How can Sri Lanka move forward?

Sri Lankan President Gotabaya Rajapaksa resigned Thursday by email, after a herculean people-power movement fueled by anger over corruption and massive inflation toppled his government. Although it’s a major victory for Sri Lankan activists, Rajapaksa’s resignation raises existential questions about how the country’s political structure, economy, and the protest movement that brought him down will forge ahead.

Gotabaya fled the country earlier this week, reportedly heading first to the Maldives, then on Thursday boarding a Saudi Arabian Airlines flight to Singapore, flight tracking data shows. His resignation has been a key demand of protesters, but it’s far from the political overhaul many see as critical to getting the country functional again.

The Rajapaksa administration’s rampant corruption and disastrous economic policies culminated in months of sustained, nonviolent action by hundreds of thousands of Sri Lankans from all over the country, of a wide variety of ethnicities and backgrounds — a testament to the severity of the economic and political catastrophes, including unsustainable debt, staggering inflation, and general, overwhelming scarcity that Gotabaya, his brothers, and his cronies brought on the nation.

“All the countries of South Asia used to look at Sri Lanka as the place with the highest development indices — definitely highest literacy,” Tamanna Salikuddin, director of South Asia programs at the US Institute of Peace, told Vox in an interview Saturday. “It’s obviously a much smaller population than any of its neighbors — India, Pakistan, or Bangladesh — but it’s always had a high GDP per capita, high standard of living, Colombo was this sort of modern, fancy city with the nice restaurants and all of that.”

Now, people wait in line for days just to buy fuel; inflation was at 54.6 percent as of June according to the Central Bank of Sri Lanka; and the government owes its various creditors $51 billion after having defaulted on its repayments for the first time in May.

Gotabaya won the presidency by popular vote by a landslide in 2019, but he wasn’t the first Rajapaksa to hold the office. His brother, Mahinda, previously held the office from 2005 until 2014 when he was voted out. Under Mahinda, the government took out billions in loans to fund flashy infrastructure projects, ostensibly to create jobs, but instead they helped plunge the country into the worst economic crisis of its existence as an independent nation, as the Guardian’s Hannah Ellis-Petersen reported last week. Gotabaya, with Mahinda as his prime minister, and their brother Basil as minister of finance, continued a disastrous economic policy.

Successive crises — including 2019’s Easter Sunday terrorist attacks on churches, the Covid-19 pandemic, and Russia’s invasion of Ukraine early in 2022 — halted Sri Lanka’s tourism industry. That meant the end of a major economic driver and source of foreign currency, which the government used to import basic necessities like fuel and food.

The government then failed to raise taxes, request assistance from the International Monetary Fund (IMF), or adjust its policy to contain the problem, allowing inflation to spiral out of control and draining its foreign currency reserves until citizens could no longer access the goods they need. Then, in 2021, the government banned the import of chemical fertilizers to preserve its dwindling stockpile of foreign currency, in the process decimating the agricultural sector and forcing the government to spend more importing necessities than it saved on fertilizer imports.

Now, with Gotabaya out of office, Ranil Wickremesinghe — an ally of the Rajapaksa clan and six-time former PM whose last stint started in May, when Gotabaya appointed as prime minister following Mahinda’s resignation — is the acting president and finance minister. He could likely be the interim president, should his Sinhalese nationalist party, founded by Basil Rajapaksa, Sri Lanka Podujana Peramuna (SLPP) maintain unity in Parliament.

“Per the constitution, he’s acting president until they hold elections, so today they will be meeting in Parliament and kicking off the vote for a new president, and that will likely happen next week on the 20th,” Salikuddin said.

Wickremesinghe’s election as interim president isn’t exactly a sure thing — there are some dissenters in the SLPP and an opposition candidate, Sajith Premadasa, has emerged, promising accountability for “those who looted Sri Lanka,” which Premadasa told the Associated Press “should be done through proper constitutional, legal, democratic procedures.” However, the SLPP maintains a majority in Parliament, and there’s a strong impetus to quickly cement leadership so that the country’s economic ship can be righted.

Sri Lanka’s economy needs help now — and a president’s needed for that

Though the likelihood of continued cronyism and corruption in Colombo is still quite high, the pressure is on to form a new government so that IMF negotiations, the last round of which concluded at the end of June, can proceed, and Sri Lanka can begin the process of crawling out of its $51 billion debt.

“I think getting a president in place means you restart the process right away; I think that will be top of the list,” Salikuddin told Vox. “[The interim government] is going to get pressure from a lot of different countries that are giving them aid,” including Australia, the US, Japan, and India, otherwise known as the Quad, “to move forward with the IMF — to restructure their loans, to try to get on a program. So you’re probably going to see real movement by September. I don’t know if they’ll conclude a program that fast, but I think you will see real movement,” she said.

