0International Monetary Fund banner, a specialised agency of the United Nations, headquartered in Washington D.C, (via Flickr)
Since 1965, Sri Lanka has taken 17 IMF loans with the total valuation being just shy of 5 billion US Dollars, equivalent to nearly the Island’s entire annual healthcare and education budget combined. After years of government corruption and economic mismanagement, President Gotabaya Rajapaksa fled Sri Lanka in what is described as the worst economic crisis since it gained independence, marking the end of the Rajapaksa dynastic rule.
His successor, Anura Kumara Dissanayake (AKD) came into power under the National People’s Power (NPP) promising a complete overhaul of Sri Lanka’s governance and economic model. In the late 1980s, the Janatha Vimukthi Peramuna (JVP), the NPP’s main component, promised similar overhauls, resulting in one of its bloodiest periods where an estimated 30,000 to 60,000 people either went missing or were killed. Bodies were left burning on tires by roadside or floating down rivers to serve as warnings. Dissanayake has since steered the NPP toward a more moderate, democratic-socialist platform which worked exceptionally well to go from a minor party who gained only 3% of votes in the 2019 election to winning the presidency in September 2024 with 43% followed by a landslide victory in November 2024 parliamentary election with 61.56% of the popular vote.
Dissanayake has taken control of Sri Lanka at one of, if not the most vital point of its history. Facing the challenges of not only Sri Lanka’s economy, and finding funds to repay its IMF loans, but also balancing the interests of three competing global superpowers.
Dissanayake put aside his party’s ideologies in favour of pragmatic realism
United States of America
With Sri Lanka heavily relying on its IMF loans, and with the US massive voting weight and influence within the IMF, maintaining its relationship with the US is vital to Sri Lanka’s economic survival.
Washington has long seen Sri Lanka as a critical piece of land, over which China cannot gain permanent military or strategic leverage over. In efforts to maintain strict neutrality, the Sri Lankan government denied a request from Washington to relocate two fighter jets warmed at Mattala Rajapaksa International Airport.
Dissanayake faces an even heavier ideological dilemma as a Marxist party, as to prevent the economy from defaulting, it must adhere to the IMF’s structural benchmarks – including fiscal consolidation, revenue reforms, cost-recovery pricing on energy, and tight public spending. Defying these terms can be detrimental, instantly trigger a relapse into hyperinflation and a total cutoff from global trade.
China
Years of heavy borrowing under the Rajapaksas’ rule to improve Sri Lanka’s commercial shipping traffic by building a deep-water port left the country heavily indebted to China. When the port struggled with low revenue, the government doubled down with another loan, and in 2017, due to low profit, the government signed a historic 99 year lease of the Hambantota Port and major land ownership in the Colombo Port City.
Before entering into power, the NPP heavily criticised Chinese backed-projects as corrupt and a clear symbol of selling Sri Lanka’s sovereignty. Since entering office, Dissanayake has remained friendly with Beijing, ultimately realising that the country could not afford to alienate China and the money it brought into the country in the forms of tourism and infrastructure development.
India
Separated by a narrow strip of water, and sharing a close maritime border, it’s no surprise that Sri Lanka’s relationship with India is vital. When Sri Lanka’s economy defaulted, it was India that acted first in the form of a 4 billion USD emergency credit line, ensuring the island could afford food, medicine, fuel and other daily necessities until the IMF package was finalised.
Given that the NPP has traditionally campaigned on anti-Indian hegemony narratives, it was interesting to watch Dissanayake shift the party to more neutral ground. India has long been anxious about China growing its footprint in Sri Lanka, especially in regards to naval vessels docking in Sri Lankan ports.
Dissanayake has clawed Sri Lanka up from an economic abyss to relative stability
Sri Lanka Today
An influx of post-pandemic tourism has given the country more breathing room and a source of foreign currency. Sri Lankan even donated $1 million USD in aid to Nepal following the severe flash floods it faced earlier this year. Dissanayake seems to have done the impossible, clawing Sri Lanka up from an economic abyss to relative stability.
The evidence shows that it was because Dissanayake put aside his party’s ideologies in favour of pragmatic realism. Rather than follow the traditionalist Marxist approach, the NPP has demonstrated immense care in navigating the crosswinds of Chinese debt, Indian security, and Western financial conditionalities with precision.
