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Sri Lanka election result increases policy uncertainty – Fitch Ratings

Published Nov 25, 2019
Updated Feb 06, 2020

Fitch Ratings believes that parliamentary elections will bring clarity in the political situation in Sri Lanka as Gotabaya Rajapaksa of the Sri Lanka PodujanaPeramuna (SLPP) defeated Sajith Premadasa of the ruling United National Party (UNP) in the Presidential polls on 16 November. Ex-president Mahinda Rajapaksa elder brother of the President has been sworn in as the prime minister

Siblings in power

The new president’s constitutional reform plans could resurrect controversial proposals to enhance the executive’s powers.
Gotabaya Rajapaksa’s economic manifesto targets average growth of 6.5% or higher, compared with 3.2% in 2018 and a Fitch-forecast 2.8% in 2019, by promoting commodity and apparel exports, construction and tourism.

Under Mahinda Rajapaksa’s presidency from 2005-2015, an aggressive infrastructure drive pushed up government debt. Gotabaya Rajapaksa’s manifesto targets a budget deficit below 4% of GDP and inflation below 5%.

This could undermine policy credibility, investor confidence, and potentially complicate relations with the IMF as per Fitch Ratings.

The new president’s manifesto suggests that the undermining of monetary policy credibility that was a feature of Mahinda Rajapaksa’s presidency will not recur.

On 18 November, Colombo Page quoting official results released by the Election Commission of Sri Lanka Sri Lanka PodujanaPeramuna [SLPP] candidate Gotabhaya Rajapaksa has received 52.25% of the votes and New Democratic Front candidate Sajith Premadasa has received 41.99% of votes. The Gotabhaya has crossed the crucial 50 % mark which would indicate that there is no requirement of a second round/Anura Kumara Dissanayake, the presidential candidate of the National Movement of People’s Power has received 3.16% of votes.

Sri Lanka’s ruling coalition party candidate, Minister Sajith Premadasa accepted defeat and conceded the presidential election victory and congratulated the Gotabaya Rajapaksa.

Sri Lanka’s leaders would do well to ensure that the economy that had suffered a major blow post the Easter Sunday terror attacks is brought back on rail.