Sri Lanka’s Ousted Leader Warns of Possible ‘Financial Crisis’

(Bloomberg) -- Ousted Sri Lankan Prime Minister Ranil Wickremesinghe said he continued to hold the majority in parliament and questioned the legitimacy of the appointment of former strongman Mahinda Rajapaksa as his replacement.

Key Takeaways

• Wickremesinghe spoke to Bloomberg from the official prime ministerial residence in Colombo
• “The issue is who is running the economy,” he said. “A constitutional crisis is enough to create a financial crisis.”
• "This whole crisis certainly does pose a risk to the whole economic strategy of debt repayment," he said.
• It "is a step back" for Sri Lanka. "Not one step back, but many steps back. It will also mean a few steps back in terms of the economy."
• "Rajapaksa is not yet the legitimate government. He has been speaking with some members of western countries, trying to reassure them. The main issue is that there’s a question of legitimacy that comes over him."
• Sri Lanka was thrown into turmoil late Friday when President Maithripala Sirisena appointed Rajapaksa as prime minister and suspended parliament until Nov. 16

Market Reaction

• On foreign investments and Rajapaksa: "There’s a question mark about what he will do," Wickremesinghe said. "Everyone is holding back. Investments have stopped."
• USD/LKR steady at 174.45; touched a record 174.75 on Tuesday
• Overseas investors cut holdings of local stocks by $0.9 million on Tuesday, taking outflows this month to $39.7 million: exchange data

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