Although the IMF wants to conclude rescue talks with Sri Lanka as soon as possible, the election of Ranil Wickremesinghe, a prince of the nation of pearls, as president indicates that the situation in the island nation will get worse before it starts getting worse.
Ranil Wickremesinghe is deeply unpopular with the public, who are suffering from acute shortages of fuel, food and other essentials after foreign reserves dry up. So much so that he is often derided by the public as Ranil Rajapaksa as he is seen as a major contributor to the Rajapaksa Empire as a front and also as a five-time Prime Minister and multiple-time Finance Minister. Economic Chaos However, as someone who has dealt with the IMF in the past, Ronil also has a chance if he can ease the country’s economic situation and restore his credibility. This is easier said than done as today the public has to wait three to four days for gas cylinders and four to five days for motor vehicle fuel.
IMF Managing Director Kristalina Georgieva has said that while she wants to conclude talks on an economic rescue package with Sri Lanka as soon as possible, Colombo’s track record with the Bretton Woods Institution is nothing to write home about. At least six to seven times in the past could not stop talks with the IMF. Sri Lanka pre-emptively defaulted on its foreign debt for the first time earlier this year after the pandemic decimated its core tourism sector. Today, the country has high inflation with 360 Sri Lankan Rupees to one US dollar and depreciating at a rapid rate.
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Since the onset of the economic crisis, India has contributed USD 3.8 billion to Sri Lanka without any incentives. Despite advice to the contrary from its MPs, the Modi government has decided not to interfere in Sri Lankan politics in any way except by providing aid in the form of food, fuel, fertilizers and medicine with the long-term aim of stabilizing the neighbourhood. This has not been the case with China, Sri Lanka’s other debtor, which has lent the Rajapakse empire high interest rates to fund economically unviable white elephant infrastructure projects such as a commercial port and airport at Hambantota and contributed to the country’s economic decline. One should not forget that when the disgraced Rajapaksa allowed China into Sri Lanka, it was Ranil who gave Beijing a 99-year lease of the Hambantota. Countries like Pakistan, Maldives and Nepal are also following the same path and are trapped by Chinese debt. Japan, Sri Lanka’s other major creditor, has refused to lend until a proper government is re-established in the country. The West simply doesn’t care except to support Ronil because it is embroiled in a never-ending war in Ukraine.
It is quite clear that the mood of the Sri Lankan public was against Ranil Wickramasinghe as they set fire to his private house. His election as President is a public slap in the face, as he is the only nominated member of Sri Lanka’s Parliament and the only face of his party. The public may not take kindly to this political manipulation and will become increasingly agitated if the economic situation is not addressed soon. And this is not possible without causing more pain to the public as the IMF will impose strict conditions in the form of tax rationalization, job cuts and retrenchments to reduce the burden on the government.
The IMF MD clearly indicates that the risk of a global recession has increased and China is headed for a “quite significant deterioration” from the institution’s April estimate of 4.4 percent growth, the world is heading into uncharted waters and countries like Sri Lanka and Pakistan will bear the brunt of uncertainty, both economic and political. With political uncertainty on the horizon, President Ranil Wickremesinghe faces an uphill task in rescuing Sri Lanka’s economy.