COLOMBO (AFP, REUTERS) - Sri Lanka’s Prime Minister Ranil Wickremesinghe was on Wednesday (May 25) given the additional responsibility of running the finance ministry as the island nation grapples with its worst-ever economic crisis.
President Gotabaya Rajapaksa’s office announced that Wickremesinghe was sworn in, two weeks after he was invited to form a unity government following his predecessor’s resignation.
"Prime Minister Ranil Wickremesinghe was sworn in as finance, economic stabilisation and national policies minister before President Gotabaya Rajapaksa this morning," the statement from the president’s office said.
In an interview with Reuters on Tuesday, Wickremesinghe said he will present an interim budget within six weeks, slashing infrastructure projects to re-route funds into a two-year relief programme.
Wednesday’s appointment ends two weeks of wrangling among coalition partners for the crucial position ahead of the bankrupt South Asian nation’s bailout talks with the International Monetary Fund (IMF).
“The president’s party had wanted the finance portfolio, but the PM insisted he wanted it if he is to lead the country out of the economic chaos,” a top politician involved in the negotiations told AFP.
Sri Lanka, an island nation of 22 million people, has been hit by its worst economic crisis since independence in 1948, with a severe shortage of foreign exchange stalling imports, including essentials such as fuel and medicines.
The turmoil is a result of the Covid-19 pandemic, which ravaged the country’s lucrative tourism industry and weakened foreign workers remittances, and ill-timed tax cuts enacted by Rajapaksa.
Demonstrations have roiled Sri Lanka since late March, with protesters accusing the president and his powerful family of mishandling the economy.
Wickremesinghe – a political veteran who has previously been prime minister five times – was sworn in for a sixth term two weeks ago, after the president’s elder brother, Mahinda, resigned from the post.
President Rajapaksa and Wickremesinghe have since tried to cobble together a new Cabinet of ministers, drawing members from the ruling party and some opposition groups.
But the critical finance ministry portfolio had, so far, remained vacant.
“The finance minister’s appointment is extremely crucial because he needs to get the ball rolling on a new budget, talks with the IMF and spearhead fiscal support,” said Lakshini Fernando, macro-economist for Sri Lanka-based investment firm Asia Securities.
Ali Sabry, the previous finance minister who started talks with the IMF in April, quit in early May when the Cabinet was dissolved after Prime Minister Rajapaksa resigned.
Seen as an economic liberal, Wickremesinghe already has experience with the IMF, having served as prime minister when Sri Lanka last had a programme with the international lender in 2016.
He has also built relationships with regional powers India and China, key investors and lenders who vie for influence over the island nation that lies along busy shipping routes linking Asia to Europe.
“Ranil Wickremesinghe is the better option, but we’ll have to see if he has a majority in Parliament and if he can do the job of both the prime minister and finance minister,” Fernando said.
The problem is that any economic reforms Wickremesinghe may bring to meet conditions for an IMF programme could cause short-term pain and trouble on the streets. Petrol and diesel price increases announced on Tuesday are bound to feed through to transport and food prices.
Annual inflation is already at 33.8 per cent and could go above 40 per cent, Wickremesinghe has said.
Udeeshan Jonas, chief strategist for market research firm Capital Alliance, said Wickremesinghe retaining the finance portfolio was largely expected. But Jonas added: “With or without support, difficult measures will have to be taken. He has no other choice.”
