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Tanya: Sri Lanka went through a tremendous political and economic upheaval which resulted in the Aragalaya movement. However, the new regime shut down the protests and the movement, by arresting the leaders and employing the military. What impact has this response had on public sentiment and the potential for future people’s protests?
Raisa: The overt use of the military and the continuous arrest of key protest leaders have added significant barriers to protesting. Apart from arrests, some of the most vocal participants in the Aragalaya have had their passports seized, been subject to travel bans, and are often called in for questioning by the CID. Both Ranil Wickremesinghe and Gotabaya Rajapaksa temporarily introduced state of emergency regulations in response to the protests, which included regulations on spreading misinformation (allowing for the potential to arrest protesters based on their social media posts). Wickremesinghe also introduced regulations making it more difficult for protesters to gather in a bid to stop protests happening near key locations. Other protests including a recent commemoration of Black July (the 1983 pogrom targeting Tamils) and a commemoration event marking the end of Sri Lanka’s civil war were disrupted by Sinhala Buddhist nationalist groups like the Sinhala Ravaya, with the police only intervening to urge protesters to leave. All of this has meant lower participation in protests.
There was also a widely held perception that the protests were being primarily led by the leftist party the Janatha Vimukthi Peramuna (JVP), and the Inter University Students Federation (IUSF), a student union that includes affiliations with both JVP and the leftist Frontline Socialist Party. While these groups were key participants in the protest, they were part of many groups protesting including performance artists, members of the corporate sector, civil society, and members of other political parties as well. However after this narrative was spread, much of upper-middle-class Colombo stopped attending the protests. This was partly due to anti-leftist scaremongering, and partly due to memories of JVP insurrections which led to violence, both wrought at the hands of the JVP and the state. This did impact public perception of the protests. Although the public was broadly supportive of the protest movement, there were some who said that ‘a few extremists’ had hijacked the protests.
Despite these acts of repression, there are still protests ongoing. The IUSF held a protest on August 10, which was disrupted by water cannons with two court orders issued preventing the protest leaders from entering certain areas in Colombo. A recent survey conducted by Verite Research with a sample size of 1008 adults found that most believed the purpose of the Aragalaya had not been fulfilled and that the most important priority was to fix corruption and bad governance. This indicates that people are still dissatisfied with the current political establishment and that if the economic situation were to worsen again, there is the potential for more protests.
Tanya: Sri Lanka's debt restructuring has been caught in a geopolitical contest with major powers, such as China, or institutions such as the IMF. How have the differing interests of these players affected Sri Lanka's ability to address its debt problems and obtain financial support?
Raisa: According to World Bank estimates, Sri Lanka has an external debt burden of around USD 52 billion as of December 2022. A substantial part of that debt (around 40 per cent) is owed to private creditors, with the rest owed to bilateral creditors, the largest of which are China (52 per cent), Japan (19 per cent) and India (12 per cent).
Over time, the type of debt that Sri Lanka has taken on has changed. This may be because Sri Lanka graduated from lower income to lower middle income according to the World Bank’s classification system, restricting the country’s access to multilateral development finance. As an alternative, Sri Lanka grew increasingly reliant on international sovereign bonds (reportedly Sri Lanka issued USD 17 billion worth of ISBs from 2007 to 2019). Sri Lanka also shifted from solely relying on institutions like the World Bank and the IMF to bilateral financing with partners like China and India.
When Sri Lanka’s economic mismanagement and external factors like the war in Ukraine led to a shortage in foreign currency reserves, the country found itself unofficially locked out of international markets. As was reported in June 2022, the country was unable to buy fuel reserves even when they had cash in hand due to heavy debts owed by the petroleum corporation. When economic activity ground to a near-halt, Sri Lanka had to turn to international institutions like the IMF and to bilateral partners like India for help. IMF has long faced criticism because the reforms required in order to qualify for assistance (fiscal austerity, high-interest rates, privatisation among others) have been harsh, overly ambitious and impacted those most in need of financial aid. Similar criticism is levelled at the World Bank for the stringent conditions they often attach to loans and assistance. With bilateral creditors, concerns are already being raised about what kinds of concessions will be made by Sri Lanka in order to qualify for financial aid — particularly as many of these negotiations are opaque and not publicly released.
At present, Sri Lanka is currently in the process of restructuring domestic debt, a signal of its lack of leverage with creditors. Under the plan, pension funds and those holding treasury bills and bonds with the Central Bank of Sri Lanka will be restructured. As analysts have pointed out, the restructuring will impact Sri Lanka’s domestic economy, placing further hurdles on growth. In addition, China has indicated that it will not join the creditors' table to negotiate a common debt treatment plan but has indicated that it will negotiate with Sri Lanka bilaterally, raising concerns about the lack of transparency.
Each creditor will be motivated by its own interests, and Sri Lanka has limited bargaining power to ensure favourable terms. It’s also important to note that even when looking at other countries (like Ecuador and Mexico) the risk of a second default on IMF loans remained high as the debt would still be due at a future date. Perhaps this is why there has been a sustained push by several countries in the region for debt forgiveness, particularly since the world is grappling with a cost-of-living crisis and the possibility of recession.
Tanya: The impact of economic crises on society can be enormous and the ongoing economic crisis in Sri Lanka has been hitting different parts of the population. Have you seen any specific ways it's impacting vulnerable or marginalized communities? And beyond the immediate financial struggles, what kind of broader social changes or implications are you observing as a result of these economic challenges?
