By Harim Peiris

(Published in The Island – Opinion / Features on 7th December 2023

As we approach the end of 2023 and with about a year to go for the next presidential election due before end 2024, President Ranil Wickremesinghe’s frequent refrain and indeed the rationale for his administration is the revival of the national economy after it was spectacularly destroyed by his predecessor’s administration, ironically elected on the platform of bringing about vistas of “prosperity and splendor”. Instead, the third Rajapaksa administration bankrupted the state, impoverished the nation and plunged about 40 percent of the population, especially its most vulnerable lower income sections into relative poverty, food insecurity and malnutrition, according to UN research and other sources.

A few weeks ago, Sri Lanka’s Supreme Court, in a landmark ruling, given in a public interest fundamental rights application filed by several social activists, found the Rajapaksas, namely siblings Gotabaya, Mahinda and Basil, respectively president, prime minister and finance minister in the third Rajapaksa administration as well as several of their key political appointees and officials, including the then Governor of the Central Bank, the Treasury and President’s secretaries responsible and liable for and/or causing the collapse of the nation’s economy through gross mismanagement and deliberate actions of commission and omission. Argued in a lengthy over 200 page judgment, a five judge bench of the Supreme Court headed by Chief Justice Jayantha Jayasuriya delivered the landmark ruling. The lone dissenter did not contest the substance of the culpability but argued more narrowly that it did not constitute an infringement of fundamental rights, the basis for the case.

The link between governance and the economy

The Supreme Court judgement, Sri Lanka’s agreement with the IMF and the public debate around economic revival and its various components from enhancing tax revenues to reducing inflation to restructuring state owned enterprises all focus on one key factor, the importance of public sector governance in the performance of the national economy. Sri Lanka during its two and a half decade long civil conflict, for all the economic and political challenges posed by it, recorded on average a 5.2% annualized economic growth in real terms. However, as President Mahinda Rajapaksa noted in 2009 at the end of the war, there was now no conflict to blame for economic non-performance and Sri Lankans can and will rightfully expect an economic renaissance and revival. That this did not occur and instead that the opposite became true, namely that the economy was destroyed, is surely largely due to both corrupt and inept stewardship of the nation’s public affairs. In rather staid, legal language and with judicial restraint, the highest judiciary argues lengthily and convincingly that deliberate actions and inactions of the Rajapaksas and their key acolytes were responsible for the Sri Lanka’s economic collapse.

The issues that arise in the context of remedial measures and non-reoccurrence is that there exists in Sri Lanka’s laws and institutions that are supposed to act as a check and balance on the executive’s arbitrary and ad-hoc decision making, including the Central Bank, its monetary board, parliamentary oversight and civil society. However, these institutions failed to be an effective check or balance on arbitrary and entirely unreasonable actions of an all powerful presidential administration. These arbitrary actions included ill-conceived tax cuts of December 2019, the refusal to go to the IMF when government finances were running down, the ad-hoc banning of chemical fertilizer impoverishing farmers and especially continuing to pay off Sri Lanka’s foreign currency obligations to the point of letting the fuel pumps run dry and hospitals run out of medicines rather than pulling the plug earlier on foreign debt obligations while previously increasing the amount of foreign, mainly Chinese debt, on white elephant projects of dubious economic and utility value.

A powerful presidency the cause rather than the preventor of national collapse

Sri Lanka’s economic collapse of 2022 was by far the worst national disaster to have occurred in our nation’s post-independence history and the Supreme Court has after much deliberation judicially informed us what everyone on the streets during the “Aragalaya” more instinctively knew that this was a man-made disaster by a small coterie of overly powerful and popularly elected politicians. Sri Lanka has a democratically elected government but not democratic, participatory or accountable governance.

