Sri Lanka’s prime minister Ranil Wickremesinghe has been sworn in as acting president as the country reels from an economic crisis and unrest.

He replaces Gotabaya Rajapaksa who fled to Singapore after unprecedented mass protests which saw demonstrators overrun the presidential palace.

Protesters defied a curfew to celebrate his resignation during the night.

Sri Lanka is experiencing economic chaos as it faces an acute shortage of food, fuel and other basic supplies. 

The process of parliament electing a new president will begin on Saturday, with MPs likely to take a vote in a week’s time.

Given the governing party has a majority, MPs are thought likely to back Mr Wickremesinghe, who has close links with the Rajapaksa family.

But whether Sri Lanka’s public would accept this is another matter, because Mr Wickremesinghe’s resignation as PM was a key demand of protestors.

Earlier this week, crowds stormed the former prime minister’s compound, clashing with security forces.

A demonstrator. Manuri Pabasari, told the BBC at the time that a protest rally against Ranil Wickremesinghe was expected in the coming days. 

“He has no people’s mandate [and] is a well known Rajapaksa supporter,” she added. “I mean the new president and the new prime minister should be not a Rajapaksa supporter.”

The governor of Sri Lanka’s central bank, Nandalal Weerasinghe, has warned the country may shut down if no stable government is formed soon.

There was a “lot of uncertainty” over whether enough foreign exchange can be found to pay for essential petroleum, he told the BBC’s Newsnight programme, and progress on getting an international bailout package depended on having a stable administration.

• Can Sri Lanka’s acting president restore order?
• How Sri Lanka’s war heroes became villains
• Why is Sri Lanka in crisis?

Meanwhile, Singapore says the ousted president Gotabaya Rajapaksa did not ask for political asylum when he arrived there. 

The former president, who arrived with his wife and two bodyguards, no longer has legal immunity as a head of state and his position is now more precarious as he tries to find a safe country to shelter in. 

He is expected to stay in Singapore for some time before possibly moving to the United Arab Emirates, Sri Lankan security sources told AFP news agency. 

Sri Lanka: The basics

• Sri Lanka is an island nation off southern India: It won independence from British rule in 1948. Three ethnic groups – Sinhalese, Tamil and Muslim – make up 99% of the country’s 22 million population.
• One family of brothers has dominated for years: Mahinda Rajapaksa became a hero among the majority Sinhalese in 2009 when his government defeated Tamil separatist rebels after years of bitter and bloody civil war. His brother Gotabaya, who was defence secretary at the time and later became president, fled the country after mass unrest. 
• Presidential powers: The president is the head of state, government and the military in Sri Lanka, but does share a lot of executive responsibilities with the prime minister, who heads up the ruling party in parliament. 
• Now an economic crisis has led to fury on the streets: Soaring inflation has meant some foods, medication and fuel are in short supply, there are rolling blackouts and ordinary people have taken to the streets in anger, with many blaming the Rajapaksa family and their government for the situation.

While much attention has been lavished on the chaos of the British government, a more serious defenestration was under way in Sri Lanka this week. The country entered a state of emergency, and its president, Gotabaya Rajapaksa, fled the country after civilians stormed his palace. The videos of people jumping into his pool and petting his pedigree dogs are astonishing.

Sri Lanka’s escalating political and economic crisis has made life on the small island almost impossible. It’s a country on the brink, with no clear sense of what comes next. On one hand this could lay the foundations for radical positive change; on the other it could be the start of a long, bloody conflict between the government and the people.

To get to grips with how Sri Lanka came to this point, I spoke to Hannah Ellis-Petersen, the Guardian’s south Asia correspondent, who is on the ground in Colombo. First though, the headlines.

In depth: A crisis years in the making

The political upheaval we are witnessing in Sri Lanka did not happen overnight. “This is a historic problem that leaders have turned a blind eye to for decades,” says Hannah Ellis-Petersen.

The country was thought to be one of south Asia’s great success stories: the streets are clean, the infrastructure is impressive, and healthcare and education are free. “The problem is all of this costs money,” Hannah explains, and the government was relying on foreign loans to keep the country running. We are now witnessing the fallout from this, in a crisis that has been years in the making. Here’s a guide to what brought Sri Lanka to this point – and where it goes from here.

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1 An unstable government

Since achieving independence from British colonial governance in 1948, Sri Lanka’s government has been structured with both a prime minister and a president. The prime minister is the head of government and the most senior member of parliament. But the real power lies with the president.

One family – the Rajapaksas – has dominated the Sri Lankan political sphere, concentrating power in the hands of a few senior officials – who all happen to be related. Unsurprisingly, this has led to problems over the past two decades, including political violence against minorities and accusations of rampant corruption.

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2 Economic crisis

The problems in Sri Lanka are systemic, says Hannah, and longstanding. “Through a series of terrible financial decisions and mismanagement of the economy, the government has spent all of the money the Sri Lankan government had, and in particular spent all of the dollars,” Hannah says. This is a problem for Sri Lanka as it relies heavily on imports. With no cash left, importing basic necessities like food, fuel and medicines has become difficult – “there are some products that have gone up five times in price”, Hannah adds.

After defaulting on its foreign debt for the first time since achieving independence, the Sri Lankan government halted the sale of fuel for non-essential vehicles for two weeks. It is the first time a country has restricted fuel sales since the 1970s. Citizens have also been faced with daily power outages, schools have closed and people are forced to work from home in an attempt to conserve energy.

