By Lynn Ockersz

Ill-concealed by the sands of time,

Skeletons continue to scramble out,

Telling inconvenient, face-reddening truths,

Of smoking guns never brought to justice,

Of equity undelivered or miscarried,

Pointing to the error of the land’s ways,

But also warning it to be reconciled ere long,

Lest the Isle wanders dangerously once again,

Down blood-splattered tracks of self-harm,

And drives home the brutal truth of nation-breaking.

by Shiran Illanperuma

On 17 February, President Dissanayake delivered his maiden budget speech. The second reading was passed by a majority of votes on 25 February, and a vote on the third reading will be taken up on 21 March.

Amid the day-to-day politicking surrounding budget debates, it is important to remind ourselves of the socioeconomic context in which this budget has been presented. It has now been three years since Sri Lanka experienced its worst economic crisis in the modern era. In May 2022, Sri Lanka defaulted on its external debt for the first time in history. In September 2022, the country entered into a staff-level agreement with the IMF for a 2.9 billion US dollar bailout.

The effects of the austerity measures undertaken in order to earn the IMF bailout were plain to see in 2023. According to recent research the Centre for Poverty Analysis, poverty in Sri Lanka soared from 26% in 2022 to 31% in 2023. In raw numbers, this means that about 7.1 million people fell into poverty. To put this into perspective, 7.1 million people is a population greater than the entire Western Province (which was about 6 million according to the last census in 2012).

It would be unreasonable to expect a single budget to resolve the colossal humanitarian crisis brought about by the 2022 default and ensuing IMF programme. However, what is reasonable to expect is a contextual analysis of the factors, both local and global, that brought us here, and an outline of the way forward. Unfortunately, such analysis was entirely missing from the President’s maiden budget speech. In its place was the pronouncement of some lofty, but admirable, principles.

No democracy without sovereignty

During his budget speech, President Dissanayake said, “What is needed going forward is for a greater democratisation of the economy” – a noble goal given the socialist aspirations of Sri Lanka’s republican constitution. In this same speech, Dissanayake also said that achieving economic sovereignty was necessary to implement the NPP’s agenda.

Two days later, at a post-budget forum organised by the MBA Alumni Association, University of Colombo, and Daily FT, Dissanayake conceded, “Our economy is running on conditions. There is no economic independence or sovereignty – it is under probation and being monitored.” The implication is stark: Sri Lanka has no economic sovereignty, and therefore the mandate of a democratically elected government cannot be carried out.

What is left out of this equation is that the mandate of the NPP was to fight for the very economic sovereignty needed to carry out its programme – that is, to renegotiate the unfavourable debt-restructuring deal which would see Sri Lanka carrying a public debt-to-GDP burden of up to 95% even in 2032. This mandate was reneged in November 2024 when President Dissanayake endorsed the IMF programme, arguing that, “This is not the time to discuss if the terms are good or bad.”

One does not need a political science degree to understand that there can be no democracy without sovereignty. Any pretences of democracy in conditions of non-sovereignty are a façade. Economic sovereignty is not something that will magically reappear once the current IMF programme comes to an end. Rather, active work will be required to undo the worst of the policies undertaken under the auspices of the programme.

In other words, the confrontation with capital required to restore economic sovereignty is inevitable. To pretend otherwise is either naïve or dishonest. To say now is not the time is to ignore that there will likely never be a good enough time, especially as all forecasts point to Sri Lanka enduring a heavy debt burden to private foreign creditors even after the IMF programme concludes.

Citizen’s budget or creditor’s budget?

This budget was promoted as a citizen’s budget. The implication is that it is a budget that prioritises the mass of people, workers, farmers, fishers etc. over the interests of big business both local and foreign. To that end, there are many welcome proposals, including the move to increase public investment as a share of expenditure from 13% of GDP in 2024 to 18% of GDP in 2025.

However, this pales in comparison to the mammoth 41% of expenditure taken up by interest payments. Sri Lanka had one of the highest interest burdens in the world before defaulting on its external debt in 2022. This was predominantly due to the shift in borrowing from multilateral and bilateral creditors to private creditors. According to data from the World Bank, private bondholders accounted for 36% of Sri Lanka’s outstanding debt but 70% of interest payments in 2021.

In fact, the greatest fiscal burden for the governments is not the public sector wage bill or subsidies, but interests’ payments, particularly those from foreign debt. In the past decade or so, Sri Lanka has made the reckless move of borrowing externally to finance its domestic budget deficit. This creates massive exchange rate risks in serving that debt, as Sri Lanka maintains a yawning trade deficit due to its underdeveloped industrial base.

