Sri Lanka’s Political and Economic Crisis

2022 Sri Lankan economic crisis, people wait for long time to refill liquefied petroleum gas cylinders. Photograph Source: AntanO – CC BY-SA 4.0

Sri Lanka, an island of 22 million people, continues to be in the grip of its worst economic and political crisis since independence on 10 February 1948.

Since April there have been protests against extensive shortages of food and fuel, as well as a profound crisis of trust in Sri Lanka’s political institutions, primarily parliament and the presidency (both have faced repeated charges of corruption and nepotism for decades, a situation unable to be surmounted by a cowed judicial system).

The heart of the anti-government movement, at this point, was a demand for the resignation of the strongman president Gotabaya Rajapaksa, a member of a successional political family.

This demand was a success. In the middle of July Rajapaksa fled Sri Lanka for the Maldives during the night on an air force plane, and announced a couple of days later that he was stepping down from the presidency. Gotabaya is now said to be in Singapore.

What precipitated Gotabaya Rajapaksa’s flight was the massive scale of his family’s corruption and venality.

The rule of the Rajapaksas began in 2005 when the older brother Mahinda was elected president. A sectarian, he became a hero with his Sinhalese Buddhist majority community for ending the brutal three-decade civil war with Hindu Tamil separatists.

At the same time, the Tamil minority regarded him as a mortal enemy for the viciousness of the war, where Tamils were killed in their tens of thousands, and even more “disappeared” when the war was supposedly over.

Gotabaya Rajapaksa was Mahinda’s defence secretary and head of the armed forces, and has repeatedly been accused of war crimes and of being personally incriminated in the killings of journalists and the enforced disappearances and the unidentifiable “white van abductions” of Tamils, human rights campaigners, and political opponents.

Mahinda lost the presidential election in 2014, brought down by widespread corruption allegations, but the stranglehold of his family on Sri Lanka’s politics meant that neither these allegations nor those of war crimes were investigated.

The president from 2015 to 2018 was the placeholder Maithripala Sirisena.

Supposedly “non-affiliated”, Sirisena turned out to be a stooge of the Rajapaksa family. Promising to serve only one term, he made Ranil Wickremesinghe (the current president) his first prime minister.

Ranil Wickremesinghe lasted until 2018, when Sirisena sacked him and appointed the former President Mahinda Rajapaksa (his erstwhile supposed rival) as prime minister.

Sirisena then prorogued Parliament, violating the Sri Lankan constitution in the process, and precipitating a constitutional crisis.

In November 2019, Gotabaya Rajapaksa, the former defense secretary who presided over the last phase of the civil war, was elected president, and appointed his brother (the former president) Mahinda as prime minister.

Parliamentary elections were held in August 2020. The brothers’ party, Sri Lanka People’s Front– campaigning on a platform of Sinhala-Buddhist chauvinism and governmental militarism– achieved a supermajority in these elections. This put them in a position to amend the constitution and remove curbs on presidential powers.

Assurances given to the international community by Maithripala Sirisena and the Rajapaksa brothers that there would be investigations into war crimes perpetrated during the civil war have always come to naught— at the same time as they mouthed these bromides to the international community, the Rajapaksas were telling their domestic audience that such measures would never be taken against the country’s “war heroes”.

Despite this, the US Ambassador to the United Nations Samantha Power in 2016 called Sri Lanka a “global champion of human rights and democratic accountability” (sic).

Ms Power was voicing what had become conventional wisdom in the international community, namely, that Sri Lanka merely “needs time” to heal the wounds of the civil war, and was somehow already embarked on that curative trajectory. Sri Lanka therefore needed encouragement rather the horsewhip. This was a grievous miscalculation.

As a result of this blunder, pervasive in international political circles, the Rajapaksas always knew they were in for an easy ride from the international community, and could use this impunity to ride rough-shod over ordinary Sri Lankans.

Mahinda and Gotabaya weren’t the only Rajapaksa players in Sri Lankan politics. Another brother, Basil, who was finance minister, as well as several other Rajapaksas who held cabinet posts, are said collectively to have bankrupted the country by engaging in widespread corruption, economic mismanagement, reckless borrowing, drastic and unnecessary tax cuts (which increased the national debt), profligate spending on vanity projects, and the already-mentioned militarization of government (the US now supplies military equipment to Sri Lanka), and a conflict-riven Buddhist-Sinhalese racist politics.

