Skip to main content

What Sri Lanka's new 'Marxist-leaning' leader means for economy, IMF loans

By Vidhura S Tennekoon* 

Sri Lankans voted for a new direction in leadership on Sept. 22, 2024, electing a leftist anti-poverty campaigner as president of the South Asian nation.
The ascent of Anura Kumara Dissanayake marks a break with the past and from the establishment parties and politicians blamed for taking the country to the brink of economic collapse in 2022.
Dissanayake characterized the victory as a “fresh start” for Sri Lanka – but he will nonetheless need to address the economic baggage left by his predecessors and the impact of an International Monetary Fund loan that came with painful austerity demands. The Conversation turned to Vidhura S. Tennekoon, an expert on Sri Lanka’s economy at Indiana University, to explain the task facing the new president – and how Dissanayake intends to tackle it.

What do we know about Sri Lanka’s new president?

Anura Kumara Dissanayake leads both the National People’s Power alliance, or NPP, and the Janatha Vimukthi Peramuna, or JVP. Rooted in Marxist ideology, the JVP was founded in the 1960s with the aim of seizing power through a socialist revolution. But after two failed armed uprisings in 1971 and 1987-89 – which resulted in the loss of tens of thousands of lives – the party shifted toward democratic politics and has remained so for over three decades.
Until this election, the JVP remained a minor third party in Sri Lanka’s political landscape, while power alternated between the alliances led by the two traditional political parties – the United National Party and the Sri Lanka Freedom Party – or their descendant parties.
In 2019, under Dissanayake’s leadership, the NPP was formed as a socialist alliance with several other organizations. While the JVP continues to adhere to Marxist principles, the NPP adopted a center-left, social democratic platform – aiming to attract broader public support.
Despite these efforts, Dissanayake garnered only 3% of the vote in the 2019 presidential election.
But the political landscape shifted dramatically during the economic crisis of 2022. Many Sri Lankans, frustrated with the two traditional parties that had governed the country for over seven decades, turned to the NPP, seeing it as a credible alternative.
The party’s anti-corruption stance, in particular, resonated strongly because many people blamed political corruption for the economic collapse.
It helped deliver 42% of the vote to Dissanayake.
While a significant achievement, it also marks a historic first for Sri Lanka — Dissanayake is the first president to be elected without majority support; the remaining 58% of votes were split between candidates from the two traditional parties.
His immediate challenge will be to secure a parliamentary majority in the upcoming elections, a crucial step for his administration to govern effectively.

What kind of economy is Dissanayake inheriting?

Two and a half years ago, Sri Lanka experienced the worst economic crisis in its history. With foreign reserves nearly depleted, the country struggled to pay its bills, leading to severe shortages of essential goods. People waited in long lines for cooking gas and fuel, while regular blackouts became part of daily life. The Sri Lankan rupee plummeted to a record low, driving inflation to 70%. The economy was contracting, and the country defaulted on its international sovereign bonds for the first time.
This sparked a massive protest movement that ultimately forced President Gotabaya Rajapaksa to resign. In July 2022, Parliament appointed Ranil Wickremesinghe to complete the remainder of Rajapaksa’s term.
In the two years that followed, Sri Lanka’s economy made an unexpectedly rapid recovery under Wickremesinghe’s leadership. After securing an agreement with the International Monetary Fund, the currency stabilized, the central bank rebuilt foreign reserves, and inflation fell to single digits. By the first half of 2024, the economy had grown by 5%.
The government successfully restructured its domestic debt, followed by a restructuring of its bilateral debt – that is, government-to-government loans, mostly from China but also from India and Western counties, including the United States. Just days before the election, an agreement was reached with international bondholders to restructure the remaining sovereign debt.
Despite these achievements, Wickremesinghe was overtaken in the presidential race by both Dissanayake and opposition leader Sajith Premadasa. Wickremesinghe’s unpopularity stemmed largely from the harsh austerity measures implemented under the IMF-backed stabilization program.
Dissanayake now inherits an economy that, while more stable, remains vulnerable. He will have limited room to maneuver away from the carefully planned economic path laid out by his predecessor, even as voters expect him to fulfill popular demands.

