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The billion-dollar question is whether the new government of President Ranil Wickremesinghe would contain social unrest, obtain foreign assistance, resolve the scarcities of essentials that people are facing, bring about political stability, overcome the severe economic crisis and bring about an economic recovery.

Beginning

President Ranil Wickremesinghe has begun on the wrong foot. The first few days of President Ranil Wickremesinghe’s regime does not augur well for the nation’s economic recovery. The tough and brutal assault of protestors by the forces, hours after his assuming office and hours before they were expected to leave the precincts of the Presidential Secretariat, has angered a wide range of Sri Lankans and the international community.

People’s response

The people’s response to this state violence could determine whether there would be a continuation of social unrest. Furthermore, the response of the international community to the violation of human rights could determine whether international assistance would be forthcoming.

Political Stability

Continued political and social unrest will disable the functioning of the economy for a further period and increase the severe hardships of people and threaten their livelihoods. Transport is crippled and economic activities are functioning at low capacities. Education and health may continue inadequately, while soaring prices of food and unemployment threaten the food security of the poor. Hunger and starvation is rising.

Priority

Politics apart, it behooves the new government to speedily reduce scarcities of essentials, especially of gas, diesel, petrol and pharmaceuticals and restore law and order.

Bridging finance

The depth of the financial crisis is such that immediate bridging finance is needed to rescue the country from its severe hardships and scarcities.  The country’s economic recovery is initially heavily dependent on immediate foreign assistance, and then an International Monetary Fund (IMF) credit facility or Extended Fund Facility (EFF) is imperative.

Immediate response

Last Sunday’s column indicated there were hopeful signs that such financial assistance, in addition to humanitarian aid, was forthcoming from the international community.

The Indian foreign minister had indicated that India, that had assisted Sri Lanka with about US$ four billion already, would continue to help.

On July 25, IMF Managing Director Kristalina Georgieva told Nikkei Asia in Tokyo, that the IMF was “very deeply concerned about the well-being of the people in Sri Lanka,” and she said it would assist Sri Lanka with emergency aid quickly.

Furthermore, there was also an international alert that countries, international organisations and international financial institutions should not confine themselves to humanitarian aid for Sri Lanka and that they should extend financial assistance to rescue the country’s economy.

Undermined foreign resolve?

Has the international response changed?

The pertinent question now is whether the events of July 22 at the aragalaya site at Galle Face Green and subsequent suppression and arrests of protestors have undermined the international resolve to help.

International response

The billion dollar question is whether the clamping down of protestors at Galle Face on the early hours of July 22 would reverse the needed international assistance, especially the bridging finance from the IMF and friendly countries and delay the IMF’s credit facility.

Concern

The initial reaction of countries to the state suppression has been one of concern.  The US, Canada, Britain, the European Union (EU), Norway and Japan have expressed their concerns. For instance the US has said it views the freedom to peaceful protest as a right of the people of Sri Lanka which should not be violated. The statement from the European Union even had a threat of withdrawing the GSP Plus concession in trade that would spell disaster to the trade balance.

Outcome

It is too early to predict the final outcome of the current political conditions. It appears that there are diplomatic overtures at the highest level to regain foreign confidence.

Strategic factors

Undoubtedly international strategic considerations may determine the decisions rather than the professed concerns for fundamental human rights. Geo-political considerations rather than human rights would be foremost in determining assistance. The political acumen of the President Wickremesinghe is also widely considered a favourable factor.

IMF

The bridging finance and an early agreement with the IMF is vital. Hopefully there would be lesser unrest and less political instability to obtain these and other bilateral aid from friendly countries and international organisations would be forthcoming soon.

Social unrest

At mid-week there are no signs of a fresh wave of protests and social unrest. It is unclear whether this is a brief spell of calm or a more durable period of social calm, that is highly unlikely in the current political context.

Social unrest is likely to resume soon owing to the continuing hardships of the people, the highly unpopular reincarnation of the previous regime under a new unpopular leader and political factors.

Economic stability

However, politics apart, in as far as the country’s economy and people’s welfare is concerned, a period of social and political calm would be highly conducive for the implementation of policies for economic stabilisation and growth.

It would be especially important for obtaining emergency assistance and coming to an arrangement with the IMF to enter into an EFF.

Summary and conclusion

The success of the new government would depend much on its ability to resolve the immediate problem of scarcities of gas, diesel, petrol and other necessities. This would perhaps deflate the political unrest and Island-wide protests. Such calm would no doubt assist in obtaining the much needed emergency aid and bridging finance to tide over till the expected IMF EFF facility is obtained.

The nation’s economic recovery, stabilisation and growth would depend on achieving political stability, obtaining of adequate foreign assistance and the country undertaking a programme of economic reforms.