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1 1 (December 18, 2023)

handle is hein.crs/goventi0001 and id is 1 raw text is: Congressional Research Service Infer Ing I leji lanve debab sm e 1914 Sri Lanka: Background and Issues for Congress Background The Democratic Socialist Republic of Sri Lanka is a constitutional democracy situated off the southeastern tip of India's Deccan Peninsula and proximate to key sea lines of communication in the Indian Ocean. The Biden Administration has identified Sri Lanka as occupying a strategic location in the Indian Ocean and in the middle of the geopolitical competition for influence. Sri Lanka (known as Ceylon from 1948 to 1972) has been a democracy since its independence from the United Kingdom in 1948. During the Sri Lankan government's 25- year-long war on the Tamil militant separatist Liberation Tigers of Tamil Elam (LTTE), the government expanded executive power, militarized Tamil-majority districts, and limited media and civil society freedoms. Since the war's 2009 end, few of those policies have been rescinded. Since 2008, U.S. policy has focused on broadening Sri Lanka's democratic institutions, promoting good governance and human rights, and facilitating post-war reconciliation. U.S. policymakers, including in Congress, also have raised concerns about the Sri Lankan government's growing ties to the People's Republic of China (PRC, or China) over the past two decades. Under former Presidents Mahinda Rajapaksa (2005-2015) and his brother Gotabaya Rajapaksa (2019-2022), Sri Lanka's government relied on China to support its fight against the LTTE and numerous post-war development projects, causing some observers to express concern about the potential for the PRC to exert economic and military influence in a key part of the region. Sri Lank's 2022 Twin Crises In early 2022, Sri Lanka experienced its worst economic crisis since independence. Inflation reached 60%, the currency depreciated by over 80% against the U.S. dollar, foreign reserves dropped almost to zero, and the government defaulted on its debt. Gross domestic product contracted by roughly 7.9%, poverty doubled (to 25% of the population), and half a million jobs were lost. The crisis is rooted in years of corruption and growing indebtedness. The COVID-19 pandemic, global inflation, and government actions such as tax cuts exacerbated the crisis. In March 2022, thousands of Sri Lankans began protesting the government's handling of the economy, which had resulted in rapidly rising inflation, fuel shortfalls, medicine shortages, and rolling blackouts throughout the country. On April 1, 2022, Gotabaya Rajapaksa declared a state of emergency and gave the military sweeping powers to arrest and detain demonstrators. On April 12, the government announced it was defaulting on its foreign debt of $51 billion. The imposition of a curfew and announcement of a military shoot to kill order failed to quell protests, and in July both Gotabaya and Mahinda Rajapaksa (who was serving as Prime Minister) resigned; Gotabaya fled the country. Parliament elected Ranil Wickremesinghe, a Updated December 18, 2023 former prime minister, as president, in accordance with Sri Lanka's constitution. Figure I. Sri Lanka in Brief Source: World Bank; CIA World Factbook. In March 2023, the International Monetary Fund (IMF) finalized an agreement with the Wickremesinghe government to extend a US$3 billion loan, provided that Sri Lanka address its financial shortfalls and renegotiate its external debt. In September, the IMF delayed release of the second $330 million tranche of its bailout loan due to concerns about shortfalls in government revenue; it approved the release in December, noting commendable progress toward debt sustainability. Some analysts say the government's decision to raise taxes and cut expenditures on government services rather than press for greater debt forgiveness from international lenders is causing hardship for the Sri Lankan people. Government data shows the economy grew by 1.6% in the quarter from July to September, the first expansion since 2021. 2024 National Elections Sri Lanka's ongoing economic hardship is complicating plans for national elections. According to Sri Lanka's Constitution, presidential elections must be held by October 2024, and parliamentary elections must be held by August 2025. Wickremesinghe, however, in February 2023 indefinitely postponed local elections, due in March 2023, citing the cost of conducting polls. Wickremesinghe has indicated he will seek reelection and in October 2023 announced that both presidential and parliamentary elections would be held in 2024, and local elections may be held in 2025. He set up a commission to examine and recommend possible electoral reforms, a move that opposition politicians say may be intended to influence

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