An Echelon Media Company
Tuesday May 30th, 2023

From war hero to target of angry crowds: Sri Lanka’s Rajapaksa falls from grace

ECONOMYNEXT – He was a demigod for tens of thousands of Sri Lankans. Some people in the North Central Sri Lankan district of Anuradhapura still keep his picture next to their Buddha statue.

He was revered to that extent.

Many of them are still thankful for the 76-year-old seasoned politician for his role in ending a 26-year war, for his government’s initiative of subsidised fertilizer, and the infrastructure drive in their rural area which had been neglected by successive governments since independence from British colonial rulers in 1948.

Rajapaksa, Sri Lanka’s president from 2005 to 2015 and four-time prime minister through 2004 to this Monday (09), built up one of Asia’s strongest political dynasties similar to the Philippines’ fallen dictator Ferdinand Marcos.

He was the most popular and ‘down to earth’ leader Sri Lanka ever had since independence. The common man’s touch he has with him helped him to connect anybody he meets – whether it is a public official or private sector CEO or a poor rural paddy farmer or a journalist.

Famous for his unique maroon family shawl wrapped around the neck, Rajapaksa the politician fought every battle to come out stronger, starting in 1988 when he took on the then mighty United National Party (UNP) government and went to Geneva alleging gross human rights violations committed under president Ranasinghe Premadasa – the father of current opposition leader Sajith Premadasa.

Not unlike the late Premadasa, Rajapaksa always presented himself as a pious Buddhist though his close allies now say he practiced Buddhism only for show.

War winner or war criminal?

In 2009, Rajapaksa cemented his legacy as a historic leader when Sri Lanka’s state military annihilated the separatist Liberation Tigers of Tamil Eelam (LTTE) which had fought for a separate state for ethnic minority Tamils in the island nation’s North and East in a 26-year war.

When he was informed of the climactic end of the war in the Northern lagoon of Nanthkadal, Rajapaksa was in a Middle Eastern country. He promptly flew back on a state-run SriLankan Airlines flight, and upon landing, he knelt on the ground and kissed it, in what became a much celebrated display of his love for the motherland.

“My country comes first; my country comes second; my country comes third,” Rajapaksa would repeat over the years that followed.

Political commentators say people were ready to even die for him after he won the war.

Less than a year later, Rajapaksa won his second term with a landslide thanks in large part to his popularity after winning the war. He ran and won resoundingly against the army general Sarath Fonseka who fought the war and led the army on the ground.

As much as he was revered as a demigod for winning the war by the majority Sinhalese, Rajapaksa was considered a war criminal by the Tamils and some international rights groups because of how he led the war, particularly during its final phase.

A report by a United Nation expert panel has revealed there could have been as many as 40,000 Tamil people killed during the final weeks of the war. Rajapaksa has never responded to calls to probe what happened to the Tamils who allegedly disappeared after surrendering to the military just before the war ended on May 18, 2009.

The UN Human Rights Council (UNHRC) is already probing past human rights allegations in the war during Rajapaksa’s first tenure.

Emotional leader with PR

Rajapaksa always has been a sentimental and emotional leader.

When the LTTE bombed a bus in North Central village of Kebithiigollewa, he went to the funerals of the people who were killed in the blast.

The father of a child killed in the attack said to Rajapaksa, in front of his child’s body: “Mr President, you have to eradicate this terrorism.”

Later that father’s statement was used frequently in state-run television to convince the public that militarily defeating the LTTE was the only solution to the conflict.

Rajapaksa is a master at engaging anybody constructively, with his ability to listen carefully and change his tone and manner in a way that will win over even his harshest critics. It was this approachability that led to his mass appeal, at least among Sinhalese Buddhists.

He also has a habit of never missing a family funeral of those who he knows well. When he was leader of the opposition, prime minister or even president, he was ever ready to sign as a witness at marriage registrations upon invitation.

The first thing he says whenever he meets just about anybody is “How are you? It’s been a while,” as he gently touches the shoulder of the person.

