Sri Lanka: Austerity for the masses, impunity for the robbers

June 1, 2022
Protest in Sri Lanka May 30
Protest on May 30 in Sri Lanka. Photo: YouthForChenge/FB

Following the resignation of Sri Lankan Prime Minister Mahinda Rajapakse on May 9, his brother, President Gotabaya Rajapaksa, went in search of a replacement who would keep him on in his role.

In a context where cabinet posts are given to anyone, brave or stupid enough to accept one, in a government that has lost its popular mandate, Ranil Wickramasinghe, former prime minister from the opposition United National Party (UNP), has offered his services to rescue the regime.

The PM’s resignation followed the attacks on peaceful protesters outside his residence and at Galle Face, which were carried out by his party ministers and thugs. The “Gota Go Home” protests at Galle Face began more than a month ago, and continue to demand the president’s resignation.

This popular protest movement is the result of the suffering of Sri Lankans due to the country’s ongoing economic crisis. There are shortages of fuels, medicines and other essential items. People wait for hours in long queues for fuel and gas — in some places kilometres long — sometimes with no relief. People have protested by shutting down roads. There have also been acts of kindness, with neighbours distributing biscuits and tea to those waiting in the queues.

Rather than coordinate the distribution process in an orderly manner, the police and military have been deployed in some instances to control the frustrated crowds.

The deal-maker

Ranil Wickramasinghe was part of the 1977 UNP government that launched the neo-liberal reforms in Sri Lanka — initiating privatisation, attacks on workers and unions — while strengthening an authoritarian state. At the time, he was appointed Deputy Minister of Foreign Affairs by his uncle, then-President J R Jayewardene, who introduced the presidential constitution, followed by the draconian Prevention of Terrorism Act in 1978.

Ranil served as PM on previous occasions, most recently from 2015‒19, for the United National Front for Good Governance. This was a broad coalition supported by unions and civil society organisations as a response to the corruption under the post-war Rajapaksa regime (2005‒15).

With Maithripala Sirisena from the Sri Lanka Freedom Party as President, and Ranil from the UNP as PM, this was the regime that failed and enabled the Rajapaksas’ return to power. As PM, Ranil was also instrumental during this period in undermining the movement against corruption and demands for government accountability.

Within months of the elections, in February 2015, the largest public money-laundering scam happened, and the state lost nearly US$11 million. These are considerable sums for an economy worth about $85 billion in 2021.

Arjuna Mahendran, the Ranil-appointed governor of the Central Bank, was directly involved in the money laundering scam and escaped to Singapore. When the Rajapakse regime took power, it avoided extraditing Mahendran back to Sri Lanka or attempting to recover any of the embezzled funds. This highlighted the tangled web of self-serving elites looking after their own.

Ranil became PM in May, following an unsuccessful parliamentary no-confidence motion against President Ragapaksa, which failed by 119 votes to 68. The motion accused his regime of causing the economic crisis by introducing untimely tax cuts and prohibiting the use of chemical fertilisers, resulting in dramatic crop losses.

The motion also noted that Rajapaksa mismanaged the COVID-19 pandemic, promoted non-scientific “domestic” solutions and mismanaged the purchases of vaccines. However, the motion was defeated, illustrating that Rajapaksa still has the confidence of the parliament.

While most eligible candidates for the PM’s post came with the condition that the President provide a timeline for his resignation, Ranil stepped in with no conditions.

Ranil is a deal maker and as soon as he was appointed PM, the protesters in front of the PM’s official residence put up a large sign saying “No-Deal gama” (“No-Deal village”). The site was earlier known as “MynaGo gama” (“Mahinda-Go gama”), referring to the demand for the resignation of former PM Mahinda Rajapaksa.

Ranil came into the 2020 parliament through the UNP’s national list, while a UNP splinter group, the Samagi Jana Balawegaya, led by the son of a former president, became the main opposition. In other words, a representative with no voting constituency has been appointed as the country’s new PM. These are the Kafkaesque moments of a ruling elite trying to create consent — an illusion of responsible government — amidst a crisis.

The main issue for the regime is to attract enough loans to stem the crisis and Ranil has a long-standing relationship with international development finance institutions, including the International Monetary Fund (IMF). Ranil wants to fast-track talks with the IMF, so that an IMF agreement builds the confidence of other potential lenders. The PM is in search of about $4 billion in loans this year, and potential lenders are India, China and Japan.

Since January, India has given nearly $3 billion to Sri Lanka, through currency swaps, credit lines for essentials, and loan deferments.

More recently, the southern Indian state of Tamil Nadu provided Sri Lanka with 40,000 metric tons of rice, 500 metric tons of milk powder, and medicines. This donation is symbolic, since the Rajapaksa regime has avoided addressing Tamil grievances in the north and east, following its 30-year-long anti-Tamil war. Moreover, the closer alliance with China under the Rajapaksa regime also enabled this neglect of Tamil concerns.

Debt cancellation

The loan-seeking PM is avoiding the issue of the president’s resignation, and the retrieval of all the public money stolen under the Rajapaksa regime, which the protesters are demanding.

Ranil is also not interested in demanding the cancellation of the country’s debt, since most of the borrowed funds went to underutilised and poorly planned pet projects of the Rajapaksa regime — from which the public benefit was nil or marginal.

The demand for debt cancellation has been around since the early 1980s, and is still a part of the movement for economic justice. In the mid 1990s the World Bank initiated its debt relief scheme. The IMF followed suit with its program, the Heavily Indebted Poor Countries initiative. By 2001, $34 billion in debt relief was provided to 23 countries, 19 of them in Africa. Of course, debt cancellation is seen as a moral hazard in terms of capitalism, and its search for perpetual profits.

Sri Lanka’s debt crisis is ongoing. The demand for debt cancellation must be linked to processes that put an end to the perpetual indebtedness of the Global South. This is also about exposing the damage of creditor-imposed structural adjustment on the poor majority as well as on the ecologies in the Global South.

Since 1977, successive authoritarian governments in Sri Lanka, promoting World Bank structural adjustment programs and IMF monetary stabilisation, have contributed to the present economic crisis.

Particularly since the early 2000s, the rising power of the financial markets over the real economy has enhanced the debt burden — for nations as well as households.

Sri Lanka is a case study on how international financial markets, including stock markets and credit rating agencies, contribute to economic crisis. The contradictions of the global finance markets, in particular the credit rating agencies, was exposed during the 2008 Global Financial Crisis. In the post-2009 period, a variety of financial actors contributed to a regime that looted the state coffers.

Last year, the International Consortium of Investigative Journalists exposed via the Pandora Papers how the Rajapaksa regime enabled the use of secretive shell companies and trusts to hide more than $18 million in tax havens.

The regulation of global financial markets and the demand for public accountability is important to addressing Sri Lanka’s debt crisis. Even the United Nations has recognised that “the gradual encroachment of financial speculators into new areas of the economy [is] putting human rights at risk”.

While Sri Lanka’s economic and political crisis continues, the Australian Border Force (ABF), intercepted a boat full of refugees from Sri Lanka near Christmas Island on May 21 — election day. A few days later, under the new Labor government, the refugees were returned to Sri Lanka.

The former Scott Morrison government publicised the boat interception on election day, hoping to influence voters. The Liberal Party sent text messages to voters in marginal seats, boasting about its tough border policies. Labor responded on the day, saying it supported Operation Sovereign Borders, and merely criticised Morrison’s politicisation of the boat interception.

While people in Sri Lanka are suffering, the major parties in Australia continue fear mongering, while ignoring human rights.

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