Sri Lankan leaders seek to boost power with parliamentary vote

(Bloomberg) — Sri Lanka held its first parliamentary election since its outsider leftist president won, testing his ambitious pledge to fight corruption and rewrite an unpopular International Monetary Fund loan program.

Anura Kumara Dissanayake’s call for early polls after her victory in the September 21 presidential election was widely seen as a stunning rebuke to Sri Lanka’s political elite, with voters blaming They pushed the country into a historic debt default in 2022. A $3 billion bailout from the International Monetary Fund the following year came with harsh austerity measures that Dissanayake’s party said increased the financial burden on the poor.

Dissanayake’s National Alliance for People’s Power held only three seats out of the 225 seats in the dissolved legislative body. There are no polls yet on voter preference, but political analysts expect the National Progressive Party to gain a parliamentary majority, a result that would ensure it has the power to pass new legislation and reform the bureaucracy.

At the top of Dissanayake’s agenda is a push to rewrite the agreement with the International Monetary Fund. The president said he was committed to continuing the financing arrangement with the Washington-based bank but wanted to modify unpopular austerity measures to reduce tax increases and cut fuel subsidies.

“To provide an alternative to the IMF, parliamentary approval is needed,” said Aditya Gowdara Shivamurthy, associate fellow at the Overseas Research Foundation, a think tank in New Delhi. “Amending the constitution, no Selling off state-owned enterprises, trying to create revenue streams – all this requires parliamentary or parliamentary oversight.”

The NPP’s main challenger is Samagi Jana Balawegaya, led by Sajith Premadasa, who was defeated by Dissanayake in the presidential election. Former president Ranil Wickremesinghe did not run but supported the New Democratic Front. A range of new independent parties are also in the running.

Voting opened at 7 a.m. local time and ended at 4 p.m., with results expected to be announced early Friday.

International Monetary Fund officials are expected to visit Sri Lanka shortly after parliamentary elections to launch a third review of the loan program, a precursor to the release of additional funds. Once the new legislative body is formed, the government will need to submit a 2025 federal budget, which will be closely watched by the International Monetary Fund and creditors to determine whether economic goals can be achieved.

Local authorities are already discussing changes to taxes and social security benefits with the International Monetary Fund to find new ways to achieve the program’s goals. Meanwhile, the country continues to move closer to completing a debt restructuring with international creditors.

Since Dissanayake’s election in September, Sri Lanka’s main stock index, sovereign bond prices and the rupee have risen in tandem as investors anticipate the government will strike new terms with the International Monetary Fund, according to Tellimer Research.

Dissanayake’s election victory comes after years of political turmoil in Sri Lanka, with a debt default and economic collapse in 2022 leading to riots in the streets of Colombo and the ouster of President Gotabaya Rajapaksa. The NPP began as a violent Marxist movement in the 1970s and 1980s, but has since abandoned violence and runs on a broadly left-wing political platform.

Dissanayake and his supporters say they will pursue a balanced foreign policy and maintain strong relations with India and China. The two countries have been vying for influence on the South Asian island given its strategic position on a key shipping lane.

Dissanayake also pledged to re-evaluate the Adani Green Energy deal amid concerns over purchase prices, allegations of a lack of transparency in project awards and court challenges from environmental groups.

He also pledged to abolish Sri Lanka’s executive presidency and replace it with a system led by a prime minister more beholden to parliament, a move supporters said was aimed at preventing a future slide into authoritarianism. Such reforms require the support of two-thirds of parliament.

“The appeal of the NPP is that it is a change,” said Bhavani Fonseka, a senior fellow and lawyer at the Center for Policy Alternatives in Colombo. “This comes against a backdrop of voter frustration and lack of confidence in existing players in the political spectrum.”

—With assistance from Asantha Sirimanne.

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