Sri Lanka Leaders Defiant at Home While Scrambling for Funds
Sri Lanka’s leaders are showing no signs of stepping down in the face of mounting protests as the government ramps up efforts to find emergency funds to import essential goods and avoid an international default.
In a national address, Prime Minister Mahinda Rajapaksa called on citizens to be patient as price surges and shortages worsen, while touting his family’s role in ending a decades-long civil war back in 2009. His brother, President Gotabaya Rajapaksa, has said he won’t resign under any circumstances.
“We did not end the war to bring people to suffering like this,” Mahinda Rajapaksa, 76, said in the televised speech on Monday night. The government will offer solutions even as the nation is falling “into a deep trench,” he said.
Hundreds of protesters have camped outside the president’s office in downtown Colombo since Friday, braving heavy rain to call for his ouster due to shrinking supplies of food, fuel and medicines, as well as Asia’s fastest inflation and $8.6 billion in debt repayments this year. Rajapaksas are accelerating their efforts to secure financing. Talks continue with the International Monetary Fund, while the government expects additional funds from China and India.
Protestors take part at a demonstration held in Colombo, April. 9, 2022.
ISHARA S. KODIKARA/AFP via Getty Images
Sri Lanka’s top diplomat in Beijing, Ambassador Palitha Kohona, said in an interview Monday that he received reassurances as recently as last week from authorities in China that arrangements for $2.5 billion in new loans and credit lines were progressing. The head of Sri Lanka’s state-run oil company also said talks have started with India for an additional $500 million credit line to buy fuel.
Bloomberg data shows that the government will face a test in global investor confidence when it pays $36 million interest on a bond worth 2023 dollars and $42.2 millions on a note of 2028. A $1 billion sovereign bond maturing July 25 presents a bigger challenge: It fell to a record low this week as economists at Citigroup Inc. see a “very high” chance of default.
Shanta Deviajan is a Georgetown University Professor and an ex-World Bank official who was appointed to a panel government advisors last week. She said that the country should urgently begin debt restructuring in order to avoid hard default and find bridge financing as well as make long-term fiscal adjustments.
“People were marching in the streets because they were angry that they weren’t getting food and fuel and pharmaceuticals,” Devarajan said in an interview with Bloomberg Television on Tuesday. “In order to alleviate that suffering, we are going to need some bridge financing while we negotiate that debt restructuring.”
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Mahinda Rajapaksa (the prime minister) shared credit for the 2009 military victory that ended 26 years of separatist conflict. He said Monday in a speech that protestors who yell slogans against inflation or outages are only able to do this because they have been inspired by war heroes.
It was speculated that he might resign in order to make way for an opposition premier. Instead, he attacked the opposition in his six-minute speech for not working with him and accusing it of engaging in petty politics.
Sri Lanka’s cabinet resigned en masse earlier this month and opposition parties have declined to form an all-party government until parliament abolishes some of Gotabaya Rajapaksa’s wide-ranging executive powers.
Officials of the Sri Lanka Podujana Peramuna government claim that they continue to hold a majority in Parliament, even though there have been defections. This will be put to the test next week when parliament meets.
A queue forms to get diesel at the Ceylon Petroleum Corporation Fuel Station in Colombo, April. 9, 2022.
AFP via Getty Images
Samagi Jana Balawegaya is the principal opposition party and has been collecting signatures for lawmakers in order to start impeachment proceedings against President Trump. It can take a while, so it requires support from at least two-thirds. The government has also been petitioned for a non-confidence motion.
“The course of action which we have proposed is a way forward for the legislature to resolve the present political crisis and we hope that all MPs will support us,” Nalin Bandara Jayamaha, an opposition lawmaker, was quoted as saying by local media.
Sri Lanka is looking to borrow $1 billion from Beijing so that it can repay existing Chinese loans due in July, as well as a $1.5 billion credit line to purchase goods, such as textiles needed to support the apparel export industry, Kohona, the nation’s envoy in Beijing, said in the interview.
“For us, it can’t come any sooner,” Kohona said, adding that it could be a matter of weeks. “Given the nature of our relationship — this very close and warm relationship — and Sri Lanka’s dire situation, I would say that I am confident that China will respond positively to our request.”
—Asantha Sirmanne, Lucille Liu, and Colum Murphy with their assistance
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