Sri Lanka’s Leaders Remain Defiant at Home While Scrambling for Funds Overseas

Sri Lanka’s leaders are showing no signs of stepping down in the face of mounting protests as the government ramps up efforts to find emergency funds to import essential goods and avoid an international default.

In a national address, Prime Minister Mahinda Rajapaksa called on citizens to be patient as price surges and shortages worsen, while touting his family’s role in ending a decades-long civil war back in 2009. His brother, President Gotabaya Rajapaksa, has said he won’t resign under any circumstances.

“We did not end the war to bring people to suffering like this,” Mahinda Rajapaksa, 76, said in the televised speech on Monday night. The government will offer solutions even as the nation is falling “into a deep trench,” he said.

Hundreds of protesters have camped outside the president’s office in downtown Colombo since Friday, braving heavy rain to call for his ouster due to shrinking supplies of food, fuel and medicines, as well as Asia’s fastest inflation and $8.6 billion in debt repayments this year. The Rajapaksas have accelerated efforts to find financing: Talks with the International Monetary Fund are ongoing, and the government also expects new funds and credit lines from China and India.

Sri Lanka’s top diplomat in Beijing, Ambassador Palitha Kohona, said in an interview Monday that he received reassurances as recently as last week from authorities in China that arrangements for $2.5 billion in new loans and credit lines were progressing. The head of Sri Lanka’s state-run oil company also said talks have started with India for an additional $500 million credit line to buy fuel.

The government faces an imminent test of global investor confidence on April 18, when $36 million in interest on a 2023 dollar bond and $42.2 million on a 2028 note both come due, Bloomberg-compiled data show. A $1 billion sovereign bond maturing July 25 presents a bigger challenge: It fell to a record low this week as economists at Citigroup Inc. see a “very high” chance of default.

Shanta Devarajan, a Georgetown University professor and former World Bank official appointed last week to a panel of government advisors, said the country must urgently initiate debt restructuring to avoid a hard default, as well as find immediate bridge financing and make longer-term fiscal changes.

“People were marching in the streets because they were angry that they weren’t getting food and fuel and pharmaceuticals,” Devarajan said in an interview with Bloomberg Television on Tuesday. “In order to alleviate that suffering, we are going to need some bridge financing while we negotiate that debt restructuring.”

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Mahinda Rajapaksa, the prime minister who shares credit for a military victory in 2009 that ended the 26-year separatist conflict, said in his speech Monday that demonstrators yelling slogans against inflation and electricity outages can do so only because of the efforts of war heroes.

The pre-scheduled address sparked speculation he would resign to make room for a premier more palatable to the opposition. Instead, he used the six-minute speech to attack the opposition for refusing to work with the government and accused it of indulging in petty politics.

Sri Lanka’s cabinet resigned en masse earlier this month and opposition parties have declined to form an all-party government until parliament abolishes some of Gotabaya Rajapaksa’s wide-ranging executive powers.

Officials in the ruling Sri Lanka Podujana Peramuna party say they still command a majority in parliament, even after defections put that into doubt. That will soon be tested when parliament meets next week.

The main opposition Samagi Jana Balawegaya party has started collecting signatures from lawmakers to initiate impeachment proceedings against the president, which can be a long process requiring support from two-thirds of parliament. Another petition for a no-confidence vote against the government is also underway.

“The course of action which we have proposed is a way forward for the legislature to resolve the present political crisis and we hope that all MPs will support us,” Nalin Bandara Jayamaha, an opposition lawmaker, was quoted as saying by local media.

Sri Lanka is looking to borrow $1 billion from Beijing so that it can repay existing Chinese loans due in July, as well as a $1.5 billion credit line to purchase goods, such as textiles needed to support the apparel export industry, Kohona, the nation’s envoy in Beijing, said in the interview.

“For us, it can’t come any sooner,” Kohona said, adding that it could be a matter of weeks. “Given the nature of our relationship — this very close and warm relationship — and Sri Lanka’s dire situation, I would say that I am confident that China will respond positively to our request.”

—With assistance from Colum Murphy, Lucille Liu and Asantha Sirimanne