Ruling elite regroups while Sri Lankans drown in debt and austerity

June 20, 2023
Former president Gotabaya Rajapaksa was ousted by a popular uprising last year. Photo: Wikipedia

As Sri Lanka slowly approaches the anniversary of former president Gotabaya Rajapaksa's resignation on July 13 last year, following a popular uprising, the social struggle continues. One year ago, a popular movement grew, triggered by shortages of essential goods, particularly food, medicine, fuel and gas.

Although the economy has recovered slightly since, beyond the surface many are struggling to make a living. A fuel rationing system is in place, along with some import restrictions. Electricity prices were increased and new tax measures introduced, targeting middle-class professionals. The welfare system, already underfunded and influenced by political patronage, is fraught. Since 2019, following the COVID-19 pandemic and economic crisis, around 4 million more people have fallen into poverty. At present, there are at least 7 million people (out of a population of 22 million) living in poverty.

Remittances from migrant workers have increased slightly and tourist arrivals recovered in December last year to about a third of pre-pandemic levels. According to the International Monetary Fund (IMF), food inflation has dropped from 70% in September last year to 54% in January.

External debt — private and public — was around US$59 billion or 78% of gross domestic product (GDP) in 2022 and this is projected to rise to US$64 billion or 79% of GDP by 2026. The main creditors are in the global North: mainly the United States, the European Union and Japan, followed by China, along with India in the margins. The Sri Lankan rupee has depreciated dramatically since March last year. Its value declined from around Rs200 to one US dollar in March 2022, to Rs340 in March this year. Since then, it has improved to around Rs300 in June. Real GDP growth, which has been in the negative range, is to recover next year to 1.5% and reach around 3% in 2026.

Meanwhile, the country's professional cricket market, the Lanka Premier League, held its player auction in Colombo in mid-June. This is where cricket businesses (franchises) bid for players. And the biggest bid at the auction for a player was US$80,000. That’s just for this tournament. It is this glaring inequality that can perhaps prompt the question "restructuring for whom?”.

Class war

Regaining credibility with financial markets is mostly done through the standard IMF playbook, which includes proposals for currency depreciation, the privatisation or commercialisation of a range of public sector enterprises, increase indirect taxes and limitations on state capacities to regulate markets, particularly the labour market. All these are attacks against the working classes in Sri Lanka, in other words tactics of class war.

Hospital, school and rail unions, along with middle-class professionals, staged numerous strikes in March against a rise in income tax. They also demanded lower bank interest rates, in a context of rising costs of living. Port workers and air traffic controllers also protested, impacting international trade and travel.

Protesting workers highlighted the burden borne by workers while government corruption continues. They noted how the government is extracting more taxes from public sector workers' wages, while billions of dollars in compensation is owed to the government because of a 2021 maritime disaster. A huge container ship, the X-Press Pearl, sank off the west coast on May 20, 2021, after an on-board fire. It was carrying 1488 containers, including 81 with dangerous goods. This was considered the country's worst maritime disaster, impacting the coastal environment, ocean biodiversity, fisheries, seafood industry and fishing communities.


The government's efforts to claim compensation through a Singaporean court were delayed, with multiple parties — politicians, government department, shipping companies and insurance companies — attempting to seek rent as well as reduce their losses. There is an ongoing investigation into an alleged bribe of US$250 million, designed to obstruct the legal process in the X-Press Pearl disaster. There is also the loss of government revenue through the February 2015 Treasury bill scam.

Addressing the corruption and rent-seeking by politicians and senior bureaucrats is of a lesser priority for the government (along with the IMF) than its economic stabilisation and restructuring agenda.

Although the IMF debt restructuring agenda mentions corruption in terms of “harmonisation” with the United Nations Convention against Corruption (UNCAC), it makes no reference to previous anti-corruption commissions or strengthening the powers of the existing anti-corruption (Bribery) commission and freedom of information (Right of Information) commission. The mainstream media and the government are complicit in maintaining a tight lid on discussing previous anti-corruption attempts.

While the IMF is vocal about reducing the public sector wage bill, foregrounding the privatisation of state-owned enterprises, it is on mute regarding the military. With around 300,000 military personnel, the security forces account for nearly 30 percent of the total public sector wage bill. The appointment of military officials to head public sector institutions was a key Rajapaksa strategy to build patronage networks and to seek rent. Demilitarisation of the state is central to “public sector reform” in order to regaining public sector accountability and transparency.

Land grabs

Meanwhile, the military colonisation of the North and East provinces, with a majority of Tamil and Muslim communities, continues. Land grabbing is justified and rationalised as protecting Buddhist heritage, conserving forests or promoting economic activities.  Even in majority Sinhala areas, land grabs continue, mainly for export-oriented monocultural crops, with high chemical inputs and low wages.

The families and relatives of close to 20,000 people who disappeared during and after the Civil War (1983–2009) continue searching for answers. The families of the disappeared in Vavuniya (in the Northern province) marked 2300 days of continuous protest, on June 8, demanding the return of their loved ones and a mechanism to ensure justice. This protest and a range of other protests rarely feature in the mainstream (Sinhala-Buddhist) media controlled by the ruling elites in Colombo.


The elephant in the room for the government and the IMF, is elections or representative politics. The government has postponed parliamentary elections and is engaged in an effort to undermine public protest and dissent. The anti-democratic strategies of the state have included attempts introduce new anti-terrorism laws, along with a clamp down on progressive media (through a new Broadcasting Regulatory Commission Act).

The ruling Rajapaksa party fragmented following the popular uprising a year ago. Last year's crisis related to the post-2009 economic strategies of the regime, which prioritised the interests of the financial markets and rent seeking. The pandemic intensified their impact. The Rajapaksa party was composed of mostly disaffected politicians of the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP). The SLFP and the UNP were the two dominant parties in the post-independence period. While the SLFP maintains some social democratic tendencies, with an orientation towards expanding domestic markets, the UNP is known for its authoritarian expansion of the post-1977 export-oriented economy.

However, in the past two decades both parties have been forced to form coalitions, particularly with the rise of the personality cult of Mahinda Rajapaksa. The Rajapaksa party was formed in 2018, breaking away from the SLFP, and the opposition alliance, Samagi Jana Balawegaya (United Peoples Power), a UNP splinter group, was formed in 2020. Meanwhile, president Ranil Wickramasinghe, leader of the UNP,  is trying to rebuild his party while dividing the Rajapaksa party. The only alternative to this intense battle within the two dominant parties is the Janatha Vimukthi Peramuna (People's Liberation Front, JVP), a more working-class party, which has been engaged in attempts to build its support base. Meanwhile, the smaller splinter group of the JVP, the Frontline Socialist Party, is engaged in grassroots activism and movement building.

Sri Lanka illustrates somewhat similar tendencies to Chile, in terms of a popular struggle attempts to change an authoritarian presidential constitution. The space for radical constitutional reforms remains limited within the realm of representative party politics. This also foregrounds the significance of civil disobedience and democratic non-violent peaceful protests. The popular protests or the Aragalaya (struggle) a year ago have sown the seeds of resistance. The galvanisation of these disparate protests into a broad counter movement remains a key challenge for a range of activists engaged in the struggle for democracy.

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