Rajapaksa’s public relations skills are the envy of Sri Lankan politicians. Observers say he may be a leading figure in this area even at a global level.

Family-first policy

Rajapaksa always loved his close family – the former first lady Shiranthi Rajapaksa, their three sons Namal, Yoshitha, and Rohitha, and his extended family.

During his second tenure, his family members in parliament were handling almost 70 percent of the island nation’s budget. When President Rajapaksa was also the Minister of Defence and Finance, his younger brother Basil was Minister of Economic Development minister, older brother Chamal was Speaker of Parliament. His younger brother was Secretary to the Ministry of Defence.

During his second tenure, he appointed his brother-in-law Nishantha Wickremesinghe to run the loss-making state-run airline, cousin Jaliya Wickremesuriya as the US ambassador, another cousin Prasanna Wickremesuriya as the head of the local Airport and Aviation firm, nephew Shashindra Rajapaksa as chief minister of a rural province and another nephew Shameendra Rajapaksa as a director at state-run SriLankan Airlines.

Another cousin Udayanga Weeratunga was the Ambassador for Russia and Ukraine. Weeratunga faced corruption allegations in a MIG fighter jet deal, while Jaliya Wickremesuriya was found guilty by a US court over misappropriation charges in a building deal.

In his second term, Mahinda Rajapaksa was criticised for allowing his oldest son Namal to organise a motor race around a sacred temple in the central Sri Lankan city of Kandy. His youngest son Rohitha was allowed to launch the country’s first satellite at an estimated cost of 320 million US dollars, while his second son ran a sports channel.

Nepotism was one of the main reasons among many others including dragging post-war reconciliation efforts and building close ties with China that led to his defeat which some analysts say was an internationally-backed domestic coup.

Rajapaksa’s family-first policy got worse during the incumbent administration of President Gotabaya Rajapaksa. Under the new current president, Mahinda Rajapksa was Prime Minister, Basil wasfinance minister, Chamal was irrigation minister, while Mahinda’s son Namal became the youth and sports minister. Chamal’s son Shashindra was also given a state ministry.

Analysts say Rajapaksa tried to run the country as a family business, keeping key decisions close to their chest within the group of four brothers – him, Gotabaya, Chamal, and Basil.

Despite political differences, the family has always been united, sources close to Rajapaksa say.

Constitutional changes

Rajapaksa will be remembered in history for achieving the goal of a two-thirds parliament, ever since the UNP’s unprecedented five-sixth majority win in 1977, which no political leader would have dared dream of. In 2012, he along with the help of his brother and Economic Development Minister Basil Rajapakasa engineered some defections from the opposition to achieve this feat.

Using the two-thirds majority, Rajapaksa removed Chief Justice Shirani Bandaranaike in 2013 for opposing a poverty alleviation bill. Later, he changed the constitution to abolish the limit on the number of terms a person can become the president.

Using the new constitutional change, he called early polls in 2014, but lost the bid for his third term. In a bitter campaign, he lost the election for his party’s former secretary Maithripala Sirisena who defected and joined a common opposition coalition.

After the last parliamentary polls in August 2020, he also helped his brother Gotabaya Rajapaksa change the constitution to remove independent institutions

and strengthen the powers of the president.

The constitutional amendments were only possible under Rajapaksa because he had a large majority in parliament and he also used some manoeuvrings to get the support of opposition politicians.

Such constitutional changes have always been beneficial for Rajapaksas, analysts say.

China’s man

Rajapaksa was always seen as a pro-Chinese leader.

Following the end of the war, he got close to China because the West led by the United States, international rights groups, and India pushed him to the wall demanding that alleged human rights violations on his watch be addressed.

China poured money into Sri Lanka under Rajapaksa in the form of investments, grants, and loans and strengthened its footing in the island nation just a few kilometres south to India. This development led to a geo political cold war being played out in Sri Lanka.

A port terminal and port city project in Colombo port drew concern from India.  Rajapaksa’s disinterest in implementing a constitutional amendment that Sri Lanka had agreed to in the 1987 Indio-Lanka Agreement did not help. India had been pushing to implement this amendment to decentralize power with the central government to Sri Lanka’s provinces. This was advocated as a solution for the ethnic conflict.

