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As Ex-Premier Returns, Calls for Sri Lanka Election Grow Louder

Sri Lankan President Maithripala Sirisena caved into mounting pressure and reinstated Ranil Wickremesinghe as prime minister.

As Ex-Premier Returns, Calls for Sri Lanka Election Grow Louder
Ranil Wickremesinghe, Sri Lanka’s prime minister, speaks during a Bloomberg Television interview at the Asia-Pacific Conference of German Business in Hong Kong (Photographer: Anthony Kwan/Bloomberg)  

(Bloomberg) -- Sri Lankan President Maithripala Sirisena bowed to mounting pressure and reinstated Ranil Wickremesinghe as prime minister, but renewed hostility between the two leaders suggest a fresh election might be the only way to end the island nation’s protracted political crisis.

Sirisena on Sunday swore in Wickremesinghe, who he’d abruptly fired on Oct. 26 and replaced with former strongman president Mahinda Rajapaksa. His actions seven weeks ago started a bout of political turmoil that prompted Moody’s, S&P and Fitch to cut the country’s credit rating. But shortly after reinstating the man he’d earlier dismissed, Sirisena cast doubt on the ability of the two to work together as calls for a new election grew louder.

"With the issues we have, I am not sure what guarantee we have that we could go on this journey together," Sirisena told a crowd that included Wickremesinghe and other lawmakers.

As Ex-Premier Returns, Calls for Sri Lanka Election Grow Louder

After months of political squabbling saw policy making grind to a halt, lawmakers and political observers suggest only a fresh election can solve the gridlock. Analysts believe Sirisena originally appointed Rajapaksa to cash in on his enduring popularity, particularly after a party backed by the former strongman defeated the ruling coalition in local elections earlier this year.

But the chaos of the last two months and the legal and parliamentary decisions against the president and Rajapaksa make the potential outcome of any poll difficult to predict.

"Relations between Wickremesinghe and Sirisena are irreparably broken and Rajapaksa will be waiting in the wings to push for as early of an election as he can," said Eurasia Group senior analyst Sasha Riser-Kositsky. "Rajapaksa will unquestionably gain ground in any fresh election, but the legal defeats of the last month have reduced his popularity and energized and unified the spectrum of those who have good reason to fear his return to power."

Regardless of how soon an election is called, the island’s leadership needs to accelerate growth in an economy that’s been expanding at a less than 4 percent pace. Sri Lanka, which has an on-going $1.5 billion loan program with the International Monetary Fund, faces significant bond maturities, including a $1 billion debt due in January. Its currency has dropped 4 percent since Wickremesinghe’s ouster.

On Monday, Sri Lanka’s dollar-denominated sovereign bonds due in 2028 jumped by a record 2.3 cents on the dollar to 92.3 cents, according to prices compiled by Bloomberg.

“In the last few weeks economic progress in the country has halted due to the crisis,” Wickremesinghe said in Colombo on Sunday. “We have to bring the normalcy back to the country.”

Sirisena said on Nov. 25 that contrasting leadership styles and Wickremesinghe’s habit of unilateral decision-making made it impossible to work toward improving the economy. Wickremesinghe has a neo-liberal economic view that Sirisena didn’t agree with, the president said.

“We will have a common program for one year, pre-agreed upfront. We will have to put mechanisms in place to discuss policy issues with the president,” said Eran Wickramaratne, a state minister of finance under Wickremesinghe. “We want to have policy coherence and focus on delivery.”

Sirisena originally suspended parliament, then tried to dissolve the legislature entirely for fresh elections -- a move that was blocked by the Supreme Court. On Sunday, he accused Wickremesinghe of spoiling his government’s promise of good governance and criticized the free trade agreement Wickremesinghe struck with Singapore -- saying it should be temporarily suspended so amendments can be made -- as well as his appointment of ministers.

His actions have been criticized internationally. India’s foreign ministry in a statement on Sunday said it welcomed the “resolution of the political situation” in the nation.

Rajapaksa on Saturday relinquished his premiership and reiterated his call for elections. Sirisena’s reappointment of Wickremesinghe came after the Supreme Court on Dec. 13 ruled against his plan to dissolve the island nation’s parliament and call a new national vote.

“There may be respite for a few months, but elections will have to be held, because there is still an unstable situation,” said Chandra Jayaratne, former head of the Ceylon Chamber of Commerce. “Trade and investment won’t come in without stability.”

--With assistance from Ryan Lovdahl, James Amott and Steve Geimann.

To contact the reporters on this story: Asantha Sirimanne in Colombo at asirimanne@bloomberg.net;Iain Marlow in New Delhi at imarlow1@bloomberg.net

To contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.net

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