Raisa: The most immediate challenge is that people are going hungry. There has been an improvement since last year — according to the World Food Programme’s July 2023 report, around 3.9 million people (17 per cent of the population) are moderately food insecure, while around 10,000 are severely food insecure. This is an improvement from May 2022, but what is not being captured in this data is that the children who are suffering from malnutrition at the moment will go on to have lingering health impacts later on in life. This means a greater burden on the health sector down the line and their life expectancy will be impacted. Measuring the impact of food insecurity alone also doesn’t capture asset loss — people who had to sell land, vehicles or other assets for urgent needs; nor does it capture those who gave up non-essentials or purchased cheaper brands of food and medicine, or had to change consumption patterns (switching off appliances to save on electricity bills, switching from gas to charcoal-fire cooking, etc) in order to cut down on bills. Some of these choices may also have health impacts in the long term. Another under-reported and swiftly emerging issue is that drought has led to drinking water shortages in 12 districts as of August 7, according to the Disaster Management Centre. This impacts over 170,000 people across the country, while over 50,000 farming families in Udawalawe, Embilipitiya, Ratnapura and Ambalantota are facing the destruction of their crops due to water shortages, and have been protesting.
A longer-term social issue that is emerging is brain drain — with many people choosing to migrate overseas for better economic opportunities and a better quality of life. What this means is that there is a shortage of specialised staff in a number of sectors already. In the health sector, the migration of consultant physicians means that hospitals outside of Colombo (such as in Kilinochchi, Mullaitivu and Awissawella) are struggling to treat patients, while there is also a shortage of consultant surgeons in Hambantota. At the same time, there are also shortages of specialised doctors in cardiology, radiology and urology, as Himal Southasian has reported. In addition, there’s reportedly a shortage of lecturers in the medical faculty in several universities, while around 600 lecturers are reported to have left their employment — meaning that there will also be a shortage of qualified teaching staff in a number of specialities. All of this will impact people’s ability to access healthcare and follow higher education.
Tanya: I've been reading about the political situation in Sri Lanka, and one thing that caught my attention is the discussion around Ranil Wickremesinghe's regime. It's curious how he came to power without winning elections, and I'm wondering how that's affecting his legitimacy and the trust people have in his government. Given the opposition's claims about his perceived lack of legitimacy, what's your take on the overall public perception of his regime? How do you see this playing out in the broader socio-political landscape of the country?
Raisa: When Wickremesinghe came into power, there were many (largely in upper-middle-class Colombo) who wanted to give him a chance. This was mainly because he was seen as the person most likely to be able to negotiate with the IMF in order to try to stave off the worst of the crisis. However as you’ve pointed out, he was not elected into power and even pre-crisis was deeply unpopular (in the 2020 general elections, his party the UNP was decimated and could only retain one seat via the national list). Wickremesinghe was particularly brutal with his crackdown on protesters after he came into power, using both the armed forces and stringent laws to crack down on freedom of assembly and expression. Wickremesinghe is also refusing to hold planned local government elections claiming a lack of funds (it’s likely that the UNP would do badly in local polls, reflecting Wickremesinghe’s unpopularity and potentially impacting the presidential polls which are scheduled to be held in 2024).
The austerity measures Wickremesinghe has put in place due to the IMF programme are deeply unpopular with voters. All this means that Wickremesinghe and his party are unlikely to perform well during the next election. However, perhaps the broader issue here is that the protesters were calling for ‘system change’ — pointing to long-standing issues like corruption, nepotism and disenchantment with the political establishment. Historically, most of Sri Lanka’s elections have come down to a fight between two parties. But these events have left the door open for a political alternative that could appeal to these disenchanted voters. Due to this, there have been a number of new parties and coalitions announced in 2023 — some of them established political parties trying to rebrand themselves and appeal to a floating voter base, and some newer configurations formed after the protests. It doesn’t seem that any of these have emerged as serious contenders up until this point, but this could change in the lead-up to elections.
Tanya: With this ongoing economic crisis and political turbulence, how do you see countries working together to shape Sri Lanka's socio-economic path? Are there certain areas where more international engagement could actually help ease some of the pressing issues the country is grappling with right now? It seems like a delicate balance between national interests and global partnerships.
Raisa: There has been a call for debt forgiveness from around 182 academics, with the reasoning that these private institutions lent money at high-interest rates to corrupt politicians and profited from the deal. This does highlight that many of the institutions that countries like Sri Lanka can turn to for financing are extractive and that their policies often disproportionately impact the poor and working class. The IMF has said that Sri Lanka’s social safety net programmes suffer from poor targeting, noting that the earlier programmes did not reach the most marginalised communities, while those who were not in need of financial aid were also unfairly receiving benefits. However, the current social welfare scheme, called Aswesuma, is also receiving complaints from the public (reportedly, there have been 400,000 appeals received over the benefits list, and a number of people have been protesting being left off the list). There has also been a call for universal social protection — recognising that lower and middle-income countries are often ill-equipped to provide social protection during crises. This has included calls to set up a Global Fund for Social Protection to provide both technical and financial support specifically to provide social security for countries in need.
All these suggestions also point to a need for ‘system change’ not just within Sri Lanka but also in international financial organisations, multilateral development banks and private corporations, which should be guided by factors other than commercial or national interests (including human rights) — especially given the scale of the global cost-of-living crisis. IMF’s 2022 annual report noted that 60 per cent of low-income countries were in debt distress or at high risk of debt distress and defaulting on repayments. There have already been missed opportunities, such as during the G20 summit in March, for countries to come together and come up with concrete solutions and opportunities for cooperation to alleviate Sri Lanka’s socio-economic issues. Capitalising on these opportunities (or even facilitating them proactively) might be a good starting point. Ideally, this could also be done through regional and subregional initiatives such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
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