Sri Lankan President Gotabaya Rajapaksa’s government is angling to turn twin economic and health crises into political opportunities, both at home and abroad.
Domestically, Rajapaksa’s regime is leveraging the Covid-19 outbreak to further strengthen the military’s hold over Sri Lankan society. Internationally, it is revamping ties with China in a time of extreme economic need.
Rajapaksa’s government has relied on former military officials to “professionalize” politics ever since the former defense minister won elections in 2019.
Since the outbreak of the Covid-19 pandemic, military officials have played an even more direct role in administering the country.
In March, when Sri Lanka was hard-hit by the pandemic, Rajapaksa set up a task force headed by the army chief to lead management of the health crisis. The military has since managed the imposition and enforcement of lockdowns as well as rolling out vaccines.
The self-touted success of that militarized approach is now being applied to a Covid-driven economic crisis that has depreciated the currency and inflated food prices across the island nation. Inflation rose by 6% in August.
When Rajapaksa declared a “food emergency” in late August, he appointed Major General Senarath Niwunhella as Commissioner-General for Essential Services to ensure a smooth distribution of essential goods and foodstuffs, as well as to crack down on hoarders.
While the military’s role has been broadly well-received, some wonder if the brass will return to the barracks after the Covid and economic crises subside.
“The Sri Lankan military today is managing politics on behalf of Gotabaya. Although it is not operating independently of the political regime yet, there is no denying that it is gradually developing a taste for politics,” said a Columbo-based political observer who requested anonymity.
“The economic and health crisis may produce a crisis of military authoritarianism in Sri Lanka in the long run,” the observer said.
At the same time, Rajapaksa’s regime is turning to China to avert a full-blown economic disaster, including a potential debt default. Sri Lanka’s economy contracted by a record 3.6% in 2020.
While critics have claimed China’s so-called “debt trap” diplomacy has contributed largely to the present economic crisis, only 10% of Sri Lanka’s external debts are owed to China, according to official figures released in April 2021. About 47% is owed to international lenders, 9% to the World Bank and 13% to the Asia Development Bank, the statistics show.
While much has been made of the debt-equity swap that gave China control over the Hambantota port after the government defaulted on a loan payment to Chinese banks, a recent study led by Harvard and Johns Hopkins University academics shows the “debt trap” narrative is overblown, if not apocryphal, and was caused more by Sri Lanka’s mismanagement than onerous Chinese lending terms.
The economic situation has gone from bad to worse since the International Monetary Fund closed last year a $1.5 billion finance facility first extended in 2015 to avert a balance of payments crisis. The withdrawal of that funding was quickly followed by the pandemic’s economic devastation.
The closure of international borders caused a massive decline in tourism while lockdowns strangled the local economy. Meanwhile, in 2020-21, FDI inflows to Sri Lanka contracted by 43% year-on-year, according to a recent World Investment Report of UNCTAD.
Analysts say Sri Lanka averted an immediate and much deeper crisis after the IMF closed its financing facility by securing a $1.5 billion currency swap agreement with China.
While China apparently sees investment potential in Sri Lanka, it is also significant that Beijing is unbothered by the growing role of the military in politics – or the fact that Gotabaya Rajapaksa is an alleged war criminal for his military role in the final brutal push that ended the nation’s civil war against Tamil insurgents.
Reciprocating China’s March 2021 vote against the UNHRC’s resolution for investigating war crimes in Sri Lanka during the civil war, Sri Lanka recently urged the same UNHRC not to “interfere” in Xinjiang or Hong Kong, arguing that the principle of “non-interference” should be upheld.
There is thus a growing political synergy between the two countries, one that has the potential to pay economic and financial dividends.
A major shift away from international borrowers to China is being underwritten by Sinhala-Buddhist nationalists who dominate Rajapaksa’s government. They see traditional lenders in the West as “imperialist” and neighboring India as an unwanted “interventionist” force that has a long history of meddling in Sri Lanka’s politics.
China, on the other hand, has been the primary source of assistance for Sri Lanka during the pandemic. Data suggests that China’s aid and assistance to Sri Lanka is now greater than the combined support provided by the US and India.
China is, therefore, a logical resort for the nationalist regime to advance its wider agenda.
Sources in Columbo claim Rajapaksa’s government is planning to sell state assets to China to cushion the economic crisis and inject new foreign exchange into national coffers to prevent a greater depreciation of the rupee, which has declined around 7.5% against the US dollar this year.
For Sri Lanka’s Tamil nationalists, these are worrying developments. As the leader of Tamil Progressive Alliance Mano Ganesan recently said, China appears “ignorant” of the ethnic and religious diversity in the island nation.
In the words of an academic based in Colombo University, the Rajapaksa regime “can ward off the criticism it often faces from the West for its alleged involvement in war crimes against the Tamil people” by allying more closely with China.
Indeed, as current trends show, an alliance with China will lessen its dependence on the West and India and allow Rajapaksa to militarize and Sinhalese the polity unhindered and potentially on an unprecedented scale.