There has been and continues to be much debate about Sri Lanka’s all-powerful executive presidency. The argument has been that such an all-powerful center was required for our national well-being. However our national experience has now been that this all-powerful center became an unaccountable center of power, which overshadowed all other institutions, overran all checks and balances and finally became the architect and vehicle of disastrous national collapse. There is a democratic deficit and a lack of accountability in Sri Lanka’s public governance that still persists in the reconfigured regime which assumed state power after the Rajapaksa retreat. The administration lacks both a popular mandate and public confidence although having perhaps elite support sufficient for it to govern, increasingly repressively until the next election. It has postponed all elections, local and provincial until the day of reconning a year hence. The real debate on economic revival is about strengthening Sri Lanka’s national governance to make it more accountable, transparent and responsive rather than what we have at present.

(The writer served as Presidential Spokesman and Advisor to the Minister of Foreign Affairs, Sri Lanka)

By Harim Peiris

(Published in India Today on the 15th July 2022)

Amid intense protests against Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe, here are the three likely scenarios for Sri Lanka, which is facing one of its worst crisis in decades.

Last week, July 9, 2022, was a momentous day in the annals of recent Sri Lankan history when the protests that had been going on for months against the government of President Gotabaya Rajapaksa gathered momentum. The protesters, swelling to their hundreds of thousands, filled the streets of Colombo and overran the heart of Sri Lanka’s executive arm of the government, the President’s House, the president’s office and earlier the prime minister’s official residence.

On July 13, they overran the prime minister’s office, taking control of the key government institutions and offices.

President Rajapaksa and his family had to be evacuated to safety by the Sri Lankan state security forces, reportedly aboard a naval vessel that then went out to sea but not outside Sri Lankan territorial waters. Three cabinet ministers also resigned, most notably the recently appointed investment promotion minister, business magnate Dhammika Perera, one the richest men in the country.

A meeting of the party leaders was chaired by the speaker of Parliament and they called for the resignation of the president and the prime minister. President Gotabaya Rajapaksa agreed to resign on July 13, while Prime Minister Ranil Wickremesinghe agreed to resign in the event a divided Parliament could agree first on his successor.

On July 13, the self-imposed deadline for his resignation came and gone, and it is clear that President Rajapaksa has little or no intention of resigning. Instead, he fled the country, aboard a Sri Lankan Air Force aircraft for the Maldives, from where he appointed Prime Minister Ranil Wickremesinghe as acting president. The leaders of parties represented in Parliament again demanded that Wickremesinghe also resigns while the speaker’s office has confirmed that it is examining if the president’s actions of fleeing the country constitutes a vacation of post situation.

Meanwhile, there are new concerns being expressed in Colombo, by both political elements and the security establishment, that the protests or ‘Aragalaya’, meaning struggle in the Sinhala language, is being hijacked and taken over by Left-wing extremists and neo-fascist forces to capture state power through the protest movement.

Trigger for the deadlock

The deadlock in the democratic political structure is very apparent because the Rajapaksa’s or their governing party, the Sri Lanka Podujana Peramuna (SLPP), controls a near majority in Parliament, even after breakaways and defections. Short of a genuine resignation, or at least a retirement to the Opposition benches by the Rajapaksas, it creates a complete deadlock in the democratic process.

The relatively young, 50 something leader of the Opposition, Sajith Premadasa, himself the son of former president Ranasinghe Premadasa, has consistently called for a parliamentary election for the multiple purposes of taking the heat from the street protests to an election campaign, getting a genuine people’s mandate and reestablishing the legitimacy of the government and securing public support for the painful fiscal and state reforms which are required for the Sri Lankan economy to become a viable, functional and sustainably growing entity again. It probably helps that he and his party, the Samagi Jana Balawegaya (SJB), are confident of winning an election, not least because the government has crashed along with the economy.

The likely scenarios for Colombo

So, what are the likely options and scenarios for Sri Lanka? The most likely one in the short term would be that Prime Minister Ranil Wickremesinghe will continue to play his preferred role as “acting president”, with the consequence that the country at best would be unable to make the reforms so essential for an economic turnaround, and at worst will lead to anarchy as a government seen entirely as illegitimate seeks to keep people in misery through an iron fist.

