapaksa as chief minister of a rural province and another nephew Shameendra Rajapaksa as a director at state-run SriLankan Airlines.
Another cousin Udayanga Weeratunga was the Ambassador for Russia and Ukraine. Weeratunga faced corruption allegations in a MIG fighter jet deal, while Jaliya Wickremesuriya was found guilty by a US court over misappropriation charges in a building deal.
In his second term, Mahinda Rajapaksa was criticised for allowing his oldest son Namal to organise a motor race around a sacred temple in the central Sri Lankan city of Kandy. His youngest son Rohitha was allowed to launch the country’s first satellite at an estimated cost of 320 million US dollars, while his second son ran a sports channel.
Nepotism was one of the main reasons among many others including dragging post-war reconciliation efforts and building close ties with China that led to his defeat which some analysts say was an internationally-backed domestic coup.
Rajapaksa’s family-first policy got worse during the incumbent administration of President Gotabaya Rajapaksa. Under the new current president, Mahinda Rajapksa was Prime Minister, Basil wasfinance minister, Chamal was irrigation minister, while Mahinda’s son Namal became the youth and sports minister. Chamal’s son Shashindra was also given a state ministry.
Analysts say Rajapaksa tried to run the country as a family business, keeping key decisions close to their chest within the group of four brothers – him, Gotabaya, Chamal, and Basil.
Despite political differences, the family has always been united, sources close to Rajapaksa say.
Constitutional changes
Rajapaksa will be remembered in history for achieving the goal of a two-thirds parliament, ever since the UNP’s unprecedented five-sixth majority win in 1977, which no political leader would have dared dream of. In 2012, he along with the help of his brother and Economic Development Minister Basil Rajapakasa engineered some defections from the opposition to achieve this feat.
Using the two-thirds majority, Rajapaksa removed Chief Justice Shirani Bandaranaike in 2013 for opposing a poverty alleviation bill. Later, he changed the constitution to abolish the limit on the number of terms a person can become the president.
Using the new constitutional change, he called early polls in 2014, but lost the bid for his third term. In a bitter campaign, he lost the election for his party’s former secretary Maithripala Sirisena who defected and joined a common opposition coalition.
After the last parliamentary polls in August 2020, he also helped his brother Gotabaya Rajapaksa change the constitution to remove independent institutions
and strengthen the powers of the president.
The constitutional amendments were only possible under Rajapaksa because he had a large majority in parliament and he also used some manoeuvrings to get the support of opposition politicians.
Such constitutional changes have always been beneficial for Rajapaksas, analysts say.
China’s man
Rajapaksa was always seen as a pro-Chinese leader.
Following the end of the war, he got close to China because the West led by the United States, international rights groups, and India pushed him to the wall demanding that alleged human rights violations on his watch be addressed.
China poured money into Sri Lanka under Rajapaksa in the form of investments, grants, and loans and strengthened its footing in the island nation just a few kilometres south to India. This development led to a geo political cold war being played out in Sri Lanka.
A port terminal and port city project in Colombo port drew concern from India. Rajapaksa’s disinterest in implementing a constitutional amendment that Sri Lanka had agreed to in the 1987 Indio-Lanka Agreement did not help. India had been pushing to implement this amendment to decentralize power with the central government to Sri Lanka’s provinces. This was advocated as a solution for the ethnic conflict.
With the end of the war, Rajapaksa’s focus was post-war infrastructure development in the North to help economic recovery.
India repeatedly conveyed its concerns with Rajapaksa who always promised to look into them, though they were hardly addressed.
Rajapaksa allowed two nuclear submarines to be docked in Colombo port – once when Chinese leader Xi Jinping was in Colombo in October 2014 and again within a few weeks of that visit.
India directly warned Rajapaksa. After the 2015 election defeat, Rajapaksa said it was India which defeated him at the presidency.
Divide and rule
Sri Lanka’s minority Muslims and Tamils have never backed Rajapaksa overwhelmingly as Rajapaksa was seen as a racist and favouring only Sinhala Buddhist majority.
Rajapaksa, however, engineered a number of defections to give himself an edge in politics.
Analysts say Rajapaksa practised the time-tested ‘divide and rule’ policy with the minorities.
Tamils saw him as a war criminal while Muslims also started to see him as a creator of violence after Rajapaksa failed to control anti-Muslim violence that erupted in June 2014.
Both minorities voted for his rival in the 2015 election in which he lost unexpectedly.
After losing the election, he went to his ancestral home in Hambantota, where he sat on a windowsill and said to a large crowd of supporters: “It was Northern Tamils who defeated me”.
As a shrewd politician, Rajapaksa has faced many challenges over the years, and engineering defections in the opposition has been an effective strategy that has helped him throughout his career.
Economic crisis
Over the years, Sri Lanka’s 22 million people endured the corruption, nepotism, misappropriation, unethical political manoeuvrings, crony capitalism, and racism that many attribute to successive Rajapaksa administrations.
Finally, it was Sri Lanka’s repeatedly delayed economic crisis that was the nail in Rajapaksa’s coffin
Many economists, including some close to Mahinda Rajapaksa, say that then President Rajapaksa called for early elections in 2015 in order to avoid a financial crisis that year. It is hard to say this was indeed the case, but what is clear now is that the once widely admired leader has now lost the plot.
Sri Lanka’s looming debt and balance of payment crises were twin risks the economy was facing when Gotabaya Rajapaksa won the presidential election in 2019.
From 2016 to 2019, Mahinda Rajapaksa and his Sri Lanka Podujana Peramuna (SLPP) said the then government had brought immense economic difficulties to the people.