How does Dissanayake plan to improve Sri Lanka’s economy?

As a leader from a Marxist party, Dissanayake will likely pursue policies to reflect collective decisions made by the politburos and central committees of the NPP and JVP, rather than his individual views. He advocates for an economic system where activities are coordinated through a central government plan, emphasizing the importance of “economic democracy.”
His party believes prosperity should be measured not just by economic growth but by the overall quality of life. They argue that people need more than just basic necessities — they require secure housing, food, health care, education, access to technology and leisure.
Dissanayake’s long-term vision is to transform Sri Lanka into a production-based economy, focusing on sectors like manufacturing, agriculture and information technology rather than service industries. One of the key policies is to promote local production of all viable food products to reduce reliance on imports. To support these activities, the NPP plans to establish a development bank. Additionally, the NPP proposes increasing government spending on education and health care, in line with Sri Lanka’s tradition of providing free, universal access to both.

Where does this leave the IMF loans?

Historically, Dissanayake’s party has been critical of the IMF and its policy recommendations. Given the severity of Sri Lanka’s economic crisis, Dissanayake has acknowledged the need to stay within the IMF program for now. But he has vowed to renegotiate with the IMF to make the program more “people-friendly.” Dissanayake’s proposals include raising the personal income tax exemption threshold to double its current level and removing taxes on essential goods. Dissanayake’s party also plans adding jobs to the public sector, despite the ongoing effort to reduce the government workforce to manage the deficit.
Dissanayake’s populist policies, aimed at attracting mass support during the campaign, will inevitably strain government revenues while increasing expenses. However, the IMF program requires Sri Lanka to maintain a primary budget surplus of at least 2.3% of gross domestic product to ensure debt sustainability. Dissanayake has promised not to jeopardize the country’s economic stability by deviating from this target. His strategy is to improve the efficiency of tax collection, which he believes will generate enough revenue to fund his policies.
Additionally, his party has criticized the deal struck by Wickremesinghe’s government with international lenders, calling it unfavorable to the country. Dissanayake has promised to seek better terms. However, since these agreements are already in place, it remains uncertain whether the new government will attempt to renegotiate them.
---
*Assistant Professor of Economics, Indiana University; former employee of the Central Bank of Sri Lanka. Source: The Conversation 

Comments

TRENDING

Adani coalmine delayed? Australian senate fails to pass crucial "reform" amendment for project's financial closure

Adanis' Mundra power plant, controversial in Australia By  A  Representative In what is being described as a new “new hurdle”, the proposed Adani coalmine in the Queensland state of in Australia failed to get the crucial Australian Parliamentary nod, essential for financial closure for one of the biggest coalmining projects in the world. The government lost the Senate vote 35-33, meaning the legislation won't pass until the Senate returns in mid-June.

Paul Newman wasn't just remarkably talented, he was anti-war activist, disdained Hollywood excesses

By Harsh Thakor*  On January 26th of this year, we celebrated the birth centenary of Paul Newman, one of the finest actors of his era. His passing on September 26, 2008, after a prolonged battle with lung cancer, was met with an outpouring of tributes and remembrances from artists across the film industry, all sharing their thoughts and memories of the legendary actor.  

Aurangzeb’s last will recorded by his Maulvi: Allah shouldn't make anyone emperor

By Mohan Guruswamy  Aurangzeb’s grave is a simple slab open to the sky lying along the roadside at Khuldabad near Aurangabad. I once stopped by to marvel at the tomb of an Emperor of India whose empire was as large as Ashoka the Great's. It was only post 1857 when Victoria's domain exceeded this. The epitaph reads: "Az tila o nuqreh gar saazand gumbad aghniyaa! Bar mazaar e ghareebaan gumbad e gardun bas ast." (The rich may well construct domes of gold and silver on their graves. For the poor folks like me, the sky is enough to shelter my grave) The modest tomb of Aurangzeb is perhaps the least recognised legacies of the Mughal Emperor who ruled the land for fifty eventful years. He was not a builder having expended his long tenure in war and conquest. Towards the end of his reign and life, he realised the futility of it all. He wrote: "Allah should not make anyone an emperor. The most unfortunate person is he who becomes one." Aurangzeb’s last will was re...