The alternative is for the fractious and divided Opposition to start coalescing together at least for the limited purpose of ousting the Rajapaksa regime, but the obstacle to the same is that the parties stronger in Parliament are less prevalent on the streets and those on the streets are not really present or significant in Parliament. Hence, the street protesters stated preference for extra-constitutional regime change and becoming more attractive as constitutional regime change is made impossible by Rajapaksa and Wickremesinghe’s intransigence.

The third option which cannot be off the table is a military-backed regime, a kind of hybrid government where a civilian façade of political personalities constitutes a government that is largely seen as illegitimate, and where military might and muscle is needed for barebones governance.

Of the above three scenarios, the only appealing one is for the Opposition to coalesce sufficiently for an interim or transitionary governing arrangement followed by elections in a clearly defined short-time span of perhaps three to six months. Even the Rajapaksas, one hopes that it is in their best interest to step aside and out of the quagmire that they have sunk Sri Lanka into and should they favour their own chances of a quick return, join the fray at an ensuing election. This would be in the best interest of Sri Lanka.

Economic challenges & India’s role

Sri Lanka’s core challenges are economic. The political instability arises from an economic collapse brought about by poor governance and bad policies. Accordingly getting Sri Lanka’s economy back on track, of crucially making her national and especially foreign debt sustainable, all require fiscal and economic policy reforms, which only a stable government can implement. India has pretty much done the most she can, and more than Sri Lanka expected.

Lending Sri Lanka over two billion dollars in currency swaps and credit lines, India stepped into the gap created by other lenders, bilateral and multi-lateral who all stopped, when repayment became suspect. But India too has to ensure that economic reforms take place, not least so that the loans she has extended to Sri Lanka are repaid over the long term and on the concessionary term that have been provided.

(The writer is former adviser to the minister of foreign affairs, Sri Lanka)

By Harim Peiris

(Published in The Economic Times of India on the 11th July 2022)

Will go down in the annals of Sri Lanka’s history as a momentous day. On that day, in a country where schools and government offices were closed for a couple of weeks because of the lack of fuel and the lines outside fuel stations ran into several kilometers and the wait for fuel was about three days, close to 200,000 people converged at the “Gota go home” protest site on the historic Galle Face green at the city centre of Colombo. For a country of 20 million people, 1% of them on the streets of the capital city is quite formidable. From Galle Face, the protestors marched to the presidential secretariat and the President’s (former Governor General’s) house, the official office complex and residence of the head of state and government of Sri Lanka.

By early afternoon, both buildings were overrun by protestors, who overturned barricades, ignored teargas hurled by the police and security forces, to storm and take over Sri Lanka’s seat of executive power. The sheer weight of their numbers, close to perhaps 200,000 at its peak, overwhelmed the thousands of assembled police and paramilitary Special Task Force personnel. The security forces had a stark choice, either stand down or engage in a Tiananmen Square type massacre, because anything less would not have worked.

Very wisely for a military that provides troops to UN international peace keeping operations with human rights mandates and receives advance training and security cooperation from both India and the United States; as well as for a country engaging in negotiations with both the IMF and as owners of its international sovereign bonds, the option of a blood bath of civilian protestors at the centre of the capital city was never really an option.

About 80 protestors and police sustained injuries — none life threatening. The only violence that occurred happened later at night at Prime Minister Wickremasinghe’s private residence, where STF officers badly assaulted six journalists, on live TV, including a young female TV reporter of the fiercely independent News 1st TV channel. As news of the attack spread, the crowd outside the PM’s residence grew, the house was overrun and torched. The whereabouts of the President and prime minister, both of whom were evacuated earlier, is unknown.

The real question is where does Sri Lanka go from here? From Greece to Iraq, Libya to Syria, governments have lost their seats of power, and continued for some time as regimes on the run and under siege. Sri Lanka is South Asia’s oldest democracy having received universal adult franchise in 1932, only a few years after all women received the vote in Britain and, accordingly, as a nation, seem to be loath to extra constitutional means of changing governments.

Sri Lanka has never had a successful military coup and always transferred power after democratic elections, even during the height of the civil war. That the change has to come from the people power protests on the streets is actually an indictment on Sri Lanka’s institutions of democracy, which have been insufficiently robust in dealing with this national calamity.

