Sri Lanka’s LG polls may derail President’s reform agenda, delay IMF loan – analysts
ECONOMYNEXT – Sri Lanka’s local government (LG) polls may derail President Ranil Wickremesinghe’s economic reforms aimed at moving out of an unprecedented economic crisis and delay a crucial International Monetary Fund loan, analysts say.
Wickeremesighe, who was elected as the president by the 225-member parliament in July last year, has proposed some tough and politically unpopulour reforms including higher personal and corporate taxes, downsizing the public sector to reduce wages and pension bills, and maintaining fiscal discipline with IMF loan.
Many state-sector trade unions have threatened to start protests against tax hike amid demand for more relief and concessions.
However, Wickremesinghe’s government does not have the luxury to keep the public sector happy, because it cannot borrow money externally as the island nation had already declared sovereign debt default.
And the country’s Election Commission (EC) has called for nominations for the Local Government (LG) Elections from January 18 to 21 and the election date to be announced after the nomination.
The earliest the LG Elections can be held is the last week of February, and the latest is by the second week of March, EC officials have said. The term of the present LG bodies would end on March 19, 2023, regardless of an election.
“Reforms will go for six”
“If the government loses the election badly, all its policies including reforms will go for a six. If that happens, the legitimacy and the mandate of President Wickremesinghe will be further questioned,” an analyst who is an economic expert told EconomyNext, asking not to be named.
“It will be worse than what happened in 2018.”
When the last LG polls were held in 2018, former prime minister Mahinda Rajapaksa-led ultra nationalist Sri Lanka Podujana Peramuna (SLPP) recorded a landslide victory, challenging the government of then president Maithripala Sirisena and then prime minister Wickremesinghe.
Later, the Sirisena-Wickremesinghe government was not allowed to pass any major bills in the parliament as its legislative power was restricted following the defeat.
Rajapaksa’s younger brother Gotabaya Rajapaksa was later elected as the president in 2019, but both Rajapaksas were forced to resign in the face of street protests by the public following wrong economic policies which later turned into a political crisis.
Wickremesinghe, the leader of center-right United National Party was mainly elected by SLPP lawmakers and now is backed by the same people.
“A defeat in the local government poll will be a signal to the ruling party that the public are not with them,” another analyst said.
“The President is a single party member. The ruling party is not fully in charge and morally everybody is bankrupt after last year’s political crisis. So an election defeat at the local government poll will be a huge drawback for the president.”
Growing political risk?
However, some political analysts say SLPP could still win in rural areas where people’s needs and lifestyle are completely different from people in urban areas, who predominantly brought down the Rajapaksa regime.
“Because there is no other alternative in rural areas. Some voters could be frustrated with Rajapaksas and SLPP, but others might vote for the same party though very less in numbers,” Kusal Perera, a political analyst said.
“The dynamics of local government polls are different from parliamentary elections. The SLPP can easily pick the winning horse. It has created a corrupt political constituency all over the country and that could help them.”
But the uncertainty of the election outcome could also delay the proposed $2.9 billion IMF loan which will be approved once Sri Lanka agrees with all its bilateral creditors over debt restructuring.
Political stability is the key for sustaining Wickremesinghe’s reform agenda for the next two years.
Growing political risks or any hiccups in the stability of his unlikely coalition government could derail the reform agenda, delay the debt restructuring and IMF loan as well as the time to move away from the current economic crisis.
“Given Sri Lanka’s past history, nobody is willing to put their penny without looking at political stability,” another analyst who has associated with a key opposition political party said.
“Even if it is a local government poll, it is a must to see if the president’s policies have acceptance among the public. If he and his government face a strong defeat, the opposition parties will take to the streets demanding a general election.” (Colombo/Jan09/2023)