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Resignations Deepen Sri Lanka’s Crisis

Gotabaya Rajapaksa’s resignation fulfills a key protester demand, but the country’s deeper problems don’t have simple fixes.

By , the newsletter writer at Foreign Policy.
People crowd inside the Sri Lankan presidential palace
People crowd inside the Sri Lankan presidential palace
People crowd inside the presidential palace in Colombo, Sri Lanka, on July 10, a day after it was overrun by anti-government protesters. ARUN SANKAR/AFP via Getty Images

Welcome to today’s Morning Brief, looking at Sri Lanka’s political crisis, Japan’s upper house elections, the Syria U.N. aid impasse, and the world this week.

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Gota Gone?

Welcome to today’s Morning Brief, looking at Sri Lanka’s political crisis, Japan’s upper house elections, the Syria U.N. aid impasse, and the world this week.

If you would like to receive Morning Brief in your inbox every weekday, please sign up here.


Gota Gone?

Sri Lankan President Gotabaya Rajapaksa finally capitulated to protesters over the weekend by announcing his resignation, effective July 13. His prime minister, Ranil Wickremesinghe—only appointed in May following the resignation of the president’s brother Mahinda Rajapaksa—also said he would leave his post.

The dramatic departures come after a weekend in which public protests, ongoing since March, boiled over. Hundreds of demonstrators stormed the presidential palace on Saturday, while others set Wickremesinghe’s house on fire.

Mahinda Yapa Abeywardena, the current speaker of Parliament, is expected to step in as interim president before lawmakers select one of their own to serve out the remaining two years of Rajapaksa’s term.

And while Rajapaksa’s exit provides some level of accountability, the damage he and his family have inflicted on the country of 22 million people will not be undone quickly. Disastrous economic policies have put Sri Lanka in a public debt crisis, and a decision to pay it off with the last of its foreign reserves has left little for necessities. The result has been massive shortages of basic goods, fuel, and medicine—and a growing anti-government revolt.

The country attempted to stanch the bleeding in May, defaulting on some of its debt for the first time in its history.

Negotiations with the International Monetary Fund to receive up to $3 billion in loans ended with no clear resolution last month. After the weekend’s upheaval, the IMF said it was monitoring the current political situation and hoped to resume talks once it had reached a resolution.

Speaking to CNBC after the talks concluded last month, Shanta Devarajan, a Georgetown University professor and member of Sri Lanka’s negotiating team, said the two sides were “very close” to taking a key step toward loan approval: an agreement with the IMF outlining the policies the country must undertake to bring down its deficit and restructure its debt.

With IMF resources on hold, Sri Lanka has been barely kept running by credit lines from neighboring India, which has provided $4 billion so far. It’s also renegotiating a currency swap worth $1.5 billion with China, but it needs new terms after its low levels of foreign reserves breached the initial agreement, signed last year.

Wickremesinghe had planned on getting together the country’s main donors—India, China, and Japan—for a conference in August, but his departure puts that meeting in jeopardy.

In the short term, Sri Lanka is hoping that Indian tourists can provide some much-needed foreign currency. The government has already organized roadshows in five Indian cities next month to help revive its tourism industry.

Although the White House has made much of its shift to the Indo-Pacific, U.S. involvement has been minimal so far. On a visit to the country in late June, a U.S. Treasury team announced $120 million in financing for local businesses as well as $27 million for Sri Lanka’s dairy industry and $5.75 million in humanitarian assistance.

The debt domino. Sri Lanka’s default could be just one of many in emerging market countries this year, as the war in Ukraine, the coronavirus pandemic, and the rising value of the U.S. dollar combine to damage already weak economies. Bloomberg’s Sovereign Debt Vulnerability Scorecard finds that El Salvador, Ghana, Egypt, Tunisia, and Pakistan are the closest to following Sri Lanka.

The risk of cascading crises is why Western leaders need to focus not just on the war in Ukraine but the wider “global economic unwinding driven by the COVID-19 pandemic, climate breakdown, and degradation of the international political and economic system,” Mark Malloch-Brown writes in Foreign Policy.