The Central Bank Act, a key condition of the IMF programme, and one that even the US ambassador seemed keen Sri Lanka adopt, will exacerbate this trend. With the newly ‘independent’ Central Bank unable to finance the government’s budget deficit, the government must rely even more on private creditors, both local and foreign, in the event of an external shock to the economy. This loss of monetary sovereignty remains the single most damaging element of the IMF’s conditions.

Changing international order

A void in the President’s budget speech was any reference to the implications of a changing international economic order to the future trajectory of the Sri Lankan economy. With the second inauguration of President Donald Trump in the US, there is an ongoing tactical shift in the US ruling class’s approach to maintaining a preponderance of power in a world where the economic centre of gravity is shifting to Asia.

First, the suspension of foreign aid leaves several government programmes without funding. Second, the combination of diminished consumer sentiment and a rise of protectionism in the Global North leaves the future of Sri Lanka’s exports highly uncertain. Third, the Global North’s attempts to reshore and “friend-shore” industrial production, leaves prospects for productive FDI uncertain. Fourth, NATO’s tactical withdrawal from the Ukraine’s proxy war in order to consolidate a US-EU defence industrial base and contain China, poses serious security threats to Sri Lanka which is situated at the heart of the Indo-Pacific Strategy.

The key countervailing force to these trends is the new mood in the Global South, characterised by a return to ideas of as South-South cooperation. In purchasing power parity terms, BRICS members account for around 37% of world GDP, surpassing that of the G7. Sri Lanka’s position in these ongoing conversations about restructuring the international economic order remain vague and uncertain. To argue for greater engagement is not a mere moral or theoretical imperative.

Going back to the question of economic sovereignty, the fact is that Sri Lanka was never going to be able to negotiate a better deal on its own. That would require coordinated multilateral action, through the formation of something like a debtor’s club. While it is not immediately clear whether forums such as BRICS will provide a platform for this, what is undeniable is that these forums are where the important conversations are happening.

(The writer is a researcher at Tricontinental: Institute for Social Research and a co-editor of Wenhua Zongheng: A Journal of Contemporary Chinese Thought. He is also a co-convenor of the Asia Progress Forum.)

(Asia Progress Forum is a collective of like-minded intellectuals, professionals, and activists dedicated to building dialogue that promotes Sri Lanka’s sovereignty, development, and leadership in the Global South. They can be contacted at asiaprogressforum@gmail.com).

President Anura Kumara Dissanayake, in his capacity as Defence Minister, last week reiterated his government’s commitment to downsize the Army to 100,000 by 2030. Dissanayake, who is also Commander-in-Chief of the armed forces, declared that the strength of the Navy and the Air Force, too, would be brought down to 40,000 and 18,000, respectively, by 2030. That commitment was made in Parliament on 28 Feb.

In May 2023, the then State Defence Minister Pramitha Bandara Tennakoon declared that the strength of the Army, the Navy and Air Force would be brought down to 100,000, 30,000 and 20,000, respectively. Obviously, the NPP defence team has amended the proposed Navy and Air Force strength by 2030, though the incumbent government accepted the overall plan.

Declaring that national security wouldn’t be compromised by the move, State Minister Tennakoon told the writer that wartime numbers couldn’t be sustained well over a decade after the conclusion of the conflict. At the time Matale district lawmaker disclosed the move, UNP leader and President Ranil Wickremesinghe also held the Defence portfolio.

In late May 2023, the Defence Ministry quoted Tennakoon as having assured US State Department official, Afreen Akhter, that the security forces would be ‘right-sized’ to perform their classic roles.

In the Biden administration, Afreen Akhter oversaw Sri Lanka, Bangladesh, Bhutan, and the Maldives, as well as the Office of Security and Transnational Affairs.

A few years after the conclusion of the war, in May 2009, the Mahinda Rajapaksa government quietly began downsizing the Army, which was little above 200,000 at the time the war was brought to an end. However, the Wickremesinghe-Rajapaksa government officially acknowledged the downsizing of the war-winning Army on 13 January, 2023. The Defence Ministry quoted Tennakoon as having said that the Army strength would be further reduced to 135,000 by the end of 2024 and 100,000 by 2030.

Of course there cannot be an issue over the need to gradually decrease military strength in peace time, taking into consideration post-war national security requirements and the pathetic economic situation confronting the country.

Regardless of the developing political-economic-social crisis, it would be the responsibility of the military top brass to brief the political leadership of the ground situation. Post-war national security requirements shouldn’t be looked at only on the basis of economic indicators. That would be suicidal. In other words, the country is in such a precarious situation, political leadership may tend to conveniently ignore basics, especially to please various interested parties eternally complaining about the military strength, thereby jeopardizing the country’s national security.

