Can new president Ranil Wickremesinghe rescue Sri Lanka’s economy?

Sri Lanka’s new president Ranil Wickremesinghe will have his work cut out for him to handle the country’s collapsed economy after he was chosen to carry out his self-exiled predecessor Gotabaya Rajapaksa’s full term.

Mr Wickremesinghe, who was sworn in on Thursday after being chosen by parliamentary lawmakers a day earlier, has a tough task ahead of him.

His handling of the cash-strapped country’s economy will be closely watched by global superpowers US and China, the latter of which the Rajapaksa clan has relied on and which some analysts blame for having a hand in the destruction of the economy.

Mr Wickremesinghe has made overtures to the International Monetary Fund (IMF) and the country’s Central Bank Governor Dr Nandalal Weerasinghe has said that an agreement with the IMF was necessary to abate the crisis.

IMF funding will unlock other sources of funding as bridge financing, which officials were hoping for in the interim, remains hard to come by, he said.

The country also seems to be hedging its bets as Mr Weerasinghe mentioned rival Asian superpowers India and China.

“If we get some assistance from either India or China in this interim, we can manage this period. We are discussing with them. What we think is, if we get (assistance), things could ease somewhat, if not we will have to continue like this,” he said.

While China is conspicuously yet to issue a statement formally congratulating the new president – a Monday statement from Sri Lanka’s envoy to China said relations will not be affected by a change in government – the CIA’s chief has spoken out.

On the same day Mr Wickremesinghe was chosen, William Burns categorised Sri Lanka’s deals with China as “some really dumb bets about their economic future”.

The IMF also chimed in on Wednesday, saying it hoped to finish negotiations with Sri Lanka at the earliest.

In an interview with Nikkei Asia just hours before Mr Wickremesinghe’s victory, IMF Managing Director Kristalina Georgieva said that “the moment there is a government that we can continue our discussions with, our team will be there.”

Adding that the IMF is “very hopeful that based on the good technical work we have already done, and the fact that this technical team of Sri Lanka is there, we can complete program negotiations as quickly as possible.”

Earlier this month, Mr Wickremesinghe, then the prime minister appointed by the Rajapaksas, had told lawmakers that a preliminary agreement has been submitted to the IMF’s board of directors for approval.

“But due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately. Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straight-forward process,” he said.

The Sri Lankan government owes $51bn in foreign debt and declared itself bankrupt in April.

One of the economy’s biggest engines, tourism, has suffered from the twin blows of the Covid pandemic and over safety concerns after a series of terror attacks during Easter in 2019.

In addition, official data reveals the country’s currency has collapsed by 80 per cent, making imports more expensive and worsening inflation that is already out of control, with food costs rising 57 per cent, reported the Associated Press.

Meanwhile, angry protesters who had overrun the president’s palace when Mr Rajapaksa was still the president, have had a muted response to his being chosen.

Protesters said while they still had these demands, fatigue had set in.

A protest outside parliament on Wednesday saw barely any turnout while a march organised by university students in Colombo who had been fore fronting the protests also saw only around 1,000 people turning up.

“We supported the struggle, but after getting rid of the Rajapaksa family there is no point in continuing it and causing disruptions,” a doctor at the national hospital told AFP, asking not to be named.

Mr Wickremesinghe, whose own private home was set on fire and who was urged to resign as well, has promised a changed system and invoked “the silent majority” on Wednesday.

“We are ready to listen to those who stage peaceful protests, and to the silent majority. We are also ready to deal with the law with those who create destruction,” he was quoted as saying by the Sri Lankan newspaper Daily Mirror.

“I also pledge to end confrontational politics and work with everyone in Parliament. Those who protest and many others question as to why all political parties in Parliament cannot work together and bring a system change. We have to focus on these questions,” he added.

He is now expected to appoint a new prime minister who will follow his policies and carry out financial reforms.

Mr Wickremesinghe has also received support from opposition politicians, including his main rival for the post, Dullas Alahapperuma who received 82 votes in parliament, compared to Mr Wickremesinghe’s 134.

Mr Alahapperuma who was defeated in Wednesday’s vote said that for the first time there is consensus among Sri Lanka’s politicians on the economy.

After announcing his defeat in parliament, he pledged unity and said he hoped all politicians come to a consensus with the objective of changing a corrupt political system.

Mr Wickremesinghe has served six terms as prime minister, but never completed a full term.