The problem is, however, more political than institutional. It was only as recently as November 2019 and August 2020 that President Gotabaya Rajapakse received an overwhelming mandate as President and a near two-third majority in Parliament for his party, which under proportional representation was thought a near impossibility. Appalling governance and corruption almost from the start have brought Lanka to ruin.

It takes a particular kind of genius to bankrupt a country, an outcome which did not even occur during 30 years of a long drawn-out civil war. This also ironically from a mandate sought to create “vistas of prosperity and splendour”. The President has informed the Speaker of Parliament (verbally) that he intends to step down in a few days’ time and the prime minister likewise says he is ready to resign if anyone else can show he commands a majority in Parliament. Why not immediate is anybody’s guess. This is because the President’s party, even after defections, is the largest party in Parliament and the other opposition parties cannot seem to agree on a common alternative. Party leaders have proposed an interim solution, where both the President and the PM resigns and, as per the constitution, the Speaker of Parliament takes over as interim President until the Parliament elects a new President and conducts fresh elections within an agreed time frame. Would Sri Lanka’s legislators now heed the voice of the people and reach a minimum consensus on basic interim governing arrangements and crucial immediate economic reforms or fail to do so. Time as well as patience is running out.

By Harim Peiris

(Published in The Island & Groundviews (as “Elections Are the Only Way Forward”) on the 24th June 2022)

The young Sri Lankan cricket team has done the impossible and in the past couple of weeks, beaten the powerful Aussie cricket team several times, in the shorter formats of the game, giving Sri Lankans some much needed respite and cheer. The games have been played to packed crowds, notwithstanding lingering covid spread threats with TV viewership also reportedly high, demonstrating that people understandably seek some avenue of cheer from the misery which Rajapakse rule has plunged our nation to.

In contrast, the Gotabaya Rajapakse / Ranil Wickremasinghe administration has only managed to guide our ravaged economy to a near crash landing and an effective standstill. Government servants are asked to stay at home, school children are again online due to effectively non-existent fuel supplies in the country. During the five weeks of Ranil’s government, its seeming only role has been in coordinating the scare foreign aid, almost exclusively from India and not in effecting many of the significant and required reform measures, economic or political. It sought to argue that political reforms are not required and only emergency management of the economic crisis was needed. There was a basic game plan, backed by a politically naïve business elite, which was to get the white knight IMF in as soon as possible and until then use political contacts to get bridging finance to keep the economy moving. 

Well, this plan has not worked, for reasons which the young people of Sri Lanka correctly understand, but our political and business elites continue to want to ignore. It is that we have an economic crisis on our hands, precisely because of and due to our politics. After all the coming calamity was not sudden but forecast and warned about, most famously by former Finance Minister late Mangala Samaraweera. Even more recently as the proverbial writing was on the wall, using foreign reserves to defend the rupee at a ridiculous over valuation, printing money, not going to the IMF and not commencing early negotiations with our international creditors was the bombastic claim to fame of the lunatic leadership of our politicized Central Bank. It was relatively recently that we turned down a half billion-dollar grant (not loan) from the American Millennium Challenge Corporation (MCC) and opposed another half billion in Indian investment into the East Container Terminal (ECT). A billion dollars we can desperately use now. That is our politics, which drive our economics. The majoritarian ethno-religious nationalism which won big in 2019, drove our politics and drove us to our knees. We were advised by those who should know better to get a Hitler like administration (as opposed to a Mandela) and we voted for one, which has now resulted in our own defeat at Stalingrad, leading to the eventual destruction and fall of Berlin. 

The IMF white knight

There is great hope in the business community because of the naïve belief in the IMF as a white knight, will bail us out of trouble. That is because the business community does not fully appreciate the political constraints to the implementation of the required economic reforms. Reforms which are more painful now, because the economy has crashed, rather than when we were healthy. Any bailout / bridging finance by the IMF and / or bi-lateral lenders require our debt to be sustainable. In other words, that we can come out of bankruptcy and start honoring our obligations, including the bridging finance we are seeking now.