Declaration that the SLA would be reduced to 100,000 by 2030 means the total strength would be cut by half, from its peak.

The LTTE couldn’t have been defeated if not for the rapid expansion undertaken during the then Lt. Gen. Sarath Fonseka’s tenure as Commander of the Army (2005-2009). The SLA lacked the wherewithal to sustain a large-scale ground offensive while deploying sufficient troops on a holding role. For want of adequate infantry battalions, the SLA couldn’t undertake large scale offensives in different theatres, simultaneously. But the rapid expansion, since the launching of operations on multiple fronts, in Vanni, from 2007, paid dividends soon enough.

A question of loyalty

Many eyebrows were raised when President Anura Kumara Dissanayake declared his intention to build a professional military that is loyal to the State rather than individuals. The Commander-in-Chief said so in Parliament on 28 Feb. The JVPer was referring to the celebrated war-winning military that proved to the world that terrorism could be eradicated. Let me also emphasize that the military defeated the JVP twice in 1971 and 1987-1990, and thereby saved parliamentary democracy, whatever shortcomings therein.

Incumbent Defence Secretary Air Vice Marshal (retd.) Sampath Thuyakontha who had served as the wartime Commanding Officer of the famed number 09 Mi- 24 attack helicopter squadron and Deputy Defence Minister Maj. Gen. (retd.) Aruna Jayasekera should be able to address any concerns of the NPP and JVP.

A retired armed forces grouping played a significant role in the NPP’s triumph at the presidential and parliamentary polls last year. AVM Thuyakontha appeared on the NPP stage as a key speaker and sustained his campaign in spite of the Wickremesinghe-Rajapaksa government’s efforts to harass him. The Island stood by Thuyakontha’s right to take a political stand, though the majority of his retired colleagues threw their weight behind the SJB presidential election candidate Sajith Premadasa.

General Shavendra Silva, who retired as the Chief of Defence Staff (CDS) recently, hasn’t received seven service extensions, as alleged in Parliament.

Gen. Silva having received appointment as Army Commander during Maithripala Sirisena’s tenure as President on 19 Aug., 2019, he thereafter received three extensions in 2020 (Sirisena), 2021 (Gotabaya Rajapaksa) and 2022 (again Gotabaya Rajapaksa) though he was replaced by Lt. Gen. Vikum Liyanage on 01 June, when he was elevated to the position of Chief of Defence Staff. As the CDS, Silva received tenures (terms) in line with the CDS Act and served four Presidents (Sirisena, Gotabaya Rajapaksa, Ranil Wickremesinghe and Anura Kumara Dissanayake).

Gen. Silva of the Gajaba Regiment who served as the Commander of the Army during the first phase of Aragalaya (31 March-14 July, 2022) was appointed CDS on 01 June, 2022. At the time protesters overran Janadhipathi Mandiraya on 09 July, 2022, Lt. Gen. Vikum Liyanage served as the Commander of the Army.

The public shouldn’t forget how the Army thwarted the JVP-inspired march on Parliament in the wake of Gotabaya Rajapaksa hastily leaving Janadhipathi Mandiraya thereby averting a major catastrophe. Had the Army failed, Sri Lanka would have ended up like Bangladesh, the country created in 1971 from what was formerly East Pakistan with a myriad of problems; being battered by periodic natural disasters, widespread poverty and overburdened by a population of over 100 million with a limited landmass, however was developing rapidly under Premier Sheik Hasina having had good relations with both India and China, when she was toppled by a Western funded Aragalaya type movement there.

It would be pertinent to mention that regardless of various accusations that had been made over the years ,the armed forces loyally served successive governments that battled both Northern and Southern terrorism. The police and its paramilitary wing, the elite Special Task Force (STF), too, made significant contributions towards the eradication of Northern and Southern terrorism. Of course there had been incalculable miscalculations, failures, shortcomings and excesses during both campaigns but the armed forces triumphed over the enemies.

Our armed forces earned the respect of other countries and currently serve under UN command though the treacherous Yahapalana government betrayed them at the Geneva-based Human Rights Commission in Oct. 2015. There had never been any question over the professionalism of our armed forces in battlefield or on the high seas as Mahinda Rajapaksa’s government gradually rolled back the LTTE units from west to east and trapped elusive LTTE leader Velupillai Prabhakaran on the banks of the Nanthikadal lagoon.

It would be pertinent to mention that the JVP had been a key member of the UNP-led coalition that also included one-time LTTE ally Tamil National Alliance (TNA) that supported the then retired General Sarath Fonseka’s candidature at the 2010 presidential election.