The BGA Sri Lanka Team led by Senior Advisor Chullanté Jayasuriya, wrote an update to clients on the government’s challenges to secure stability amid the country’s political and economic crisis.

Context

  • President Ranil Wickremesinghe’s government faced several challenges during the week of August 8 as it continues to struggle with securing stability amid the country’s manifold political and economic crisis. The president is now looking to form an all-party governance structure that would enable members of Parliament representing any political party to join, according to sources within the government.
  • Separately, the Chinese tracking vessel Yuan Wang 5’s request to dock at the southern port of Hambantota posed a serious challenge for the new government. The government reversed its initial decision to allow the vessel visit following concerns from India and the United States, only to reverse course once again. China was irritated and said it would halt any future assistance to Sri Lanka, even though Beijing did not withdraw its support for the country getting an agreement with the IMF.

Significance

  • All major political parties in Parliament are avoiding Wickremesinghe’s invitation to form an all-party system of government. With the president failing to form a government, he has been unable to push through reforms in the legislature required to secure funding from the International Monetary Fund (IMF).
  • The docking of the Chinese vessel raised questions from Indian and U.S. officials. The tripartite diplomatic dispute between India, China and the United States will impact Sri Lanka’s ability to secure external funding as China said it would halt future assistance to Sri Lanka despite supporting Sri Lanka in securing an agreement with the IMF.

Implications

  • Businesses should carefully monitor developments in the country to evaluate whether Sri Lanka is able to secure much-needed external assistance in time. The current government is unable to push through reforms in the legislature required to secure funding from the IMF.
  • Business can expect the country’s recent dispute with China may complicate the timeline for securing external assistance because Beijing’s consent to restructure Sri Lanka’s debt is a prerequisite for the IMF to issue an assistance package.

BGA will continue to keep you updated on developments in Sri Lanka as they occur. If you have any comments or questions, please contact BGA Sri Lanka Senior Advisor Chullanté Jayasuriya at cjayasuriya@bowergroupasia.com.

A small ginko leaf

Senior Advisor

Chullanté‘s command of economic, political and social trends in Sri Lanka makes him a unique leader with a broad and deep network throughout the country. He has over 30 years of experience in trade and investment promotion, private sector development, policy planning implementation, management of chambers of commerce and international development cooperation. Chullanté previously served as the International Trade Centre’s national consultant to the National Export Strategy of Sri Lanka and as Sri Lanka senior technical advisor for local economic governance at The Asia Foundation. He is a United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) ... Read More