We not only need to raise revenue, but we also need to rationalize Government expenditure. We cannot as a nation afford to spend more on peace time defense, than we do on both education and health combined. But that is Rajapakse politics. We cannot afford badly targeted generally subsidies, though we can and must have a social safety net which takes care of those most vulnerable amongst us, which number is growing daily. We need to privatize our loss-making state-owned enterprises. Rajapakse politics was to re-nationalize Sri Lankan Airlines and kick out Emirates Airlines. Our politics have brought our economic collapse. We need to remove the anti-export bias in our economy and regulatory framework and the failed import substitution of the 1970’s towards which the Viyath maga & Eliya crowd at Shangri-La was dragging us. That would diminish the role of local oligarchs and replace rent seeking wheeler-dealing with internationally competitive businesses following best practices, as drivers of economic growth.

Elections the only solution

Ranil’s interim government has not been able to elect a woman deputy speaker, pass the 21^st Amendment or most likely not even pass a genuinely reforms oriented interim budget. It has on the contrary given a major reprieve to the Rajapakses’, taken the steam out of the “Aragalaya” and sought to solidify the status quo. We need the new, not the status quo ante. The reason is because Mr. Wickramasinghe is now Prime Minister of an essentially SLPP Government, of which he is nominally the vice-captain, but does not lead.  The Rajapakses still call the shots. An internal family reshuffle and image makeover, denying any course correction does not provide the reforms which make our debt sustainable, which is what the IMF and all our creditors require. We would not be able to go there and do that with the leadership which brought us to this ruin.

Self-realization of failure dawns slowly, if at all for some people. The Rajapakse Administration and the SLPP are in denial mode and a fractious opposition has not helped the nation by easing up the pressure for the Rajapakses’ to go. The Opposition should challenge the interim government to present to parliament a Cabinet approved minimum common program, which it has not unveiled and can garner bi-partisan support from the Opposition or move a motion to dissolve parliament and go for a general election, because Sri Lanka requires a government with political legitimacy and a mandate to deal with the mess created by those mandated in 2019, to create “vistas of prosperity” who instead bankrupted us. As a recent Verite Research report pointed out, we would spend less on an election than we are on a new defense ministry headquarters or barely more than just the loan, interest component only, for the Kotelawala Defense University’s teaching hospital.

Sri Lankans are inordinately proud of their state, and we have much we can be proud of. Regular elections have been a big social safety valve of releasing pent up political frustrations, empowering the people and they reinforce the legitimacy of governments. We can and must go for parliamentary elections, sooner rather than later.

By Harim Peiris

(Published in The Island & Groundviews (as “Need for Parallel Political and Economic Reforms”) on the 08th June 2022)

There is a fallacy being promoted by the reconstituted Rajapakse regime, that political reforms such as the proposed 21^st Amendment are not really necessary or at least have already occurred through the change of Prime Minister and a reconstitution of the regime and the need of the hour is urgent measures to resuscitate the economy, because people are suffering economic hardship and their misery must be alleviated. Undoubtedly the people are suffering, and their misery must be alleviated, but political reforms are required for the required economic reforms. Both political and economic reforms need to move in tandem and in fact, political reforms are a necessary precursor for sustainable economic reforms.

A regime reconstitution – Ranil as Rajapakse nominee 

The Gotabaya Rajapakse Administration destroyed the Sri Lankan economy. With a combination of the fool hardiness of the naïve, the arrogance of absolute political power and corruption through unaccountability, they delivered not the vistas of prosperity and splendor they promised and was mandated to do, but instead they destroyed of the national economy. Which was resilient even in the face of a thirty-year civil war. It is ironic that the leaders who claimed credit for ending our war, managed to bring about a national destruction which the war never could. 