Basil Rajapaksa, a US citizen, is nicknamed “Mr Ten Percent” as a result of his habit of demanding a 10% personal commission from local and foreign companies on their receipt of government contracts.

Basil, and the eldest Rajapaksa, Mahinda, remain in Sri Lanka on the orders of the supreme court. Also subject to this order is Mahinda’s nephew Namal Rajapaksa, said to be the family’s political heir apparent.

Sri Lanka ran out of foreign currency to pay for imports. The ensuing fuel and food shortages, months of lengthy power blackouts, and record inflation (39.1% in May), prompted Sri Lankans to take to the streets in April.

These protests were met with teargas attacks, draconian surveillance, travel bans, death threats, and imprisonment of protesters without charge.

The protesters stormed the presidential palace, took dips in the absconded Gotabaya’s swimming pool, and worked out in his gym.

There is no confidence that current president Ranil Wickremesinghe can, or will, do anything significant about this critical situation. Ranil is expected to seek a bail-out deal with the IMF, which of course will demand its usual hardline “conditionality” that will hit the poorest hardest.

Like the 2015-2018 placeholder president Maithripala Sirisena, the wily and opportunistic deal-making Ranil Wickremesinghe (nickname “Deal Ranil”) seems to have been earmarked for a similar role by the Rajapaksas.

The Rajapaksas may be a family, but their record shows they are also Sri Lanka’s foremost cartel.

Soon after being made president, Wickremesinghe declared a state of emergency, and called the protesters “fascists” while cracking down on the demonstrations.

The state of emergency continues, allowing security forces to arrest leaders of the protest movement, conduct searches without warrants, limit public gatherings, and to demolish the main anti-government protest camp in a violent pre-dawn raid that caused consternation in foreign embassies and among human rights advocates.

A government spokesman said last week that Gotabaya will return to Sri Lanka— he only has a short-term visa for his stay in Singapore, and has not so far applied for asylum there.

However, last week Sri Lanka’s supreme court posted a call for Gotabaya Rajapaksa to make submissions by 1 August in response to various petitions seeking accountability for those deemed responsible for the country’s economic collapse.

This step by the supreme court may encourage Gotabaya to prolong his foreign travels, taking care of course to avoid those countries which have extradition agreements with Sri Lanka.

Instead of walking away with their tails between their legs for turning a long and steady blind eye to the Rajapaksas’ excesses and crimes, western governments and media saw Sri Lanka’s economic collapse as yet another opportunity to target bogeyman China.

Western political leaders and media have consistently depicted China’s Belt and Road initiative as a “debt trap” for the countries benefitting from it.

Sri Lanka is now alleged to be the latest “victim” of this “debt trap”.

Alas for purveyors of this “debt trap” narrative, the vast majority of Sri Lankan foreign debt is owed to the West.

It turns out that (as of 2021) a massive 81% of Sri Lanka’s foreign debt was owned by US and European financial institutions, as well as western allies Japan and India.

According to statistics released by Sri Lanka’s Department of External Resources, as of April 2021, the bulk of its foreign debt is owned by Western venture capitalists and banks, who own 47% of the debt.

The top holders of Sri Lankan foreign debt, in the form of international sovereign bonds (ISBs), are the following:

BlackRock (US)
Ashmore Group (Britain)
Allianz (Germany)
UBS (Switzerland)
HSBC (Britain)
JPMorgan Chase (US)
Prudential (US)

The Asian Development Bank and World Bank, which are arms of the US’s Washington Consensus, own 13% and 9% of Sri Lankan foreign debt (respectively).

Japan owns 10% of Sri Lanka’s foreign debt, while India own’s another 2% as of April 2021.

China, by contrast, owns !0% of Sri Lanka’s foreign debt.

Most of my information regarding Sri Lanka’s debt is taken from Ben Norton’s excellent piece (posted on 13 July) on MRonline.

To quote Norton: “Western media reporting on the economic crisis in Sri Lanka, however, ignores these facts, giving the strong, and deeply misleading, impression that the chaos is in large part because of Beijing”.

Meanwhile the people of Sri Lanka continue to suffer, with the prospect of a Rajapaksa return to power somehow looming over them.

This content originally appeared on CounterPunch.org and was authored by Kenneth Surin.

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