Lankans say ayubowan for goodbye. As they look forward to saying ayubowan to their president Gotabaya Rajapaksa, they continue to lay siege to his home. Just three days ago, they had torched their prime minister Ranil Wickremesinghe’s home in capital Colombo. The flames of Lankan anger is spreading without let. Surely, Rajapaksas are on the backfoot.
A Bastille Redux
Finally, the surrendering president has declared he would resign on 13 July. He is said to be hiding in a naval vessel now. Wickremasinghe too has expressed his desire to depart after the new government takes over. In an orgy, reminiscent of Bastille, Lankans are treating themselves to all the goodies and gadgets in the breached presidential home.
Such large-scale uprising is unprecedented in Lankan history. Cutting across classes, faiths and ethnicity, Lankans are rallying under their national flag to dismantle the presidential standard. Nothing else matters to them, getting the Rajapaksas out is paramount now. Their anger is understandable.
Sri Lanka is bankrupt and running short of food and fuel. It has defaulted on foreign debt and has no resources to finance imports. Institutions remain closed and hospitals are crippled. Essential drugs are in short supply. Well, the list of Lankan woes is longer.
Hit by Hard Experience
Alarmed Rajapaksa party honchos deliberated on what needs to be done in an important meeting. The decision was unanimous: the incumbent government should exit. Wickremesinghe even assured he would resign to facilitate an all-party government. But, inflamed protesters are in no mood to accept these words, they want much more, nothing less than total exit of all Rajapaksas.
Slapped severely, Lankans do not believe their politicians and their promises today. They have no hopes of a credible interim all-party government taking over. They have no dreams about the ability of their government to negotiate with the World Bank swiftly. They do not trust to their politicians to hold a nationwide general election to pave way for smooth transition of power. This is the tragedy.
How an economic hope of yesterday has turned into a hellhole is a lesson in profligacy and political corruption, dynastic excess and destruction of democracy. Whoever inherits the mantle will not find easy to govern. Extricating an insolvent nation from the jaws of intimidating inflation will not be so easy.
An Agenda of Formidable Tasks
Years of nation-building have dissolved into despondency. Caught in the crisis are millions of distraught Lankans attempting to flee a Rajapaksa-manufactured crisis. However, Sri Lankan politicians continue to harp on the growing possibility of an all-party government. Such a government, if ever it is formed, will have formidable tasks to do. Managing the balance of payments will be tough. Bridging the export-import gap will be a major headache. Nursing the wounded tax system will be delicate. Boosting Sri Lanka’s credit ratings will be Herculean. Above all, ensuring dynasts do not rear their heads again will be a real challenge.
Of these tasks, priority number one is restoring Sri Lanka’s downgraded credit ratings. Until this is done, Sri Lanka will struggle to borrow from global capital markets, its mainstay since 2007. Mainstay, more so now, as Sri Lanka is badly hit by the pandemic with disastrous consequences for its lifeline sources of revenue.
Resuscitating a Gasping Economy
Inevitably, Sri Lanka did sound the World Bank out. If assistance from the bank does not materialize, Sri Lanka will default again on its foreign debt. This will crash its global ratings further and open the sluice gates for creditors to rush in clamouring for debt-restructuring.
Thus, an Extended Fund Facility from the World Bank alone can help Sri Lanka resuscitate its gasping economy. Until the receipt of this assistance, Sri Lanka will need bridge finance to import food, fuel and medicines. Without this bridge finance, vehicles will not move, power plants will not generate electricity needed to run essential services and Sri Lanka will be paralysed.
Protests may Continue
If the new government is headed by the speaker, it may facilitate smooth transition of power. The parliament then can pick the new president in a month. Considering Sri Lanka Podujana Peramuna, the right-wing party of the Rajapaksas, continues to hold the majority in Sri Lankan parliament, it is unlikely a credible and legitimate government will take over. Inevitably, World Bank negotiations will hit a bump.
In such a scenario, mass Lankan protests will continue. This will jeopardize any economic recovery. Sri Lanka may look up to India for succor. After all, India offered Si Lanka a 4 bn USD bridge finance.But, India may not help this time. For clues, read India’s recent clarification which explicitly states it will not continue to support Sri Lanka as assistance has its limits. Turning to a calculated China is out of the question, as it will come with its own risks. Where will this leave Sri Lanka? Undoubtedly, in a murderous cycle of civil war.
Profligacy a large stone on Sri Lanka’s placid economic waters. Ban on chemical fertilizers ate into its agricultural output. Inflation pushed it to the edge of the precipice. Populist tax cuts sliced government revenues. Covid landed the final blow by drying up inward remittances and forex inflows from tourism.
Topping these, politics of dynasty drove the final nail in the coffin. For the Lankans, the only hope now lies in how soon they learn the lessons from this crisis and how well they choose their leaders. In Sri Lanka, an old adage must now read as ‘once bitten, always shy’.