After the crash landing and the resultant political outcry by the populace, the initial response of the Rajapakse’s was to fire (request the resignation) of their entire cabinet of ministers who obliged. When that did not assuage public anger, the response was a combination of trying to shoot protesters (Rambukkana) and / or beat up the protesters (GotaGoGama) and then reconstituting the regime, with a UNP prime minister, with a full parliamentary group of himself. The rationale for this move was that the Government was resigning, and someone must take over the reins. What now exists in Government, is Mahinda Rajapakse giving up the trappings of a ceremonial PM, a single seat MP as prime minister, dependent on the core SLPP parliamentary group for the government’s survival, Basil Rajapakse reverting to his customary role of SLPP party boss calling the shots, sans ministerial office and President Gotabaya Rajapakse continuing with full executive powers. 

The Samagi Jana Balawegaya (SJB) of Opposition Leader Sajith Premadasa was correct to have adopted the principled position as well as align with the sentiment of the vast majority of the Sri Lankan public, who have been seeking to have the president take responsibility for the economic collapse he engineered and to abdicate power. The Opposition Leader has correctly stated that Sri Lanka had an executive president and a ceremonial prime minister and either the executive president must go and / or his powers transferred to the prime minister and parliament for a prime minister led administration to work. (It was Sajith’s father late President Ranasinghe Premadasa who was famously, quoted as stating that under the 1978 constitution, the PM does not even have a peon’s powers). It is in the light of that reality as well as the constitutional reform discourse since the presidency of Chandrika Bandaranaike Kumaratunga, that the SJB, through its general secretary, Ranjith Madduma Bandara, tabled a proposed 21^st Amendment to the constitution, which inter alia, changes the executive presidency to a ceremonial one. 

The proposed 21^st Amendment is a significant compromise from the reform proposals of the SJB and is instead, a reversal to the status quo ante of the pre 20^th Amendment period, albeit a 19^th amendment minus situation. With some degree of consensus reached on many issues of the 21^st Amendment, it is now the (still) ruling SLPP which is seeking to renege on the 21^st Amendment and keep Ranil as a puppet on a string.

Economic reforms come through policy changes which only which only a government with public political legitimacy can deliver. But the even the truncated 21^st Amendment must be passed. 

The economic reforms

Sri Lankan faces a catastrophe which even 30 years of civil law never perpetuated on a hapless general public. It is paradoxical that the political leaders who are credited with ending our war have been clearly responsible for a national destruction, which the war was never able to bring about. 

The response of PM Wickremasinghe’s economic team has been to reverse the lunacy of the Viyath Maga, Eliya and SLPP policy framework, of slashing taxes, defending an artificially low exchange rate with all available foreign reserves, printing money to fund a fiscal deficit, being utterly corrupt, tone deaf to expert advice and banning fertilizer. Now, Interest rates have been raised, the exchange rate has been floated somewhat and the disastrous tax cuts of 2020 are sought to be reversed. Again, a reversal to the status quo ante of 2020. However, what was sufficient before the economic collapse will not suffice to pull us out of the same. That would require a restructure of loss-making state monopolies and other structural reforms of the Sri Lankan economy, especially measures to ensure that our national debt burden is sustainable. Reforms which require public and political legitimacy, which the Rajapakses have totally lost. 

The IMF and the World Bank have made clear, that no new funding facilities can be made available until Sri Lanka demonstrates a policy program which basically makes our national debt, especially its foreign currency component sustainable, i.e., repayable over time. The global financial system requires that sovereign nations honor their debts. Just like a national financial system require it domestically. 

Contrary to popular belief, the reversal of the 2020-22 policies have made no material impact on our national finances and we only have fuel to provide mobility and ease our foreign currency situation because of Indians supply us with fuel on credit. Foreign policy wise, India is very kindly doing for Sri Lanka, what in years past, Germany tried to do for a while for Greece, which is bail us out of trouble. With over six hundred billion dollars in foreign reserves, it has decided that about one or two billion could be used to fill the space vacated by the Chinese, who seeing the writing on the wall have made their cheque book scarce. The middle kingdom is quite hardnosed about their finances, just check the rates at which they lent money for the Rajapakse white elephant projects.

Ranil’s interim government has perhaps done as much as it could, which is clearly not enough. A clear timeline for early elections, perhaps sometime early next year, will be required for the real reforms required for rebuilding our devastated nation. 

(The writer served as Advisor, Ministry of Foreign Affairs from 2016-17)