Countries like Sri Lanka that enter debt restructuring should, at a minimum “expect an immediate debt repayment standstill and ultimately debt reductions matched to a realistic plan for economic growth,” Malloch-Brown writes.

“But too many governments are looking away, trying to ride a wave of patriotism over Ukraine but without the vision, will, skill, or bandwidth to respond at scale on this other front, which threatens global stability perhaps as much as Russia’s invasion.”


The World This Week

Tuesday, July 12: U.S. President Joe Biden hosts Mexican President Andrés Manuel López Obrador at the White House.

U.S. Treasury Secretary Janet Yellen visits Japan, where she is expected to meet her Japanese counterpart Shunichi Suzuki.

Fiji hosts the leaders meeting of the Pacific Islands Forum.

Wednesday, July 13: Biden arrives in Israel for the first leg of his Middle East trip.

Friday, July 15: Biden travels to the Palestinian territories and is expected to meet with Palestinian Authority President Mahmoud Abbas.

Later, Biden travels to Saudi Arabia, where he’s expected to meet with King Salman and Crown Prince Mohammed bin Salman.

G-20 finance ministers and central bank governors meet in Bali.


What We’re Following Today

Japan’s election. Japan’s ruling Liberal Democratic Party secured a decisive victory in Sunday’s upper house elections, which took place just days after former Prime Minister Shinzo Abe was assassinated at a campaign event. The result means that Prime Minister Fumio Kishida will have enough control of both chambers to propose constitutional amendments.

Last Friday, Tobias Harris assessed Abe’s legacy and the country he has left behind.

Syria aid. United Nations Security Council members continue to work on a deal to allow external humanitarian aid deliveries to northern Syria after the group missed a deadline to extend the U.N. mandate on Sunday. Russia vetoed a one-year extension to the program on Friday, and it was unable to garner support for an alternative six-month extension proposal. U.S. Ambassador to the U.N. Linda Thomas-Greenfield described the aid issue as “life-and-death” and called the impasse a “a dark, dark day in the Security Council.”

Attack in Donetsk. Rescue workers continue to sort through the rubble after a Russian rocket attack struck residential buildings in Chasiv Yar in Ukraine’s Donetsk region late Saturday. At least 15 people were killed in the attack, while 24 people are believed to be still trapped.


Keep an Eye On

Political violence in Brazil. A local official from Brazil’s opposition Workers’ Party (PT) was shot dead on Saturday by a man shouting support for President Jair Bolsonaro. A shootout occurred after the assailant entered the victim’s birthday party while brandishing a gun in the city of Foz do Iguaçu; the assailant survived and is currently in police custody. The incident raises fears of political violence ahead of October’s presidential election, which has already been marked by Bolsonaro’s claims of fraud. Polls currently show PT candidate Luiz Inácio Lula da Silva defeating Bolsonaro.

The Uber files. French President Emmanuel Macron was named in an international investigation of the car service Uber, which suggests the French leader personally intervened on behalf of the company to thwart local regulators while serving as economy minister. The report also highlights attempts to influence foreign governments from a number of former Obama administration officials as part of a lobbying campaign regarding regulation of the ride-hailing industry in the mid-2010s.

Gantz and Saar team up. Israeli Justice Minister Gideon Saar and Defense Minister Benny Gantz announced a political partnership on Sunday ahead of November’s general election. Saar and Gantz, who head the New Hope and Blue and White parties, respectively, will hope to improve on the 14 seats their parties won in the March 2021 election.


Odds and Ends

Russia’s former McDonald’s restaurants, now rebranded under new local ownership, are taking fries off the menu in some locations due to a potato shortage. Similar supply snags have already ensnared fast-food chains in Japan and Kenya.

The potato variety needed to make the fries had a poor harvest in 2021, the company explained to the TASS news agency, while sanctions made foreign imports infeasible. The chain plans to have everything back to normal by the fall.

Russia’s agriculture ministry tried to assuage concerns of a wider shortage, saying in a statement that the market was “fully supplied.”

Correction, Aug. 16, 2022: A previous version of this newsletter incorrectly stated that the assailant in the Foz do Iguaçu shooting had been killed in the firefight. It has been fixed.

Colm Quinn is the newsletter writer at Foreign Policy. Twitter: @colmfquinn

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