With the end of the war, Rajapaksa’s focus was post-war infrastructure development in the North to help economic recovery.

India repeatedly conveyed its concerns with Rajapaksa who always promised to look into them, though they were hardly addressed.

Rajapaksa allowed two nuclear submarines to be docked in Colombo port – once when Chinese leader Xi Jinping was in Colombo in October 2014 and again within a few weeks of that visit.

India directly warned Rajapaksa. After the 2015 election defeat, Rajapaksa said it was India which defeated him at the presidency.

Divide and rule

Sri Lanka’s minority Muslims and Tamils have never backed Rajapaksa overwhelmingly as Rajapaksa was seen as a racist and favouring only Sinhala Buddhist majority.

Rajapaksa, however, engineered a number of defections to give himself an edge in politics.

Analysts say Rajapaksa practised the time-tested ‘divide and rule’ policy with the minorities.

Tamils saw him as a war criminal while Muslims also started to see him as a creator of violence after Rajapaksa failed to control anti-Muslim violence that erupted in June 2014.

Both minorities voted for his rival in the 2015 election in which he lost unexpectedly.

After losing the election, he went to his ancestral home in Hambantota, where he sat on a windowsill and said to a large crowd of supporters: “It was Northern Tamils who defeated me”.

As a shrewd politician, Rajapaksa has faced many challenges over the years, and engineering defections in the opposition has been an effective strategy that has helped him throughout his career.

Economic crisis

Over the years, Sri Lanka’s 22 million people endured the corruption, nepotism, misappropriation, unethical political manoeuvrings, crony capitalism, and racism that many attribute to successive Rajapaksa administrations.

Finally, it was Sri Lanka’s repeatedly delayed economic crisis that was the nail in Rajapaksa’s coffin

Many economists, including some close to Mahinda Rajapaksa, say that then President Rajapaksa called for early elections in 2015 in order to avoid a financial crisis that year. It is hard to say this was indeed the case, but what is clear now is that the once widely admired leader has now lost the plot.

Sri Lanka’s looming debt and balance of payment crises were twin risks the economy was facing when Gotabaya Rajapaksa won the presidential election in 2019.

From 2016 to 2019, Mahinda Rajapaksa and his Sri Lanka Podujana Peramuna (SLPP) said the then government had brought immense economic difficulties to the people.

“How is cooking gas? Do you have gas? How much are onions? How about potatoes? People cannot afford three vegetables in their meals. People are forced to eat only once a day because of the high cost of living,” Rajapaksa famously said at an election rally in 2019.

He and the SLPP criticized the then government’s tax hikes, flexible exchange rate, its IMF programme, and a misunderstood fuel price formula.

Rajapaksa would never have guessed his own fear mongering would become a reality under his brother’s leadership.

It all started with a tax cut in December 2019. Nobody asked for tax cuts, but the president slashed the tax assuming that a bigger volume of business will increase government revenue under a lower tax regime. This never happened.

Then, one of President Rajapaksa’s advisors said, the former military official was of the view to go for tax reforms under a new government after the parliament polls which was expected to be held in March 2020. Those reforms never came.

COVID-19 was a real shock, but Sri Lanka was not the only country that was hit by the pandemic.

Farmers furious

Making matters worse, the president blundered through the government’s agriculture policy by banning the import of inorganic fertilizer. Thousands of farming families took to the streets protesting Gotabaya Rajapaksa’s decision. Despite widespread criticism from farmers, opposition politicians and experts, a stubborn president stuck to his guns and refused to relent.

He along with former Agriculture Minister Mahindananda Aluthgamage imported Chinese organic fertilizer. The shipment was rejected by the government authorities who said it was contaminated, and a subsequent non-payment for the Chinese shipment became a diplomatic issue. President Rajapaksa’s government then turned to India for liquid nitrogen fertilizer which farmers refused to use claiming it had a strong odour and dogs and other animals going over the crops as a result.