“It’s important that we understand that it’s not just Covid-19 or the war in Ukraine, or global inflation,” Hannah says, explaining that while these external factors have exacerbated the problems in the country, Sri Lanka’s difficulties are largely the consequence of reckless spending and endemic corruption.

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3 A doomed dynasty

At the heart of it all is the Rajapaksa family. Gotabaya Rajapaksa, the president, was a popular figure when elected in 2019. At that stage “it was genuinely unfathomable to think that the Rajapaksas would ever fall; they seemed untouchable”, says Hannah. Before a few resignations in April, Gotabaya and his brothers, Mahinda and Basil, were running the country with an iron fist. They appointed sons and other family members into government positions, and this nepotism created the perfect conditions for corruption to fester.

Basil, until recently the country’s finance minister, has been accused of lining his own pockets through huge infrastructure projects which are said to be completely useless; and in 2016 Gotabaya was charged in a corruption case. (The charges were eventually dropped on the grounds of immunity after he was elected president.) In only three years, the Rajapaksas have shifted greater political power to the president, further limiting his accountability for political or economic decisions.

But these protests have created a “political awakening”, Hannah says. “People don’t just want Rajapaksa to go or even for his family to go – they want the whole political system to be overhauled.”

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4 What next?

The people of Sri Lanka aren’t just complaining about their conditions – they have clear demands too. A resignation and a unity government that includes all political parties to help solve the economic crisis – and then eventually a general election.

The protesters will not fade away – when resignation looked unlikely, protesters set the prime minister’s residence on fire. This mounting pressure and constant threat of escalation have led to Gotabaya Rajapaksa’s official resignation.

This is a positive sign, however the country is not out of the woods yet. The now acting president, Ranil Wickremesinghe – also the current prime minister, who has been involved in government for more than two decades himself – has given the military free rein to “restore order and peace”. Such a directive would be concerning anywhere, but under a government that already stands accused of human rights abuses and war crimes, it felt ominous.

Yet Hannah remains optimistic: “My hope is that this upheaval could really positively change the island. After the end of the civil war, there were no efforts of reconciliation, accountability or unity. And this finally, 13 years later, might be the thing that does that,” she says. “But it relies on politicians being admirable and doing the right thing.” 

Prime Minister Ranil Wickramasinghe was sworn in as the Acting President this morning before the Chief Justice.

The protestors say that Wickramasinghe should not be appointed as the Acting President but should leave the post of Prime Minister and go home.

Meanwhile, the No Deal Gama protest against Wickramasinghe has started again in front of the Temple Trees.

In May 2022, Sri Lanka defaulted on its debt for the first time in history when the country was negotiating a swap facility from a bilateral country. The lender was livid that Sri Lanka defaulted without informing the lender. Despite Sri Lanka was given a 30-day grace period to pay $78 million in unpaid interest, the Central Bank
ultimately failed to pay. The Governor informed ex President Gotabaya Rajapakse that it was only a “soft default”.

LNW is still to find a good definition for what a soft default really means in the banking world . Because for the writer a default is a default however big or small . This unplanned and unauthorized default not only did it impact Sri Lanka’s economic future for a long time, but it also raises an important question; what else is risk of default? His decision to default without parliamentary approval is only one of the list of the blunders that has caused serious harm to the economy.

The default has virtually put Sri Lanka out of world capital markets for ever. The ongoing economic crisis, the worst Sri Lanka has ever seen in its post-independence history, would next test the country’s largest banks’ resilience, as Fitch Ratings on Monday said their asset quality, earnings, capitalisation and liquidity could come under tremendous pressure, when the operating conditions deteriorate further due to the ongoing crisis..

Fitch rating agency said the sovereign credit default in April and rapid deterioration in the broader macro-economic environment, where the soaring interest rates, red-hot inflation and currency depreciation have narrowed the banks’ operational flexibility, which in turn would mute growth, trigger loan defaults and hike operating costs, putting enormous pressure on the earnings. Therefore for this foolish decision ably supported by the opposition who were running scared of a “super default” ( meaning unknown)

Nandalalweerasinge in my view should like #Gota go home to Australia . We can no longer experiment with academics and inexperienced pundits who try to impress using big words. To unwind some of the decisions he has taken for example hiking interest rates by 100% when inflation is driven by a shortage of foreign exchange and CBSLs inability to stabilize the foreign exchange by sticking to text book interventions, he has caused unrepairable damage to the livelihoods of the people of Sri Lanka.

There must certainly be better and practical and less cocky people in the Central Bank who can fill his shoes.

Adolf

Hon. Ranil Wickremesinghe was sworn in as Acting-President a short while ago by Chief Justice Jayantha Jayasuriya

Prime Minister Ranil Wickremesinghe was sworn in as the acting President, sources said.

He was sworn in as the acting President of Sri Lanka before Chief Justice Jayantha Jayasuriya at Walukarama Temple, Kollupitiya, according to sources.

His swearing in has taken place with a limited audience, and the Walukarama Temple was chosen as it would be problematic for him to hold this event before a bigger audience amidst the crisis, sources further added.

Opposition leader Sajith Premadasa has held a special discussion with a group of MPs representing the Parliament. The discussion was held at the Parliament premises.

Several party leaders representing the opposition have participated in this and a group of members of the Podujana Peramuna who are currently independent has also participated.

As Gotabaya Rajapaksa has resigned from the office of President, the responsibility of choosing the successor President has been assigned to the Parliament. Accordingly, the new president will be elected within the next week.