Challenges Facing Sri Lanka’s President-Elect Ranil Wickremesinghe
Ranil Wickremesinghe became Sri Lanka’s ninth president after winning the presidential poll on Wednesday July 20. But winning the election with 134 votes was only the easy part. The path ahead of him is steep and steep. He will have to play a balancing game to manage the country’s resources, debts and public opinion, if he hopes to revive the Sri Lankan economy and, subsequently, retain power.
THE CHALLENGES RANIL WICKREMESINGHE FACES
The first major challenge for Ranil Wickremesinghe would be to quell the protests and overcome opposition to power among the public. Since the start of the unrest in Sri Lanka, protesters have repeatedly demanded his resignation first as prime minister and then as caretaker president, after being handpicked by his predecessor for the post.
The demonstrators see him as close to the old regime and also hold him responsible for the current economic crisis. His rise to the post of president could prompt protesters to step up the protests.
LACK OF A RESCUE PACKAGE
Sri Lanka’s external debt stands at a staggering amount of nearly $51 billion. Wickremesinghe’s first task in power would be to convince the International Monetary Fund to provide a bailout. But the task would not be easy as the IMF said Sri Lanka would have to work much harder on debt restructuring and implement anti-corruption measures before such a package is finalized.
Crippling Fuel Shortage
With queues increasing at petrol stations, fuel shortages in Sri Lanka have crippled the island nation. At the end of June, the shortage forced the government to ban the sale of petrol and diesel for vehicles performing non-essential services for two weeks. The shortage has pushed fuel prices in Sri Lanka to record highs.
However, prices were revised on July 17. The government’s Ceylon Petroleum Corporation (CPC) has reduced the price of Octane 92 petrol from 20 Sri Lankan rupees to 450 Sri Lankan rupees per litre. The price of Octane 95 petrol has been reduced by 10 rupees to 540 rupees per liter while the cost of Super Diesel has been reduced by 10 rupees to 520 rupees per litre. The price of Auto Diesel has been reduced from 20 rupees to 440 rupees.
With very little international help in sight, Wickremesinghe must strive to bring down the price of fuel to make it affordable for the public. Sri Lankan Oil Minister Udaya Gammapilla said earlier that the country does not have enough money to pay for oil imports.
DECREASE IN FOREIGN EXCHANGE RESERVES
According to government estimates, Sri Lanka’s foreign exchange reserves can pay for imports for just three months. The government has taken measures such as limiting US dollar transactions and imports of agricultural chemicals, vehicles and spices. But imports are still more than the value of exports of tea, rubber, etc. of the island nation. Wickremesinghe should balance the replenishment of Sri Lanka’s foreign exchange reserves with debt restructuring and repayments.
Tourism is one of Sri Lanka’s main foreign exchange earners, providing employment for nearly 3 million people and accounting for over 5% of its GDP. For a country that once thrived on tourism, the dismal state of Sri Lanka’s tourism sector, now battered by inflation and protests, has failed to recover from Covid-imposed travel restrictions. While the government blamed Covid and a series of bombings in 2019 for dwindling tourist numbers, many experts and the public blame Gotabaya Rajapaksa’s financial mismanagement for the crisis.
Wickremesinghe, close to Rajapaksa, will have to shed this image and take strict measures to attract tourists again if he wants to revive his country’s economy.
CHINA’S DEBT TRAP
Breaking out of the Chinese debt trap would be a daunting task for Wickremesinghe. Sri Lanka owes more than $7 billion to Chinese banks and other entities, far more than it needs in a bailout. The debt piled up as China claimed to be investing in the country with the intention of boosting its economy through infrastructure projects.
Sri Lanka also owes nearly $25 billion to private sector bond investors. On top of that, China refused to give up loans to Sri Lanka but offered more money, ostensibly to pay off its debts but in reality piling up on the debt trap.
Wickremesinghe must look to other nations for help in getting out of the Chinese debt trap.
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