The fertilizer policy blunder hit Sri Lanka’s paddy cultivation and created a food shortage. The government was compelled to import rice due to Rajapaksa’s ill-timed and ill-advised decision.

The fertilizer policy left farmers with a lower than normal or no harvest. Meanwhile, prices across all farm products were rising. As a result, consumers are now forced to pay more than double the price for rice and all vegetables.

The government’s maximum retail price policy on import products created shortages in cooking gas, milk powder, and wheat. That led to a queue regime which Sri Lankans hadn’t seen until the 1970s.

On the financial front, the central bank reduced interest rates to a record low, printed excess money, and kept the exchange rate around 200 rupees per US dollar.

Neither the Rajapaksas nor the government officials told the truth about an impending economic crisis to the people.

Central Bank Governor Ajith Nivard Cabraal misled the public with a six-month policy framework with over 26 billion US dollar inflows into the country in just six months through March 31. He also promised a stable currency and claimed that using reserves for repayment of international sovereign bonds (ISBs) will not be a problem for imports.

Around February 2022, the people finally realised they had been fooled as queues for essentials grew longer. Then, the government’s weak foreign reserves prevented it from importing fuel required for power generation which resulted in extended power cuts. The severe scarcity for dollars also had an impact on the import of medicines, wheat, and milk powder.

All of these prompted the people to protest against President Gotabaya Rajapaksa as he had failed in his economic policies in ensuring the essentials to the public.

Then came the “Go Home Gota” protests, which later extended to a Go Home Myna (Mahinda) campaign. However, the anti-Mahinda protests weren’t as aggressive as youth-led protesters demanding the president’s resignation – at least at the start.

In the meantime, people started to believe the allegation that the Rajapaksas had looted the country and that that was the main reason for the current economic crisis.

People started to ask questions about how the first family got as rich as it did when they were just elected officials living on government pay and perks.

Even as the protests were going on, there were no policy measures taken by the government to address the core issues faced by the public such as the shortage of dollars, fuel, cooking gas, medicines, and foods.

Final days

Finally, Cabraal opened the door for the destruction of Mahinda Rajapaksa’s 50-year political career. He allowed flexibility in the exchange rate without any plans to control its range in the event of a steeper depreciation.

The rupee fell as much as 85 percent in just two months. The cost of fuel more than doubled. All goods and services prices increased sharply. People could not bear the cost of living. The country was forced to face power cuts for as long as 13 hours a day.

People started to realise that they had been cheated and taken advantage of by Mahinda Rajapaksa before the election just to grab power.

The protesters started to demand his ouster as well.

It is true that the protesters really wanted Gotabaya Rajapaksa to resign. However, that demand has now somewhat shifted to getting Mahinda Rajapaksa out.

Protestors soon tired of the indecisiveness of Mahinda Rajapaksa over his resignation, which had by now become a national demand. His office repeatedly issued statements that he had not resigned.

On the last day, May 09, his supporters unleashed violence on unarmed and peaceful protesters after listening to him and his close ally and former minister Johnston Fernando.

Before the violence he spoke to the supporters at his official residence.

“I am ready to sacrifice anything on behalf of the people. But I do not want to betray the 6.9 million people who voted for us,” he told the gathering.

When he asked if he should resign, his supporters said in unison that he should remain as prime minister.

“I always have the memory of uniting the country that was to be divided into two. We will fulfil our responsibility on behalf of the country. I believe we can stand together to face the challenges of the country,” he said.

“As I have always said, for me, the country comes first, the country comes second, the county comes third.”

That was his last public utterance as prime minister of Sri Lanka.

Many people have expressed that they are “done with Mahinda Rajapaksa”.

The violence he started has now backfired. He is said to be in an undisclosed location now, heavily guarded by security forces personnel. The people are in search of him to demand accountability for Monday’s violence which took place in the presence of police.