The government will have to impose austerity on an already-struggling populace under an IMF program, Salikuddin told Vox. “In a way it’s good that it would be this president that is setting up for fresh elections, because they’re going to have to institute a bit of pain” — likely in the form of tax hikes to get non-contingent funds flowing back into government coffers, as well as additional IMF requirements.

“The challenge will be, can they find a way to use both aid and, maybe, cash transfers to the poorest of Sri Lankans to alleviate some of that pain,” Salikuddin said.

Additionally, any IMF program will include requirements and benchmarks for economic reforms, as will aid from the Quad. However, those are likely to be incremental, and won’t bring about the full-system overhaul that protesters are seeking.

A critical element clouding any discussion of monetary changes is the massive amount that Sri Lanka owes China. “It’s very complicated, it’s very opaque,” Salikuddin told Vox. “We don’t know a lot of the restrictions on those loans.” The challenge of restructuring or refinancing those loans, though, is negotiating with China.

“China is, of course, a very important creditor of Sri Lanka,” Treasury Secretary Janet Yellen said in a news conference on July 14:

Sri Lanka is clearly unable to repay that debt. And it’s my hope that China will be willing to work with Sri Lanka to restructure the debt — it would likely be both in China and Sri Lanka’s interest. But more broadly, we’re really looking to China to step up their role in debt restructurings that are eligible for treatment under the Common Framework. We’ve not seen much progress and part of what I expect to do over the next several days is urge our partners in the G20 to put pressure on China to be more cooperative in restructuring these unsustainable debts.

But, there’s a catch-22, Salikuddin told Vox. “China is not going to [renegotiate Sri Lanka’s debt] until they do that with their Western donors. Sri Lanka has loans from a lot of different people, but China will not restructure anything or refinance anything until it sees what [Sri Lanka’s] other lenders are doing,” she said.

Can people power change Sri Lanka?

Although a leaderless, grassroots movement has managed to drive out Gotabaya, protesters wonder, as the Straits Times’ Rohini Mohan put it, “What if nothing really changes?”

In the immediate term, Salikuddin argued, it won’t. Government moves “at a glacial pace,” she told Vox. “I think the question will be, how long to people stay united and focused on the goal? You might get new elections, you might get some repeal of executive presidency power that the protesters want, but will it go far enough, in terms of reconciliation with minority communities?”

The government’s economic malfeasance and the suffering that’s resulted for the people of Sri Lanka has, in a sense, been an equalizer. Now, instead of minorities, like Tamils for whom there’s never been any effort toward amnesty after the brutal civil war which ended in 2009, or Muslims who’ve felt further marginalized after the 2019 terror attacks, Sri Lankans from all walks of life feel the government fails to represent them and act in their best interests, Salikuddin told Vox.

“That’s what’s interesting about this protest movement is that it was representative of a lot of ethnic groups and it wasn’t just one community. And now you have Sinhalese majority community as upset about the government, as upset about the economic and humanitarian crisis,” she said.

The devastating, 30 year civil war between ethnic Tamils and the Sinhalese majority came to an end under Mahinda’s rule, in 2009, due in part to Gotabaya’s ruthlessness as defense secretary. Under his orders, the military launched a brutal offensive against the Liberation Tigers of Tamil Eelam who were fighting for a Hindu Tamil state in the northeast of the country. As many as 40,000 Tamil civilians were killed in the process according to United Nations estimates, Reuters reports. Gotabaya’s administration persistently maneuvered its way out of inquiries into alleged atrocities during the civil war, putting seemingly complicit officials in positions of power and threatening individuals and institutions working toward accountability, according to a 2021 United Nations report.

“I think all of that will come to the fore, if you don’t get really structural reform and address these things,” Salikuddin told Vox. “And I’m not hopeful that any fresh elections are going to bring true representation for these groups in a real way.”

Thus far, the movement has been incredibly peaceful, from its beginnings in March until mid-July. That means that, as much as the government may want the protesters to disperse and for the status quo to return, they’re limited in the tools they can deploy to make that happen, Salikuddin told Vox. At this point, barring violence and chaos on the part of the protesters, a true crackdown on the demonstrations isn’t really politically viable.

What Wickremesinghe’s government is likely to do, she said, is try to wind down the movement, rather than work with them to achieve stability and a government that’s responsive to people’s needs. It seems they’re already trying to do so by instituting a curfew and a state of emergency, as they did Wednesday. However, protesters feel their demands haven’t been met — thus there’s no reason to go home. Creating a reasonable equilibrium is “going to actually require engagement and resolution with the protest movement,” Salikuddin said.