Sri Lanka to elect new president Sept 21 amid critical economic reforms

Sri Lanka is set to hold presidential elections on September 21, as announced by the government on Friday. This crucial vote is anticipated to shape the future of reforms in the country, which is grappling with its most severe financial crisis in decades.

Nominations for the election must be submitted by August 15, and incumbent President Ranil Wickremesinghe has already made history as the first candidate to do so, having paid a non-refundable deposit to the election commission, according to his office.

Wickremesinghe, 75, assumed office in July 2022 after widespread protests linked to the crippling financial crisis forced his predecessor, Gotabaya Rajapaksa, to flee and resign. The Parliament elected Wickremesinghe to complete the remainder of Rajapaksa’s five-year term, which began in November 2019.

“This is a critical time for Sri Lanka,” remarked Bhavani Fonseka, a senior researcher at the Colombo-based Centre for Policy Alternatives. “Calling for an election is vital for democracy, but it is essential that the election commission is allowed to fulfill its duties. A free and fair election is imperative.”

Out of Sri Lanka’s 22 million population, nearly 17 million are eligible to vote in the upcoming election.

Backed by a $2.9 billion International Monetary Fund (IMF) bailout program, Wickremesinghe has worked to stabilize the shattered economy, reducing inflation from a staggering 70% in September 2022 to just 1.7% in June. He has also strengthened the rupee and rebuilt severely depleted foreign exchange reserves.

Sri Lanka’s economy is projected to grow by 3% in 2024, following a contraction of 2.3% last year and a decline of 7.3% at the height of the crisis. Recently, bilateral creditors, including Japan, China, and India, agreed to a $10 billion debt restructuring deal, giving Colombo a reprieve by deferring repayments for four years and saving $5 billion. However, the country still needs to finalize a preliminary agreement with bondholders on restructuring $12.5 billion of debt before a third IMF review later this year.

Despite these positive steps, higher taxes implemented under the IMF program, ongoing inflation, and a stagnant job market have pushed a quarter of the population into poverty, prompting thousands to seek opportunities abroad.

Opposition leader Sajith Premadasa and Anura Kumara Dissanayake, head of the Marxist-leaning Janatha Vimukthi Peramuna (JVP), are likely to capitalize on this discontent as they launch their presidential campaigns. Both have indicated a desire to revise the IMF program to alleviate the cost of living for Sri Lankans and ease the nation’s debt repayment burdens.

Analysts warn that Sri Lanka’s recovery remains fragile, and any attempts to reverse reforms could trigger a new crisis. The next government must ensure that reforms continue to transform the economy and steer it onto a positive trajectory.

“What we require from this election is for the progress we have seen to continue,” said Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers. “Sri Lanka is not in a position to engage in trial and error.”