Mahinda Rajapaksa was forced to relinquish office as the leader of what can only be described as a kleptocracy rather than a great statesman who ended a war to bring peace for millions. (Colombo/May11/2022)

Comments (2)

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  1. Asitha Pathirage says:

    Some of these are not 100% correct. Authors have failed or dropped the issue of Easter Sunday attack on Christians who were praying in churches, by some Muslim extreme group, killing 350 persons and injuring many, which also helped Rajapakses to get 2/3 power.
    Another important one is that Mahinda Rajapaks’s visit to the Bomb Blast site in North Central Province, which killed hundreds of poor down trodden villagers, by the LTTE, by a well planned Bus Bomb. He visited the blast site, not the funeral, where a poor villager handed his child’s body, pleading him to end this brutal terrorism, which made him to make a firm decision to defeat LTTE by war. This same video clip was used unfortunately, by the Eelam propagandists against the SL Govt, misleading many in the western world, alleging that it was an another human right violation by the SL Govt. I won’t be surprised even if they do it again.
    In my opinion, the public anger against him now is mainly due to corruption and nepotism ,but not the economic crisis.

  2. Veluppillai Thangavelu says:

    After the war, Mahinda went on a spree to build white elephants all located in his home district Hambantota. How did he manage to pour billions into a single district at the expense of other districts? It shows the other MPs did not have a backbone.

    The pyrrhic victory over the LTTE went into the heads of Rajapaksas that they are invincible politically. That was his undoing.

    The war cost billions of rupees, money that should have been diverted to develop the economy. After all Prabhakatan asked for a separate state within one island. Rajapaksas could have negotiated a political settlement like what the British over Northern Ireland insurgency.

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Your email address will not be published. Required fields are marked *

  1. Asitha Pathirage says:

    Some of these are not 100% correct. Authors have failed or dropped the issue of Easter Sunday attack on Christians who were praying in churches, by some Muslim extreme group, killing 350 persons and injuring many, which also helped Rajapakses to get 2/3 power.
    Another important one is that Mahinda Rajapaks’s visit to the Bomb Blast site in North Central Province, which killed hundreds of poor down trodden villagers, by the LTTE, by a well planned Bus Bomb. He visited the blast site, not the funeral, where a poor villager handed his child’s body, pleading him to end this brutal terrorism, which made him to make a firm decision to defeat LTTE by war. This same video clip was used unfortunately, by the Eelam propagandists against the SL Govt, misleading many in the western world, alleging that it was an another human right violation by the SL Govt. I won’t be surprised even if they do it again.
    In my opinion, the public anger against him now is mainly due to corruption and nepotism ,but not the economic crisis.

  2. Veluppillai Thangavelu says:

    After the war, Mahinda went on a spree to build white elephants all located in his home district Hambantota. How did he manage to pour billions into a single district at the expense of other districts? It shows the other MPs did not have a backbone.

    The pyrrhic victory over the LTTE went into the heads of Rajapaksas that they are invincible politically. That was his undoing.

    The war cost billions of rupees, money that should have been diverted to develop the economy. After all Prabhakatan asked for a separate state within one island. Rajapaksas could have negotiated a political settlement like what the British over Northern Ireland insurgency.

Sri Lanka rupee at 296.75/297.25 to dollar at open, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee opened at 297 /297.50 against the US dollar in the spot market on Monday, while bond yields were steady, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 was quoted at 26.50/75 percent steady from Friday’s close at 26.50/65 percent.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 29/2023)

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Sri Lanka rupee appreciation squeezes exporters

ECONOMYNEXT – Sri Lanka’s recent appreciation is starting to squeeze apparel exporters as their domestic costs including wages and energy, were hiked over recent months, when the rupee fell steeply, an industry official said.

Companies had raised salaries and emoluments at rates averaging 25 percent for workers while transport costs have also gone up but not has come down, Yohan Lawrence Director General of the Join Apparel Association Forum said.

Apparel factories in particular also provide transport and some meals for workers.

Electricity prices have also been hiked, based on the rupee which was weaker. A tariff cut is expected from June after the rupee appreciated and imported fuel prices fell.

