July ’83 carnage, July ’22 anarchy, and July ’23 towards recovery

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President Ranil Wickremesinghe congratulating Prime Minister Dinesh Gunawardena after the latter was sworn-in at the Prime Minister’s Office in Colombo on July 22, 2022.

Some superstitious Sri Lankans fear Jooly Hatha (July 7) more than inauspicious numbers 9 or 13. However, now most of the people in this country believe the entire month of July is bad for Sri Lanka as many politically and socially harmful or significant events have been recorded in the month of July over the years.

This belief started with the infamous ‘Black July’ of 1983 in which the worst communal violence in Sri Lanka’s modern history took place, which earned this Paradise Isle the sobriquet of ‘Teardrop Island’. The anti-Tamil riots started initially as a spontaneous revenge action for the killing of 13 soldiers in the North by the terrorist outfit Liberation Tigers of Tamil Eelam (LTTE). However later it spread as communal program against the Tamils as anti-social groups went on rampage of killing, torture, looting and harassment of unarmed Tamils while some law enforcement personnel acted as mere onlookers.

Although only a handful of culprits were responsible for the riots and the vast majority of the Sinhalese condemned the act outright, the fact remains that episode brought the biggest black mark for Sri Lanka across the globe and even four decades the country is paying for the crime one way or the other.

Another major July event was LTTE’s first suicide bomber, Vallipuram Vasanthan alias Capt. Miller killing 40 soldiers at Sri Lankan Army camp in Nelliady in Jaffna by driving his explosive-laden truck into the camp on the ‘Black Tiger Day’ in July 1985.

Two years later, on July 29, 1987, the India-Sri Lanka Accord was signed by President J R Jayewardene and Indian Prime Minister Rajiv Gandhi with the intension of ending the fighting between the Sri Lankan armed forces and the LTTE and laying the foundation for the devolution of power to the provinces, principally to a united Tamil-speaking North Eastern province. It was signed amidst protests across the country. Aftermath of the ISLA, Janatha Vimukthi Peramuna (JVP) activists made a futile attempt to assassinate President Jayewardene inside the Parliament complex. Four years later Rajiv Gandhi was killed by the LTTE.

Sri Lanka, a country enjoying universal adult franchise since 1931, democratically changed Governments during the last 9 decades, of which last 7 decades as a thriving independent democracy. In July 2022, the protest movement Aragalaya brought the country towards anarchy. When the protestors entered the President House, the elected President Gotabaya Rajapaksa decided to leave and with his subsequent resignation President Ranil Wickremesighe was elected by the majority in Parliament. Following which, on July 22, new Prime Minister Dinesh Gunawardena was sworn in.

The aragalaya received the support of many, as they believed the Government had failed to tackle the worsening economic crisis and shortages. By July 2022 Sri Lanka was facing its deepest ever economic and political crisis. The public antagonism due to prolonged power outages, long queues and shortages of essential commodities made the protests spreading across the cities with the strength gained due to public sympathy. The country was rapidly moving towards anarchy as the law and order was collapsing amidst the widespread protests all over the country.

However, even those who sympathized with the protests were really concerned that Sri Lanka would descend into a state of anarchy if the aragalaya was allowed to continue.

This week, as the country marks the first anniversary of the Government headed by President Ranil Wickremesinghe and Prime Minister Dinesh Gunawardena, there is general acknowledgement that the rapid decent towards anarchy was averted with the transfer of power in July 2022.

Within 12 months, the Government made a slow, but steady progress towards recovery of the economy, first by holding complex negotiations with creditors on debt restructuring and successfully concluding an International Monetary Fund (IMF) bailout package.

Last July, cost-of-living index and inflation hit an all-time high. Now it has been brought down to a manageable limit with prospects of further reduction in the coming months.

Twin attacks of Covid Pandemic and the economic crisis resulted in economic downturn and swelling of poverty segment from 2019 to 2022. The closure of factories and decline in agriculture sector resulted in loss of jobs and income losses signalled the country’s plunge into a prolonged recession. In 2022, GDP is contracted by close to 9 per cent and the latest estimates suggest that the economy will contract by 3–4 per cent this year, despite the growth in the last quarter.

The Central Bank expects the economy to resume growth this quarter after six quarters of contraction. The independent economists say the recovery is faster than expected by many analysts. The growth is mainly due to increase in overseas remittances and tourist arrivals. It is true that Sri Lanka is banking on an IMF bailout to facilitate access to bilateral and multilateral financial support to get the economy back on track. At the same time comprehensive programmes initiated to increase agriculture production are expected to yield results in the next year.

With the improvement of foreign exchange reserves and IMF loan restructuring plans, private investors and creditors’ confidence also increased. Although the people are not happy about taxhikes, they at least understand the need for such unpopular measures.

Dr. Dushni Weerakoon of Institute of Policy Studies said an economic crisis can sometimes be the catalyst of a major economic overhaul, but in the absence of political stability the downside risks are significant. Governments have far fewer resources in hand to compensate those who are bound to lose out from reforms.

As the economist suggested, the swift conclusion to the debt restructuring negotiations has provided a concrete base for follow up actions. “The evidence is sobering in today’s complex creditor landscape. For Sri Lanka, having China, India and Japan as its largest bilateral creditors alongside primarily US-based private bond holders adds a layer of complexity in working out treatment that is comparable and acceptable to all”.

Many economists believe that even if everything goes according to plan, it will be another two or three years before the Sri Lankan public feels any real improvement in economic conditions. The erosion of real wages and the introduction of higher taxes are squeezing disposable incomes, prompting exit by many to seek better living standards overseas.

However, there is universal agreement that the Government managed a most difficult task of arresting the decline in the economy and brought it to a stable level during the first year in Office. Now one has to be patient to see further improvements and assist the programmes that are being implemented for recovery of the Sri Lankan economy and take it further to the path of progress.

Last Tuesday Chinese Ambassador Qi Zhenhong called on Prime Minister Dinesh Gunawardena to express high appreciation over Sri Lanka’s success in its economic recovery efforts in the first year in Office. On Wednesday outgoing Swiss Ambassador Dominik Furgler said he was highly impressed with rapid recovery of Sri Lanka in one year after it was hit with the worst economic and fiscal crisis. Today President Ranil Wickremesinghe is finalizing the assistance package from India, our friendly neighbour who extended the fullest support for the economic recovery efforts.

Sugeeswara Senadhira