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 easiest part. The path before him is uphill 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 Sri Lanka's economy and, subsequently, hold on to power.

CHALLENGES RANIL WICKREMESINGHE FACES

ANTI-INCUMBENCY

The first major challenge for Ranil Wickremesinghe would be to quell protests and overcome the anti-incumbency among the public. Ever since the agitation in Sri Lanka began, the protesters have been constantly demanding his resignation first as the Prime Minister and then as the acting President, after he was handpicked by his predecessor for the post.

The protesters see him as someone close to the previous dispensation and hold him responsible as well for the current economic crisis. His ascent to the President's post could spur the protesters to intensify protests.

ABSENCE OF A BAILOUT PACKAGE

Sri Lanka's external debt amounts to a staggering amount of nearly $51 billion. Wickremesinghe's first task in office would be to convince the International Monetary Fund to provide a bailout package. But the task would not be easy as the IMF has said that Sri Lanka would have to work a lot more on its debt restructuring and implement anti-corruption measures before such a package is finalised.

CRIPPLING FUEL SHORTAGE

With queues outside fuel stations increasing, the fuel shortage in Sri Lanka has crippled the island nation. In late June, the shortage forced the government to ban the sale of petrol and diesel for vehicles engaged in non-essential services for two weeks. The shortage pushed up the prices of fuel in Sri Lanka to record highs.

However, the prices were revised on July 17. The government's Ceylon Petroleum Corporation (CPC) reduced the price of Petrol Octane 92 by 20 Sri Lankan Rupees to 450 Sri Lankan Rupees a litre. The price of Petrol Octane 95 was reduced by 10 rupees to 540 rupees a litre while the cost of Super Diesel was cut by 10 rupees to 520 rupees per litre. Auto Diesel's price was reduced by 20 rupees to 440 rupees.

With very little international help in sight, Wickremesinghe must work to bring down the price of fuel to make it affordable to the public. Sri Lanka's Petroleum Minister Udaya Gammapilla earlier said that the country did not have enough cash to pay for oil imports.

DWINDLING FOREIGN EXCHANGE RESERVES

According to the government's estimates, Sri Lanka's foreign exchange reserves can pay for imports for barely three months. The government has taken some steps like limiting US Dollar transactions and imports of farm chemicals, vehicles, and spices. But imports still amount to more than the value of the island nation's exports of tea, rubber, etc. Wickremesinghe would have to balance replenishment of Sri Lanka's foreign exchange reserve with debt restructuring and payoffs.

FAILING TOURISM

Tourism is one of Sri Lanka's biggest foreign currency earners, providing jobs to nearly 3 million and accounting for over 5% of its GDP. For a country that once thrived on tourism, Sri Lanka's dismal condition of the tourism sector, now battered by inflation and protests, failed to revive after the Covid-enforced travel restrictions. While the government blamed the Covid and a series of bomb attacks in 2019 for the dwindling number of tourists, many experts and the public blame Gotabaya Rajapaksa's poor finance mismanagement for the crisis.

Wickremesinghe, a close aide of Rajapaksa, will have to shed this image and take strict measures to attract tourists again if he wants his country's economy to revive.

CHINA'S DEBT TRAP

Coming out of China's debt trap would be an uphill task for Wickremesinghe. Sri Lanka owes over $7 billion to China's banks and other entities, way more than what it needs in a bailout package. The debt mounted up as China claimed to invest 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 this, China refused to waive the loans to Sri Lanka but offered more money, seemingly to pay off its debts but in reality piling up on the debt trap.

Wickremesinghe must look to other nations for help in order to come out of the Chinese debt trap.

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