Sri Lanka’s rupee collapsed in 2022 from 200 to 360 to the US dollar as interest rates were suppressed with liquidity injections and a failed attempt was made to float the rupee with surrender requirement in place.

From the second half of 2022, with higher interest rates and negative private credit, the central bank has avoided printing money under conditions which are generally accepted to be difficult, and is broadly running deflationary open market operations, triggering a balance of payments surplus and putting the rupee under upward pressure.

Central bank net credit to government which was 3,302 billion rupees in September in 2022, was down to 3,209 billion rupees by March 2023, part of which was due to rollovers, analysts say.

Market pricing of fuel and electricity by the Ministry of Energy and also spending controls and tax hikes buy have also helped contain domestic credit.

Sri Lanka also has mandatory conversion rules, imposed on exporters, which is a concern for exporters.

“We believe rupee should be at its natural level, but with forced conversions you won’t get the correct picture,” Lawrence said.

Sri Lanka has to release a plan to remove import controls, exchange controls and other restrictions imposed in the period where policy rates were suppressed with liquidity injections (so-called multiple currency practices and capital flow measures) by June under the IMF program.

Apparel exporters have also seen orders fall amid tighter conditions in Western markets.

The central bank has to peg (intervene actively in forex markets and create money) to meet reserve targets under an IMF program and cannot free float (avoid creating money through international operations) the rupee.

The newly created money has generally been absorbed in an overnight liquidity shortage.

There have also been foreign purchases of rupee Treasuries. Amid a contraction in credit, the inflows also do not turn into imports fast as the money if the money is spent.

By making purchases a little below what is allowed by the contraction in domestic credit, the rupee can be allowed to appreciate, analysts say.

The central bank has so far allowed the rupee to appreciate to around 300 to the US dollar from 360 levels under a transparent guidance peg up to February.

Except after the 2008/2009 currency crisis, Sri Lanka’s central bank has not previously allowed to the rupee to appreciate under IMF programs where the first year in particular sees balance of payments surpluses, before private credit and domestic investments picks up again.

One of the considerations used by third world central banks are Real Effective Exchange Rate indices.

The REER of the Sri Lanka rupee based on a basket of currencies calculated by the central bank was 61.12 points in February before the rupee was allowed to appreciate by lifting a surrender rule.

In March the index went up to 69.55 points, but remained steeply below 100. Real effective exchange rates are calculated also taking into account inflation in counterpart trading nations.

Sri Lanka’s inflation index had hardly risen since September amid rupee gains. Falling food prices can help contain pressure for further wage hikes, analysts say. (Colombo/May30/2023)

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Sri Lanka forum to discuss central bank independence vs sound money

ECONOMYNEXT – Central bank independence and sound money will be under discussion at a public event organized by the Sri Lanka chapter of the Bastiat Society today, May 30, as island is recovering from the worst episode of monetary instability since independence.

The forum will feature Lawrence H White, Professor of Economics at George Mason University in the US, and W A Wijewardene, former Deputy Central Bank Governor, of the Central Bank of Sri Lanka.

“The discussion will compare the current system against alternative systems and explore the relationship between such banking systems and sound money,” the organizers said.

White specializes in the theory and history of banking and money. He is the author of “The Clash of Economic Ideas” (2012), “The Theory of Monetary Institutions” (1999), “Free Banking in Britain” (2nd ed., 1995), and “Competition and Currency” (1989).

Wijewardene has been speaking on central bank independence in Sri Lanka long before it became a topic of wider discussion, but also on accountability.

In April, a Central Bank Independence and Other Matters, which includes a collection of his orations on the subject over the years as well a recent development was published.

The discussion comes as independent central banks in the West have created the worst inflation since the 1970s and early 1980s and are apparently unaccountable to parliaments and the public.

The early 1980s also saw the first wave of external debt crises in so-called soft-pegged countries in Latin America and Eastern Europe in particular as the US and UK tightened policy to end the Great Inflation.

The discussion will be held at 7.00 pm at the Lakmahal Community Library and those interested can register online, the organizers said. (Colombo/May30/2023)

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