Health expert Dr Amitav Banerjee on commercialization of healthcare and neglect of natural immunity

By AK Shiburaj  In an interview with me, eminent health expert Dr. Amitav Banerjee has examined the impact of privatization on the healthcare sector, the implications of the World Health Organization (WHO) becoming a commercially driven entity, and the consequences of a pharmaceutical industry prioritizing profit over public health. He argues that an approach ignoring the importance of natural immunity fosters a drug-centric system that undermines the benefits of modern medicine.

Beyond his riding skill, Karl Umrigar was admired for his radiance, sportsmanship, and affability

By Harsh Thakor*  Karl Umrigar's name remains etched in the annals of Indian horse racing, a testament to a talent tragically cut short. An accident on the racetrack at the tender age of nineteen robbed India of a rider on the cusp of greatness. Had he survived, there's little doubt he would have ascended to international stature, possibly becoming the greatest Indian jockey ever. Even 46 years after his death, his name shines brightly, reminiscent of an inextinguishable star. His cousin, Pesi Shroff, himself blossomed into one of the most celebrated jockeys in Indian horse racing.

Haven't done a good deed, inner soul is cursing me as sinner: Aurangzeb's last 'will'

Counterview Desk The Tomb of Aurangzeb, the last of the strong Mughal emperors, located in Khuldabad, Aurangabad district, Maharashtra, has this epitaph inscribed on it: "Az tila o nuqreh gar saazand gumbad aghniyaa! Bar mazaar e maa ghareebaan gumbad e gardun bas ast" (the rich may well construct domes of gold and silver on their graves. For the poor folks like me, the sky is enough to shelter my grave).

Hyderabad seminar rekindles memories of the spark lit 50 years ago by students

By Harsh Thakor*  History is something we constantly remember and reflect upon, but certain moments and events bring it back to our memory in a special way. For the Telugu people, and Telangana in particular, the memorial seminar held on February 20–21 was a significant occasion to recall the glorious events, transformations, leaders, and heroes of past struggles. Thousands of students rewrote the history of people's movements in Andhra Pradesh, carrying revolutionary zeal and the spirit of self-sacrifice to levels comparable to the Russian and Chinese Revolutions.

Trust, we (from People to PM and President) did not take a Holy Dip in some Holy Shit!

By Dr Mansee Bal Bhargava  I could see two deeply interlinked aspects between human and water in #MahaKumbh2025. Firstly, the HOPE that a ‘holy dip’ in the River Ganga (colloquially referred as dubki and spiritually as ‘Snan’) will cleanse oneself (especially the sins); and secondly, the TRUST that the water is pure to perform the cleansing alias living the hope. Well, I consider hope to be self-dependent while, trust is a multi-party dependent situation. The focus here is on the trust and I shall write later on hope.

Vadodara citizens urge authorities to adhere to environmental mandates in Vishwamitri River Rejuvenation Project

By A Representative   A coalition of environmental activists, ecologists, and urban planners in Vadodara has issued an urgent appeal to state and municipal authorities, demanding strict compliance with court-mandated guidelines for the upcoming Vishwamitri River rejuvenation project. Scheduled to commence in March 2025, the initiative aims to mitigate flooding and restore the river, but citizens warn that current plans risk violating National Green Tribunal (NGT) orders and jeopardizing the river’s fragile ecosystem, home to endangered species like crocodiles and Indian Softshell Turtles.  

Buddhist communities in Michigan protest for Mahabodhi Temple’s return to Buddhist control

By A Representative   Buddhist communities in Michigan have staged protests demanding the return of the Mahabodhi Vihara in Gaya, Bihar, India, to full Buddhist control. The Mahabodhi Temple, regarded as the holiest pilgrimage site in Buddhism, is currently managed under the Bodhgaya Temple Act of 1949, which grants a majority of control to non-Buddhists.