September 21, 2024, marked a historic day for Sri Lanka, a day that will undoubtedly be remembered for many firsts. Millions of voters flocked to polling stations across the island to participate in the country’s first presidential election since mass protests ousted former President Gotabaya Rajapaksa in 2022. However, the results of the election did more than just highlight the public’s desire for political change; they marked a significant shift in the nation’s political landscape.
For the first time in Sri Lanka’s 76-year post-independence history, the country experienced a second round of vote counting in a presidential election. No candidate was able to secure the 50% majority needed to claim victory outright. But it was what happened during the second round that delivered a shock, one of the most dramatic in decades. Anura Kumara Dissanayake, leader of the National People’s Power (NPP) alliance, emerged victorious. In a country where the two major parties—the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP)—have dominated for generations, the ascendance of a third-party candidate like Dissanayake is nothing short of revolutionary.
Dissanayake’s rise is a political earthquake, but it also brings new hope to a country that has been grappling with economic collapse and political corruption. His election promises a fresh start, but it comes with monumental challenges, chief among them the dire state of the Sri Lankan economy. How will this new leader and his left-leaning coalition bring the country back from the brink?
Anura Kumara Dissanayake, leader of the leftist Janatha Vimukthi Peramuna (JVP), which forms the backbone of the NPP alliance, has long been known for his progressive and egalitarian rhetoric. The JVP, originally a Marxist-Leninist party, has a storied history in Sri Lankan politics, often being associated with radicalism and insurgency in its early years. However, under Dissanayake’s leadership, the party shifted focus to become a legitimate political force advocating for social justice, anti-corruption measures, and economic reform.
Dissanayake’s victory marks a significant break from the past, especially since Sri Lanka’s politics have been monopolized by the UNP and SLFP since its independence in 1948. His campaign was focused on addressing widespread corruption, economic mismanagement, and the failings of previous governments to meet the basic needs of ordinary Sri Lankans. This message resonated with a population still reeling from the financial and political crises of 2022, which had brought the country to its knees.
His ability to capture a plurality of votes in the second round of counting, where voters’ second-choice preferences were tallied, demonstrates that his appeal extended beyond his core base. He tapped into a broader dissatisfaction with the status quo, uniting voters across class, ethnic, and regional lines.
A Daunting Economic Task
Dissanayake now faces an immense challenge: guiding Sri Lanka through its worst economic crisis in modern history. The country defaulted on its foreign debt in 2022, suspending payments on a staggering $78 billion in loans, both domestic and international. This default sparked rampant inflation, food and fuel shortages, and an unemployment crisis, leaving the majority of the population struggling to survive.
While the most immediate threat of economic collapse has receded, the country’s financial situation remains precarious. Sri Lanka has been reliant on a $2.9 billion bailout loan from the International Monetary Fund (IMF), but this deal, negotiated under the previous administration of acting President Ranil Wickremesinghe in 2023, came with harsh conditions. These include sweeping austerity measures, drastic cuts in public spending, and an increase in the cost of essential goods and services. Most alarmingly, a large portion of the burden has fallen on the country’s working-class population, whose pensions and savings are set to lose half of their value under domestic debt restructuring plans.
One of Dissanayake’s first priorities as president will be to manage the terms of this IMF bailout, which many Sri Lankans view as unjustly favorable to the country’s foreign creditors. While the IMF agreement aims to stabilize Sri Lanka’s financial situation by reducing public debt to 95% of GDP by 2032, it also stipulates that a staggering 30% of government revenue must be allocated to debt servicing once the program concludes. These conditions threaten to drain the country’s already limited resources, perpetuating poverty and inequality.
Public opposition to the IMF deal has already been mounting. In March 2024, thousands of public sector workers staged strikes across the island, protesting the austerity measures imposed by the government. Teachers, healthcare professionals, and railway workers joined the demonstrations, voicing their discontent over wage cuts, price hikes, and a lack of social safety nets.