“How is cooking gas? Do you have gas? How much are onions? How about potatoes? People cannot afford three vegetables in their meals. People are forced to eat only once a day because of the high cost of living,” Rajapaksa famously said at an election rally in 2019.
He and the SLPP criticized the then government’s tax hikes, flexible exchange rate, its IMF programme, and a misunderstood fuel price formula.
Rajapaksa would never have guessed his own fear mongering would become a reality under his brother’s leadership.
It all started with a tax cut in December 2019. Nobody asked for tax cuts, but the president slashed the tax assuming that a bigger volume of business will increase government revenue under a lower tax regime. This never happened.
Then, one of President Rajapaksa’s advisors said, the former military official was of the view to go for tax reforms under a new government after the parliament polls which was expected to be held in March 2020. Those reforms never came.
COVID-19 was a real shock, but Sri Lanka was not the only country that was hit by the pandemic.
Farmers furious
Making matters worse, the president blundered through the government’s agriculture policy by banning the import of inorganic fertilizer. Thousands of farming families took to the streets protesting Gotabaya Rajapaksa’s decision. Despite widespread criticism from farmers, opposition politicians and experts, a stubborn president stuck to his guns and refused to relent.
He along with former Agriculture Minister Mahindananda Aluthgamage imported Chinese organic fertilizer. The shipment was rejected by the government authorities who said it was contaminated, and a subsequent non-payment for the Chinese shipment became a diplomatic issue. President Rajapaksa’s government then turned to India for liquid nitrogen fertilizer which farmers refused to use claiming it had a strong odour and dogs and other animals going over the crops as a result.
The fertilizer policy blunder hit Sri Lanka’s paddy cultivation and created a food shortage. The government was compelled to import rice due to Rajapaksa’s ill-timed and ill-advised decision.
The fertilizer policy left farmers with a lower than normal or no harvest. Meanwhile, prices across all farm products were rising. As a result, consumers are now forced to pay more than double the price for rice and all vegetables.
The government’s maximum retail price policy on import products created shortages in cooking gas, milk powder, and wheat. That led to a queue regime which Sri Lankans hadn’t seen until the 1970s.
On the financial front, the central bank reduced interest rates to a record low, printed excess money, and kept the exchange rate around 200 rupees per US dollar.
Neither the Rajapaksas nor the government officials told the truth about an impending economic crisis to the people.
Central Bank Governor Ajith Nivard Cabraal misled the public with a six-month policy framework with over 26 billion US dollar inflows into the country in just six months through March 31. He also promised a stable currency and claimed that using reserves for repayment of international sovereign bonds (ISBs) will not be a problem for imports.
Around February 2022, the people finally realised they had been fooled as queues for essentials grew longer. Then, the government’s weak foreign reserves prevented it from importing fuel required for power generation which resulted in extended power cuts. The severe scarcity for dollars also had an impact on the import of medicines, wheat, and milk powder.
All of these prompted the people to protest against President Gotabaya Rajapaksa as he had failed in his economic policies in ensuring the essentials to the public.
Then came the “Go Home Gota” protests, which later extended to a Go Home Myna (Mahinda) campaign. However, the anti-Mahinda protests weren’t as aggressive as youth-led protesters demanding the president’s resignation – at least at the start.
In the meantime, people started to believe the allegation that the Rajapaksas had looted the country and that that was the main reason for the current economic crisis.
People started to ask questions about how the first family got as rich as it did when they were just elected officials living on government pay and perks.
Even as the protests were going on, there were no policy measures taken by the government to address the core issues faced by the public such as the shortage of dollars, fuel, cooking gas, medicines, and foods.
Final days
Finally, Cabraal opened the door for the destruction of Mahinda Rajapaksa’s 50-year political career. He allowed flexibility in the exchange rate without any plans to control its range in the event of a steeper depreciation.
The rupee fell as much as 85 percent in just two months. The cost of fuel more than doubled. All goods and services prices increased sharply. People could not bear the cost of living. The country was forced to face power cuts for as long as 13 hours a day.
People started to realise that they had been cheated and taken advantage of by Mahinda Rajapaksa before the election just to grab power.
The protesters started to demand his ouster as well.
It is true that the protesters really wanted Gotabaya Rajapaksa to resign. However, that demand has now somewhat shifted to getting Mahinda Rajapaksa out.
Protestors soon tired of the indecisiveness of Mahinda Rajapaksa over his resignation, which had by now become a national demand. His office repeatedly issued statements that he had not resigned.
On the last day, May 09, his supporters unleashed violence on unarmed and peaceful protesters after listening to him and his close ally and former minister Johnston Fernando.
Before the violence he spoke to the supporters at his official residence.
“I am ready to sacrifice anything on behalf of the people. But I do not want to betray the 6.9 million people who voted for us,” he told the gathering.
When he asked if he should resign, his supporters said in unison that he should remain as prime minister.
“I always have the memory of uniting the country that was to be divided into two. We will fulfil our responsibility on behalf of the country. I believe we can stand together to face the challenges of the country,” he said.
“As I have always said, for me, the country comes first, the country comes second, the county comes third.”
That was his last public utterance as prime minister of Sri Lanka.
Many people have expressed that they are “done with Mahinda Rajapaksa”.
The violence he started has now backfired. He is said to be in an undisclosed location now, heavily guarded by security forces personnel. The people are in search of him to demand accountability for Monday’s violence which took place in the presence of police.
Mahinda Rajapaksa was forced to relinquish office as the leader of what can only be described as a kleptocracy rather than a great statesman who ended a war to bring peace for millions. (Colombo/May11/2022)