Sri Lanka Leftist Wins Presidency After Vowing to Rejig IMF Deal
(Bloomberg) -- Sri Lanka’s leftist candidate won a tightly contested presidential election, with voters sweeping out the incumbent for the economic pain they’ve endured in the two years since the country was plunged into crisis.
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Anura Kumara Dissanayake had a commanding lead of about 42% of the votes in the first round of counting, defeating opposition leader Sajith Premadasa, who won about 33% support. Second-round votes counted in the country’s first runoff in its history didn’t change those margins, according to results released Sunday by the Election Commission of Sri Lanka.
The incumbent President Ranil Wickremesinghe was dealt a resounding defeat after being knocked out in the first round.
Dissanayake, 55, popularly known in Sri Lanka as AKD, secured his win on a platform of clean governance and combating corruption in a country that’s still saddled with high debt and a shaky economy two years after widespread unrest and the government’s first default in its history.
The results hand Dissanayake and his leftist National People’s Power coalition a mandate to follow through with a series of economic pledges, including a vow to reopen negotiations with the International Monetary Fund over its $3 billion bailout struck by the outgoing administration. The tough austerity measures and tax hikes that Wickremesinghe imposed to secure the IMF bailout made him deeply unpopular with voters.
Some in Dissanayake’s party also oppose the debt restructuring terms agreed with the nation’s creditors. That’s made investors nervous, with a new review of the debt plan or a reopening of IMF talks likely to delay the disbursement of fresh loans from the Washington-based lender and put the economy under further strain.
The IMF has said it will conduct talks with the new administration once it’s in place. Under the current bailout program, Sri Lanka will need to meet certain economic targets before the IMF approves the next tranche of funding, estimated at about $350 million.
Dissanayake’s win marks a victory for the anti-establishment protest movement that took to the streets in the wake of the 2022 economic crisis and culminated in the ouster of the powerful Rajapaksa government. A comeback candidate — he secured only 3% of the vote when he last ran for president in 2019 — Dissanayake was the only major contestant not to come from one of Sri Lanka’s small number of political families. His ascension signals the depth of frustration among Sri Lankans with the ruling establishment.
Wickremesinghe took power two years ago by parliamentary appointment after the political uprising that swept out Gotabaya Rajapaksa.
“Cost of living and austerity measures were the heart of these elections” compared with previous votes, when constitutional reforms and minority rights were in focus, Bhavani Fonseka, senior researcher and lawyer at the Colombo-based Centre for Policy Alternatives, said ahead of the result.
Dissanayake now faces the challenge of following through on his economic pledges while maintaining stability in the economy and keeping IMF bailout funds flowing. Although he has not spelled out his plan on the IMF deal in detail, his backers have said he plans to seek modifications without throwing out existing terms altogether.
“We are staying with the program but will look for modifications,” Rizvie Salih, an executive committee member of Dissanayake’s NPP coalition, said on Saturday. “Even the IMF has said they are open to new ideas, proposals.”
The incoming president pledged other economic measures on the campaign trail, including an increase in tax exemptions and more “equitable” tax rates and brackets. He’s seeking more oversight on government spending and cleaner governance. Dissanayake may also cancel a proposed Adani wind power project amid claims of a lack of transparency and uncompetitive pricing.
On foreign policy, Dissanayake faces the challenge of juggling the competing interests of China and India, strategic rivals who’ve been major investors in the island nation. Some analysts have said Dissanayake may be more likely to favor China given his party’s Marxist roots, although he also paid a visit to New Delhi at the invitation of India’s government earlier this year.
Meanwhile, Dissanayake’s backers have also called for greater scrutiny of investment deals with China and other nations to avoid future debt traps. He’s previously questioned the government’s trade agreement with China, saying it would undermine Sri Lankan businesses.
Dissanayake got his political start as a student leader in his party, the Janatha Vimukthi Peramuna. The party was once known for violent Marxist uprisings in the 1970s and 1980s, but has since renounced violence, with Dissanayake positioning himself as a center-left figure. He became the party’s head in 2014 and has included civil society leaders and academics in the group to appeal to a broader section of the country.
The party has shifted away from its anti-capitalist roots and briefly joined coalition governments. Still, the JVP leadership are untested as administrators, and the coalition that it leads has only three members in the 225-seat parliament.
A question, however, hangs over how the incoming president will square promises for tax relief and other austerity reversals while also meeting the needs of the IMF and creditors. “The biggest question is where is the money coming from?” said Paikiasothy Saravanamuttu, executive director of the Centre for Policy Alternatives, a Colombo-based think tank.
“The JVP believes that if they can stop corruption money will automatically come,” he said. “That in itself will require some sort of a judicial process which will take time. At the moment we don’t know where the money is going to come from to meet all the promises made to people.”
--With assistance from Asantha Sirimanne and Swati Gupta.
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