Dissanayake, who campaigned on a platform of social equity and economic justice, will need to renegotiate the terms of Sri Lanka’s financial agreements. But how he will balance the demands of the IMF with the needs of the Sri Lankan people remains an open question.
Restructuring Debt: A Path to Growth?
One of the most pressing concerns for Dissanayake is how to handle the restructuring of Sri Lanka’s foreign debt. In the final months of Wickremesinghe’s presidency, his administration reached a tentative deal with international bondholders, who are owed around $12.5 billion, to restructure some of this external debt. The proposed deal involves the issuance of new bonds that track Sri Lanka’s economic recovery, offering larger payouts tied to GDP growth.
However, many economists are skeptical about this deal, warning that these “recovery bonds” could trap the country in a vicious cycle of debt. By linking bond repayments to future economic growth, the country risks becoming even more vulnerable to future economic downturns. Should growth stagnate or reverse, Sri Lanka could once again find itself unable to meet its obligations, leading to yet another default.
Dissanayake’s administration will have to approach this issue with caution. While rejecting the deal outright could destabilize the country’s financial system and international standing, agreeing to its terms could leave Sri Lanka in a perpetual state of financial dependence. The new president will need to walk a fine line between satisfying creditors and ensuring that the country has enough resources to invest in critical infrastructure, public services, and social welfare programs.
One of the main criticisms levied against the previous government’s handling of the crisis was its adherence to IMF-mandated austerity. The measures, aimed at curbing public spending and stabilizing the currency, exacerbated inequality and deepened the suffering of the poor and working class. While fiscal responsibility is important, many argue that austerity alone cannot bring about long-term economic recovery.
Dissanayake and the NPP have indicated that they will pursue a different approach, focusing on equitable growth and social justice. During his presidential campaign, Dissanayake pledged to strengthen Sri Lanka’s welfare state, providing increased support to low-income families, ensuring free healthcare and education, and bolstering the country’s agricultural sector to achieve food security. He has also spoken of the need to diversify the economy, moving away from an over-reliance on tourism and remittances toward sustainable industries like renewable energy, technology, and manufacturing.
A key component of Dissanayake’s economic plan will likely be renegotiating the terms of the IMF bailout to allow for more public spending on essential services. His administration will also need to push for a restructuring of the country’s foreign debt that includes not just repayment extensions but also debt forgiveness. While this may be a hard sell to international creditors, particularly China and private bondholders, it is a crucial step toward achieving a more sustainable financial future for the country.
Economic recovery, however, is only possible in a politically stable environment. One of Dissanayake’s first moves after taking office was to dissolve the 225-member parliament, which had become gridlocked and unrepresentative of the public’s desires. His NPP alliance held only three seats in the old parliament, and Dissanayake himself has called the legislative body out of touch with the people’s demands.
In a bold but risky move, Dissanayake announced that a new parliamentary election would be held on November 14. This gives his administration only a short window to prove its credibility to the Sri Lankan people. Should the NPP gain a significant number of seats, Dissanayake will have the political capital necessary to enact his ambitious economic reforms. However, if the election results in a fragmented parliament, his government could face significant hurdles in implementing its policy agenda.
The upcoming parliamentary elections will be crucial for determining whether Dissanayake’s presidency represents a genuine turning point for Sri Lanka or simply a temporary deviation from the norm. The NPP’s rise signals that the Sri Lankan electorate is hungry for change, but it remains to be seen whether Dissanayake can maintain the momentum and translate popular support into effective governance.
In addition to economic recovery, Dissanayake will also need to address other pressing issues, including ethnic tensions, corruption, and human rights abuses. His decision to appoint Harini Amarasuriya, an academic and feminist activist, as prime minister suggests that his government is serious about gender equality and human rights. Amarasuriya is only the third woman in Sri Lankan history to hold the position of prime minister, and her appointment is a clear signal of the administration’s commitment to progressive values.
