By Nasriya Naffin, TON Sri Lanka

President Ranil Wickremesinghe was appointed President of Sri Lanka with the expectation that he could use his international relations and economic knowledge to ensure the supply of essentials such as fuel, cooking gas, and medicines, as well as a continuous power supply.

However, gas and fuel lines have grown longer in the month since Wickremesinghe assumed responsibility for stabilizing the economy.

Even though Sri Lanka earns approximately one billion US dollars in exports, 500 million US dollars in remittances, and an additional 300 million US dollars from services, most debt repayment has been suspended, and the country is experiencing foreign exchange shortages due to a failed float.

With money still being printed and a surrender demand in place, monetary stability has not yet been restored.

Fuel prices have skyrocketed in terms of rupees as the rupee has collapsed after two years of mistargeted interest rates during the worst currency crises. The currency collapse has made food unaffordable for the less affluent, causing people to struggle to afford their daily meals. Many elderly find it difficult to ensure a steady supply of medication.

Wickremesinghe began by stating the actual economic situation of the island nation. He spoke publicly about external debt, the necessity of seeking assistance from the International Monetary Fund (IMF), and collaborating with international partners such as India, China, and Japan.

Wickremesinghe is struggling to provide the essentials for the public nearly four weeks after his appointment, as monetary stability continues to elude the country and foreign exchange shortages persist.

President Ranil Wickremesinghe was appointed President of Sri Lanka with the expectation that he could use his international relations and economic knowledge to ensure the supply of essentials such as fuel, cooking gas, and medicines, as well as a continuous power supply.

However, gas and fuel lines grew longer in the month since Wickremesinghe assumed responsibility for stabilizing the economy.

Even though Sri Lanka earns approximately one billion US dollars in exports, 500 million US dollars in remittances, and an additional 300 million US dollars from services, most debt repayment has been suspended, and the country is experiencing foreign exchange shortages due to a failed float.

With money still being printed and a surrender demand in place, monetary stability has not yet been restored.

Fuel prices have skyrocketed in terms of rupees as the rupee has collapsed after two years of mistargeted interest rates during the worst currency crises. The currency collapse has made food unaffordable for the less affluent, causing people to struggle to afford their daily meals. Many elderly find it difficult to ensure a steady supply of medication.

Wickremesinghe began by stating the actual economic situation of the island nation. He spoke publicly about external debt, the necessity of seeking assistance from the International Monetary Fund (IMF), and collaborating with international partners such as India, China, and Japan.

Wickremesinghe has struggled to provide the essentials for the public nearly four weeks after his appointment, as monetary stability continued to elude the country and foreign exchange shortages persist.

He advocated for IMF aid before becoming president. He correctly predicted power outages, dollar shortages, import issues, unemployment rises, companies fail, and food shortages can occur in the future. He said Sri Lanka should not have suspended debt payment and should have gone to the IMF earlier when it was creditworthy. Wickremesinghe suggested that the government and opposition should work together to resolve the crisis.

What happened when he took office?

When a soft-pegged exchange currency collapses, people suffer and budgets become nearly impossible to manage, even though inflation can generate nominal revenues as long as salaries do not rise. He wanted a national assembly with all political parties to solve the crisis, and proposed an all-party government and new parliamentary committees to hold the president and cabinet accountable to the legislature. He also promised to introduce a constitutional amendment to limit President Gotabaya Rajapaksa's power, whose stubborn and misguided policies and mismanagement are blamed for Sri Lanka's current crisis.

He promised to build a country “without queues for kerosene, gas, and fuel; a nation free of power outages; a nation with plentiful resources where agriculture will flourish; a nation where the future of the youth is secure; a nation where people’s labor need not be wasted in queues and in struggles; a nation where everyone can lead their lives freely with three square meals a day”.’

Wickremesinghe said budget revenue numbers were inflated and actual revenue would be 30% below target, expenses would be higher, and the deficit would be large.Which is why he warned of power cuts likely to be increased to 15 hours a day, because there was no foreign currency to buy food from September onwards. A source said.

President’s fiscal fixes

The new prime minister proposed a budget that cuts capital expenditures and increases safety net spending for those who have been impoverished by the central bank's money printing.

Wickremesinghe raised VAT from 8% to 12% and telecommunications levies from 10% to 15% to boost government revenue. October saw new taxes. Government spending is minimized. 695 billion more estimates were planned. He suggested privatizing SriLankan Airlines.

Fuel prices reflect market conditions. Wickremesinghe told the media that he would have to print currency to pay state-sector workers and buy necessities.

Wickremesinghe has warned of a food shortage, starvation, a lack of dollars for imports, prolonged power outages, and a longer-than-expected recovery since taking power. He predicted deterioration before recovery.

What is the situation now?

Opposition and political analysts say Wickremesinghe hasn't changed much. Some political analysts say Wickremesinghe's hopes of reviving the economy are fading because he has not lived up to the expectations of the common man, who had believed the new prime minister would bring in more dollars to the country and ensure the necessary policy changes to drive the economy in a different direction for sustainable debt repayment and growth. Debt restructuring takes time, so an IMF program has not ended quickly.

Why is there a delay in Wickremesinghe’s promises?

Political analysts say Wickremesinghe's lack of a majority in parliament and major policy differences with President Rajapaksa's Sri Lanka Podujana Peremuna (SLPP) have hampered political reforms. The constitutional amendment, essential for political stability, is unresolved.

Some SLPP members oppose the 21st amendment because it will force former finance minister Basil Rajapaksa out of parliament due to his dual citizenship and strip President Rajapaksa of his powers. Wickremesinghe is also being criticized for unconditionally accepting the post to protect the Rajapaksas from political exile. That deterred key opposition parties from supporting him. While Rajapaksa is in power, few will support Wickremesinghe.