COLOMBO (BLOOMBERG) - Sri Lanka's President Gotabaya Rajapaksa and the Cabinet are putting in motion plans to reduce his wide-ranging powers as opponents gained momentum in their push to oust his family over mismanagement of the economy.

The Cabinet late on Monday (April 25) approved a proposal by Prime Minister Mahinda Rajapaksa - the president's brother - to return to the 19th amendment of the constitution "with necessary changes".

The decision came hours after the president made public a letter to the country's influential Buddhist clergy, saying he would support the process to clip his executive powers.

"As the President of the country, I am committed to stabilising democracy in the country," Mr Gotabaya Rajapaksa said in the letter, adding that "such an amendment should be made jointly by the President and Parliament".

The Cabinet agreed to appoint a sub-committee to prepare a draft bill that "entrusts more powers to the Parliament by further strengthening the democracy", according to a press statement issued on Tuesday.

Prime Minister Mahinda Rajapaksa will put forward a resolution in the legislature to appoint a Parliament select committee to consider the government's bill and other constitutional proposals submitted by political parties.

The decisions come after the main opposition party said they had garnered enough support for a no-confidence vote against the government.

A simple majority of 113 lawmakers is needed to bring about such a motion and various opposition politicians and independent lawmakers have put the level of support at 120 to 140 Members of Parliament.

There are two private members' bills submitted to the speaker to repeal the so-called 20th amendment that has given the president unprecedented power in holding ministries, sacking ministers and controlling the election commission, police and anti-corruption agency.

"This is about the political survival of the Rajapaksas. This government is good at messaging but there are no concrete plans shared. The same can be said about the opposition," said Ms Bhavani Fonseka, a Colombo-based senior researcher for the Centre for Policy Alternatives.

"It is extremely fluid now in who is really supporting the government and the opposition but both are not listening to the protesters who just want the Rajapaksas out," she said, referring to the near-daily demonstrations in Sri Lanka since March.

Parliament resumes on May 4 for three days and it is possible that the proposals for the presidency and the no-confidence motion will be brought up. However, neither the government nor the opposition have given a timeline for the process.

Funding Race

For the past month, the government and the president's opponents have been pursuing separate processes to resolve the political turmoil in Sri Lanka after the opposition rejected offers to form an all-party Cabinet.

The previous Cabinet resigned following massive protests over food and fuel shortages and when the ruling coalition appeared to have lost its simple majority in Parliament.

It has only been in recent days that the Rajapaksa family and their backers have publicly said they were looking at repealing the executive powers of the presidency.

Trading in Sri Lanka stocks was halted for a second straight day within minutes of the open as investors continued to fret over over the island nation’s economic crisis.

The Sri Lanka Stock Market Colombo All-Share Index plunged 8.4 per cent as of 11.35am (2.05pm, Singapore time) after losing 7.6 per cent in Monday’s session that lasted barely 32 minutes.

Tuesday’s suspension came as the bluechip S&P Sri Lanka 20 Index sank 10 per cent, same as the previous session.

The developments come as Sri Lanka races to secure funding from creditors including India, China and the International Monetary Fund (IMF).

The IMF on Tuesday doubled down on its calls for Sri Lanka to tighten monetary policy to tackle inflation, raise revenues to help consolidate its finances, and pursue a flexible exchange rate as part of broader fiscal and debt management reforms required to unlock aid financing.

"The most important issue is to find a credible and coherent macroeconomic strategy that addresses the key risks in the country," said Ms Anne-Marie Gulde-Wolf, acting director for Asia and Pacific Department, adding that the two sides have had "fruitful technical discussions on preparations for the negotiations".

Gulde-Wolf also reiterated that progress toward debt sustainability is required for funding and welcomed the country's intent to engage with creditors.

Sri Lanka, which warned earlier this month that it will stop paying its international debts, is still yet to hire financial and legal advisers to guide a restructuring, a key step towards unlocking emergency funds from the IMF.

"It may seem that the political situation and the discussions with IMF are separate. But international actors need to see stability and know who are they exactly negotiating or working with," Centre of Police Alternatives' Fonseka said.