Inflation in Sri Lanka in August 2024 was at 0.5%, the lowest it’s been since 2000. While vehicle imports had not resumed, there were no shortages, no banks had collapsed and foreign reserves were up. An agreement on commercial debt was close by the time the country went to polls. In essence, the situation in Sri Lanka was in stark contrast from the chaos of 2022.
Yet, Sri Lankans voted out the man who steered this recovery and gave a weak mandate to an inexperienced outsider. Parliamentary elections scheduled for mid-November are likely to send into retirement an unusual number of incumbents.
As a tumultuous political season gets underway, it is important to understand the nature of the currently dominant political formation led by the new Sri Lankan president and the reasons for its rise from 3% of the vote in 2020 to a winning 42% in 2024. A comparison with Greece’s Syriza, an alliance of centre-left to left-wing political parties in Greece, which grew from 5% vote share in 2007 to forming a government with 36% of the vote in 2015, offers valuable insights.
Syriza
Syriza and the National People’s Power (NPP) in Sri Lanka may be seen as expressions of unhappiness with austerity measures and reduced living standards resulting from traumatic economic crises. Both formations were coalitions of heterogenous groups and interests. Syriza formed a government in January 2015 and held on through defections and snap elections but it was defeated four years later.
NPP suffered internal turmoil because of differences in ideology and approach among constituent parties. For example, Yanis Varoufakis, an active participant in Sri Lanka’s post-crisis economic debates, was appointed as the finance minister in January 2015 but resigned in six months when his approach failed.
The NPP, like Syriza, is an agglomeration of groups rather than a formal coalition of parties. The difference is that a single cadre-based party, the 60-year-old Janatha Vimukthi Peramuna (JVP), is at its core and controls the levers of power. Others are necessary for the NPP’s success, but they are individual and amorphous organisational entities, not parties.
If the JVP concedes too much to the mostly middle-class individuals in the broad formation and the business leaders who supported the campaign, there may be defections to the Frontline Socialist Party (FSP), a breakaway faction which shares the Varoufakis prescriptions of debt cancellation and exit from the IMF program. Despite the 11,000 votes they garnered, the FSP cannot be discounted because of the university student unions it controls. On the other hand, if NPP actions threaten their middle-class comforts and aspirations by bringing back inflation and shortages, the fellow travellers may depart.
Fiscal discipline
Alex Tsipras, the Syriza Prime Minister from 2015-2019, had to make a 180-degree turn when confronted by the constraints within which the Greek economy functioned. He negotiated hard and even called a referendum to support his anti-austerity position. In the end, the Syriza government had to accept a bailout package that had pension cuts and tax increases even larger than what was rejected by voters in the referendum. This led to defections and a snap election that allowed Syriza to continue.
The NPP’s initial response to the crisis in December 2021 made no mention of the IMF and lacked specifics on addressing the looming debt crisis. After the government engaged with the IMF in March–April 2022, the NPP condemned the move, at times vilifying key officials, including the secretary to the Ministry of Finance. To everyone’s surprise, once elected, the president reappointed the same finance secretary.
Ministry secretaries serve at the pleasure of the president and are replaced when governments change. In 2019-20, the Gotabaya government went beyond this by compelled independent appointees in the decision making body of the Central Bank to resign and installed a loyalist as governor. The NPP exerted no pressure on the governor who played a critical role in interactions with the IMF. The difference is that the NPP had 33 months to learn what Tsipras and Syriza had to learn in a few weeks.
The government of Greece, like its counterpart in Sri Lanka, had spent more than the revenue it generated year after year, piling up debt. Unlike in Sri Lanka, Greece lacked the ability to reset the economy by letting the currency float. In both countries, the remedy embodied in the IMF agreement centred on the achievement of a primary surplus. In Sri Lanka, this was to be achieved from the revenue side, with no overt cuts in expenditure; in Greece, by reducing government expenditures including cuts in salaries and pensions, downsizing government and raising taxes. Syriza administered the bitter medicine and normalcy was restored.
In Sri Lanka, government employees and pensioners were protected throughout the turmoil (except from the effects of inflation that reached 70% at the peak). The government even increased their payments in 2024 by raising additional tax revenues. Major tax increases were implemented by the president who just lost the election. All the NPP has to do is hold the line.
Unless fiscal discipline is maintained, an exit from the IMF program is inevitable. The surprising retention of key officials responsible for the IMF program and the acceptance of the terms of the settlement with commercial creditors indicates the NPP’s intention to not deviate from the IMF agreement. But will they be able to postpone or tweak the many spending promises made to various interest groups? Can they renege on the tax cuts they promised during the campaign?
New brooms
Both Syriza and the NPP came to power because they were seen as untainted and not complicit in the crisis in respective countries. They were also expected to act on corruption. The anti-corruption narrative was a part of the reason for Syriza’s rise but there is little evidence that it remained in focus once the alliance rose to power.
The narrative of pervasive corruption was drummed into the minds of Sri Lankan voters since the 2022 protest. They were told that corruption caused the debt, which could be repaid by recovering stolen assets. This narrative was the main reason behind NPP’s rise. The government that lost the election enacted the necessary laws, but failed to convince voters that they were credible anti-corruption actors.
During the campaign, the NPP promised quick results and swift justice, similar to Chandrika Kumaratunga’s rise to power on an anti-corruption platform in 1994. Kumaratunga established an independent body to investigate and prosecute bad actors while adhering to the law. All indications suggest that the NPP will follow a similar approach.
While the parliamentary election is decisive in Greece, winning the presidential election is not enough in Sri Lanka, though it helps. MPs in the island nation are elected separately through a proportional representation system. The NPP must increase its vote share from 42% to form a majority government. This appears likely, given disarray among the losers in the last election. But if they gain a large enough majority to change the Constitution by themselves, then the JVP’s totalitarian tendencies that many fear, and are currently in abeyance, may reappear.
As he assumed office in the throes of the crisis, former President Gotabaya Rajapaksa likened his mission to that of crossing a mountain gorge on a flimsy bridge while carrying a baby amidst a storm, invoking an image from Bertolt Brecht’s The Caucasian Chalk Circle – one of the most popular Sinhala plays, deeply embedded in Sri Lankan cultural consciousness. He did not quite make it across and was compelled to hand over the baby for the last stretch. So far, the new president has kept his footing. Whether he can finish crossing the bridge depends on how he keeps his balance in the face of electoral storms and political gusts. But what matters is the fate of the baby more than that of the carrier.
Rohan Samarajiva is founding Chair of LIRNEasia, an ICT policy and regulation think tank active across emerging Asia.
A version of this article appeared in the Daily FT.