Sri Lanka: Marxism and the artfulness of pragmatism
Since 1965, Sri Lanka has taken 17 IMF loans with the total valuation being just shy of 5 billion US Dollars, equivalent to nearly the Island’s entire annual healthcare and education budget combined. After years of government corruption and economic mismanagement, President Gotabaya Rajapaksa fled Sri Lanka in what is described as the worst economic crisis since it gained independence, marking the end of the Rajapaksa dynastic rule.
His successor, Anura Kumara Dissanayake (AKD) came into power under the National People’s Power (NPP) promising a complete overhaul of Sri Lanka’s governance and economic model. In the late 1980s, the Janatha Vimukthi Peramuna (JVP), the NPP’s main component, promised similar overhauls, resulting in one of its bloodiest periods where an estimated 30,000 to 60,000 people either went missing or were killed. Bodies were left burning on tires by roadside or floating down rivers to serve as warnings. Dissanayake has since steered the NPP toward a more moderate, democratic-socialist platform which worked exceptionally well to go from a minor party who gained only 3% of votes in the 2019 election to winning the presidency in September 2024 with 43% followed by a landslide victory in November 2024 parliamentary election with 61.56% of the popular vote.
Dissanayake has taken control of Sri Lanka at one of, if not the most vital point of its history. Facing the challenges of not only Sri Lanka’s economy, and finding funds to repay its IMF loans, but also balancing the interests of three competing global superpowers.
United States of America
With Sri Lanka heavily relying on its IMF loans, and with the US massive voting weight and influence within the IMF, maintaining its relationship with the US is vital to Sri Lanka’s economic survival.
Washington has long seen Sri Lanka as a critical piece of land, over which China cannot gain permanent military or strategic leverage over. In efforts to maintain strict neutrality, the Sri Lankan government denied a request from Washington to relocate two fighter jets warmed at Mattala Rajapaksa International Airport.
Dissanayake faces an even heavier ideological dilemma as a Marxist party, as to prevent the economy from defaulting, it must adhere to the IMF’s structural benchmarks – including fiscal consolidation, revenue reforms, cost-recovery pricing on energy, and tight public spending. Defying these terms can be detrimental, instantly trigger a relapse into hyperinflation and a total cutoff from global trade.
China
Years of heavy borrowing under the Rajapaksas’ rule to improve Sri Lanka’s commercial shipping traffic by building a deep-water port left the country heavily indebted to China. When the port struggled with low revenue, the government doubled down with another loan, and in 2017, due to low profit, the government signed a historic 99 year lease of the Hambantota Port and major land ownership in the Colombo Port City.
Before entering into power, the NPP heavily criticised Chinese backed-projects as corrupt and a clear symbol of selling Sri Lanka’s sovereignty. Since entering office, Dissanayake has remained friendly with Beijing, ultimately realising that the country could not afford to alienate China and the money it brought into the country in the forms of tourism and infrastructure development.
India
Separated by a narrow strip of water, and sharing a close maritime border, it’s no surprise that Sri Lanka’s relationship with India is vital. When Sri Lanka’s economy defaulted, it was India that acted first in the form of a 4 billion USD emergency credit line, ensuring the island could afford food, medicine, fuel and other daily necessities until the IMF package was finalised.
Given that the NPP has traditionally campaigned on anti-Indian hegemony narratives, it was interesting to watch Dissanayake shift the party to more neutral ground. India has long been anxious about China growing its footprint in Sri Lanka, especially in regards to naval vessels docking in Sri Lankan ports.
Sri Lanka Today
An influx of post-pandemic tourism has given the country more breathing room and a source of foreign currency. Sri Lankan even donated $1 million USD in aid to Nepal following the severe flash floods it faced earlier this year. Dissanayake seems to have done the impossible, clawing Sri Lanka up from an economic abyss to relative stability.
The evidence shows that it was because Dissanayake put aside his party’s ideologies in favour of pragmatic realism. Rather than follow the traditionalist Marxist approach, the NPP has demonstrated immense care in navigating the crosswinds of Chinese debt, Indian security, and Western financial conditionalities with precision.
Zaid Faizar
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