Sri Lanka's Pivotal Presidential Election Amid Financial Crisis

Sri Lanka will hold presidential elections on Sept. 21, setting a crucial date for reforms amidst a severe financial crisis. Incumbent President Ranil Wickremesinghe, running for re-election, faces opposition from Sajith Premadasa and Anura Kumara Dissanayake. The outcome will heavily influence economic recovery and debt restructuring plans.

Sri Lanka will hold presidential elections on Sept. 21, as confirmed by a government notice on Friday. This crucial vote is expected to shape the future of reforms in the nation grappling with its worst financial crisis in decades. Nominations must be submitted by Aug. 15, with incumbent President Ranil Wickremesinghe being the first candidate to do so by paying a non-refundable deposit to the election commission, his office announced.

Wickremesinghe, 75, assumed office in July 2022 following widespread protests triggered by the financial crisis, which forced his predecessor Gotabaya Rajapaksa to flee the country and resign. The parliament elected Wickremesinghe to complete the five-year term originally won by Rajapaksa in November 2019.

"This is a critical time for Sri Lanka," said Bhavani Fonseka, a senior researcher at the Colombo-based Centre for Policy Alternatives. "An election is vital for democracy, but the election commission must be allowed to fulfill their mandate. Conducting a fair and free election is essential."

Nineteen million of Sri Lanka's 22 million population are eligible to vote. Assisted by a $2.9 billion IMF bailout programme, Wickremesinghe has managed to stabilize the economy, reducing inflation from 70% in September 2022 to 1.7% in June, strengthening the rupee, and rebuilding foreign exchange reserves.

The economy is projected to grow by 3% in 2024 after contracting by 2.3% last year and 7.3% during the worst period of the crisis. Bilateral creditors, including Japan, China, and India, recently agreed to a $10 billion debt restructuring plan, providing Colombo with a four-year deferment on repayments and saving $5 billion. However, Sri Lanka still needs to finalize a $12.5 billion debt restructuring agreement with bondholders preceding a third IMF review later this year.

High taxes under the IMF program, prolonged inflation, and a stagnant job market have plunged a quarter of the population into poverty, prompting thousands to migrate. Opposition leaders Sajith Premadasa and Anura Kumara Dissanayake, head of the Marxist-leaning JVP, are capitalizing on this discontent in their presidential campaigns.

Both Premadasa and Dissanayake have declared plans to review the IMF program to alleviate living costs and reduce the debt burden. Analysts caution that Sri Lanka's recovery remains fragile, and any attempt to reverse the reforms could trigger another crisis. The new government will need to ensure the continuity and completion of these reforms to positively transform the economy.

"The election's outcome must ensure the progress we've seen continues," noted Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers. "Sri Lanka is not in a position to experiment with trial and error."

(With inputs from agencies.)