Event

On 16 November, Gotabaya Rajapaska (SLPP party), former Defence Secretary and brother of former President Mahinda Rajapaksa (2005–2015), convincingly won a peaceful presidential election with 52.3% of the votes ahead of the strongest opposition candidate, Sajith Premadasa, who took 42.9% of the votes. The parliamentary election, due by August 2020 at the latest, could be held earlier – possibly in February – as the current government is likely to be dissolved. Given the SLPP’s probable victory, Mahinda Rajapaksa, who is particularly popular among the majority Sinhalese population, is likely to be appointed by his brother and return to power, this time as Prime Minister.

Impact

Gotabaya Rajapaksa has clearly capitalised on the failure of the former government to prevent the country’s worst terrorist attack last Easter. The magnitude of the shock for the population and of the impact on tourism meant that ensuring national security suddenly became top priority for most voters in the presidential election. Based on their reputation for doing what has to be done, which in particular brought them success at the end of the civil war in 2009, the “Rajapaska candidate” had a high chance of being elected. The Rajapaksa clan could soon rule the country with Mahinda Rajapaska as PM if their SLPP party wins the next parliamentary election as expected. Political stability should be the main positive aspect of this political development. Indeed, permanent infighting between former President Sirisena and PM Wickremesinghe has largely hindered economic policy since 2015. Apart from that, the return of the Rajapaksa family is marred by uncertainty and risks of a return to the populist policies of the past. 

This is particularly worrying as it is happening at a time of economic weakness and global trade gloom. Gotabaya will diverge from his predecessor’s policies and reverse a number of them. He made populist fiscal promises during his campaign, announcing various tax cuts and higher social spending. Those measures could not only cause the further deterioration of the already poor fiscal sustainability of a country burdened by the second highest government debt in Asia (83% of GDP expected at the end of 2019) and huge interest payments depriving the government of more than 45% of its revenues, but would also call into question fiscal consolidation under the current IMF programme (ending next June). Moreover, as Sri Lanka is expected to tap the international markets in the coming years, a loose fiscal policy would negatively affect investor sentiment and make the financing of its higher external debt service more difficult.

Internally, Gotabaya will focus on restoring order and tightening national security. The risk is that he could emulate what his brother did when he was President, making the regime more repressive – which would mean a crackdown on political and media criticism – and fuelling ethnic and religious tensions. The latter has become more sensitive since the Easter terrorist attack. Among his first major political moves, Gotabaya could reverse the rebalanced political system under the Sirisena presidency (e.g. a two-term presidential limit) by once again strengthening the President’s constitutional executive powers. Foreign policy is also likely to change direction. Although he claims to remain neutral, Gotabaya, like his brother, is expected to be somewhat more inclined to favour China than India diplomatically and when attracting FDI. Moreover, under Rajapaksa’s rule, relations with the UN, USA and EU could turn sour again over alleged human rights abuses in the final weeks of the civil war, which ended in 2009. Gotabaya played an active role as Defence Secretary and has pledged to free war heroes and police officers.  

The coming months will tell whether Gotabaya will follow in his brother Mahinda’s footsteps, with all the risks it entails, or whether he will opt for a more pragmatic, conciliatory and balanced approach. Sri Lanka’s risk outlook is likely to reflect the chosen trajectory. Credendo’s MLT political risk rating remains unchanged at 5/7.

Analyst: Raphaël Cecchi – r.cecchi@credendo.com