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Rajapaksas down but not out in bankrupt Sri Lanka

While the ruling Rajapaksa clan is largely responsible for Sri Lanka’s economic collapse and financial default, the escalating twin crises are unlikely to knock the powerful political family from power anytime soon.

Despite the entire cabinet’s recent resignation, President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa have refused to step down and rejected the formation of an interim government amid massive protests crying out for their ouster while surrounding the Prime Minister’s Residence.  

The Rajapaksas have instead formed a new cabinet and are in talks with China, India and the International Monetary Fund (IMF) to supply a financial lifeline that reassures markets and provides enough financial breathing room to wait out the political storm now buffeting their elected

The protests have erupted amid skyrocketing food and fuel prices, both driven up by a 60% devaluation of the rupee vis-à-vis the US dollar in the last month, falling from 203 during the first week of March to around 330 at present.

The nation of 22 million has been plagued for weeks by frequent power cuts as the government struggles to pay its fuel bills and rations oil and gas supplies. Hospitals are also reportedly short of crucial medicines due to the lack of foreign exchange.

Markets have reacted punitively to the spiraling crisis. On Monday and Tuesday, regulators suspended trading in stocks with the Columbo All-Share Index plunging 8.1% in just five minutes of trading on April 26. The index fell 7.6% during a mere half- hour of trading on Monday.  

Last month, the Rajapaksa government commenced the default process by unilaterally stopping debt payments, with the central bank announcing it would use the nation’s scarce remaining reserves of US$1.93 billion to buy only essential goods. The small island nation’s total debts now exceed $56 billion.

When the mass anti-Rajapaksa protests first erupted in late March, some observers saw the street actions as the first spark of a fiery “revolution” that would eventually bring down the Rajapaksas.

President Gotabaya initially responded by assuming emergency powers and imposing a curfew in the capital Colombo but backtracked three days later as protesters refused to abide by the draconian measures.

Yet mainstream political parties have clearly failed so far to leverage the popular outrage, including now among the influential Buddhist clergy, to their advantage. That’s partly because the political opposition is disorganized and fragmented – and not particularly trusted by the protest movement agitating on the streets.

As one Colombo-based, ethnic Sinhalese activist told Asia Times on condition of anonymity, “no party or politician representing a party is allowed to join the protests … because people are sick of all politicians.”

Adds a Muslim activist involved in the protest movement: “the divided opposition is surely helping those in power.”

The activist, who requested anonymity, noted the anti-Rajapaksa National Movement for Social Justice (NMSJ) that emerged in 2014-15 and later defeated Mahinda Rajapaksa at the presidential election was more potent than the current opposition movement.

Other observers note the opposition movement on the streets has no clear leader that could be elevated as an alternative to Gotabaya and his ruling family clan.  

“The Rajapaksas see this as an advantage,” according to an office-bearer of the United National Party (UNP), whose presidential candidate Sajith Premadasa lost resoundingly to Gotabaya (52.25%-41.99%) at the 2019 election.

Instead, political parties are pushing their narrow, piecemeal programs rather than offering a comprehensive solution to the nation’s economic and financial collapse.

The UNP, which now has only one seat in the parliament as compared to 105 in the previous elections, is bidding to play both sides of the crisis.

On April 7, its current leader Ranil Wickramasinghe met Gotabaya to offer him advice on how to approach the IMF for a bailout. He also pitched forming a “Sri Lanka aid consortium” consisting of the IMF, the European Union, India, Japan, China, and South Korea.

In the parliament, Ranil proposed to pass a resolution under Section 148 of the constitution for the legislature to take over the financial management of the country. The proposal did not gain any traction, however, a reflection of parliament’s deep divisions on various lines.

Those divisions are one key reason why the largest opposition party, Samagi Jana Balawegaya (SJB), which was established in 2020 following a UNP split, has not been able to garner enough support to move a no-confidence motion against the Rajapaksa regime.

While the SJB refused Gotabaya’s offer to join the new cabinet, three members of the Sri Lanka Freedom Party (SLFP) have decided to re-join, extending Gotabaya the elected support he needs to stay in power. If no party and politician had decided to join the new cabinet, Gotabaya might have been left bereft of executive power.

While the UNP and the SJB are now holding their own protests, the leftist Janatha Vimukthi Peramuna (JVP) is doing its own Long March against the government. All in all, though, there is no united front with the masses that have organically taken to the streets in response to their dire economic straits.

This lack of coordinated, multi-party action has allowed the Rajapaksas to reaffirm their control, seen in the establishment of its new 17-member cabinet. It’s also seen in the government’s leading role in liaising with external players to seek emergency financial assistance.

Regime officials have confirmed that they are in talks with Beijing for a US$2.5 billion loan. Beijing’s ambassador to Columbo, Qi Zhenhong, has said China is involved in “all-out efforts” to help Sri Lanka while calling on former European colonial powers to also lend a helping hand.

With an eye on China’s moves, India has said it is willing to open another US$2 billion credit line while also supporting Sri Lanka with food and fuel supplies.

Most importantly, perhaps, the IMF has so far willingly engaged the Rajapaksa government towards a bailout package. It has recently appointed Shanta Devarajan, a respected former World Bank chief economist, to represent Colombo in talks with the IMF.

The Rajapaksas no doubt realize their political fate is hanging by an economic and financial thread. But until the political opposition mounts a more coherent and potent front, they seem more than willing to absorb the criticism of street protestors and hold onto power on the hope external help is on the way.

ASIA TIMES

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