Where Sri Lanka’s Inflation-Driven Crisis Could Head Next

(Bloomberg) -- Sri Lankan President Gotabaya Rajapaksa has defied calls to resign, pledging instead to form a new government after violent clashes this week left eight people dead in an escalation of a monthslong crisis over food and fuel shortages.

“I will give the opportunity for the new government and new PM to start a new program to take the country forward,” he said in a televised address, adding that after stability is restored, he will discuss curbing his executive powers with all political parties. 

Gotabaya Rajapaksa earlier extended a nationwide curfew until Thursday morning, after government supporters on Monday initiated attacks on protesters who had camped out for weeks in downtown Colombo to call for his ouster. Rajapaksa opponents then attacked ruling-party lawmakers and burned some of their houses, prompting key family members to effectively go into hiding. 

His brother Mahinda Rajapaksa quit as prime minister leading to the dissolution of the cabinet, leaving no government in place to negotiate with the International Monetary Fund and creditors on $8.6 billion of debt due this year. A deal is essential stabilize the nation’s finances and help the government provide essential goods to the island nation’s 22 million people. 

Gotabaya Rajapaksa is refusing to step down, and the opposition has declined his offers of a unity government without constitutional change that would reduce the powers of the presidency. 

“He needs to give the country a timeframe on what will happen,” Jehan Perera, executive director at the National Peace Council in Colombo, said of the president. “This is one way he can redeem himself as a statesman before things get worse.”

Here’s what could happen next:

1. President Is Impeached 

Under Sri Lanka’s constitution, removing a president is difficult and time consuming. First a resolution must be passed by two-thirds of parliament explaining why a president is unfit for office, then it must be investigated by the Supreme Court, and then if judges agree with the findings lawmakers need to vote again. 

Officials in the ruling Sri Lanka People’s Front party say they still command a majority in parliament, and last week they proved they had the numbers in a vote for a new deputy speaker. It’s unclear if the violence, which led to attacks on the houses of more than two dozen lawmakers and former ministers linked to the Rajapaksas, and the death of a ruling party lawmaker, changed that equation at all.  

2. President Forms Unity Government With Opposition

Now that his brother is gone as prime minister, Gotabaya Rajapaksa has made another overture to the opposition to form an all-party government. The main opposition parties have consistently rejected his offer, as the president would still retain large powers.

The influential Buddhist clergy and the Bar Council of Sri Lanka proposed an interim government that would run the country for 18 months while lawmakers draw up constitutional amendments to curb presidential powers. But any government that doesn’t have broad-based support is likely to be unstable.

3. President Dissolves Parliament, Holds Fresh Elections  

The constitution doesn’t allow the president to dissolve parliament until midway through its five-year term, which isn’t until February 2023. But it does allow the parliament to request a dissolution before then by passing a resolution. 

While some opposition leaders have floated this option in recent days, elections will also be expensive and time consuming. And even if the opposition wins, Gotabaya Rajapaska would still retain key powers as the president. He has the power to appoint a prime minister who in his opinion commands the parliament majority, and he will have a large say in naming and firing cabinet ministers. He can also assign himself to any ministry portfolio. 

This is why the opposition has put forward a bill to clip the powers of the presidency rather than pushing for an election. The previous cabinet under Mahinda Rajapaksa had also put in motion the writing of a new bill to curb the executive presidency. 

While an election could possibly give the opposition the two-thirds majority it needs to change the constitution, that may need the endorsement of a referendum and will possibly get tied up in the Supreme Court -- all of which could drag on for months.

4. President Resigns, Flees the Country

This is what the protesters are hoping for with their chants of “Go Home Gota,” and can’t be ruled out if the violence spreads. If the president resigns, then immediately whoever becomes prime minister would take over, with the house speaker as next in line. 

Then parliament has one month to elect his replacement by an absolute majority through a secret ballot, according to the constitution. Any lawmaker would be eligible, including an outsider who takes a party list position ahead of the vote. The new president will hold office for the remainder of the term, which ends in 2024. 

Nishan De Mel, executive director of Verite Research, said Gotabaya Rajapaksa has three main options: resignation, impeachment or a compromise that includes reducing presidential powers. “He has been resisting all three options,” De Mel said.

5. Military Coup

While Sri Lanka has a history of authoritarian rule, if anyone stages a coup it will likely be to help the Rajapaksas. The brothers have run Sri Lanka for 13 of the past 17 years, often with an iron fist. Gotabaya Rajapaksa is widely credited with putting an end to a 26-year separatist conflict with ethnic Tamil rebels, and has appointed more than two dozen serving or retired military officers into key posts. 

Gotabaya Rajapaksa’s top allies include Sri Lankan army chief General Shavendra Silva, who has been sanctioned by the U.S. on allegations of war crimes committed during the last phase of the conflict with the Liberation Tigers of Tamil Eelam, and Kamal Gunaratne, secretary to the defense minister who stands accused of similar actions. Both men have denied wrongdoing. 

Silva has told foreign diplomats that Sri Lanka’s army would uphold the constitution and was “prepared to provide security and protection to the state as necessary.”

For now Rajapaksa has given powers to the military under the emergency to detain people a without warrant for 24 hours while private property can be searched. 

“In a country where we don’t have a prime minister and a cabinet and the emergency rule brings broad powers to an executive with broad ties to the military, that combination is extremely dynamic,” said Bhavani Fonseka, a Colombo-based senior researcher for the Center for Policy Alternatives. “It can lead to scenarios that Sri Lanka has not seen before even with the civil war.”

(Updates to recast lead)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.