Economic hardship continued amid severe drought and looming debt restructuring, while inter-ethnic tensions spilled over from north east as govt unveiled new measures aimed at reconciliation.

Inflation diminished but concerns grew over drought’s impact. Reports in Aug showed inflation in July fell to under 7%, but relief for average citizens remained limited given high prices of many essentials. Drought conditions during month affected large parts of island, threatening drinking water supplies and farming and possibly reducing hydroelectric power. Meanwhile, govt’s flagship anti-poverty program continued to face serious administrative delays.

Domestic debt restructuring took centre stage. Govt attempted to fend off legal and political criticism of its decision – endorsed in motion by parliament on 1 July – to impose losses on contributory govt and private sector pension schemes while sparing banks. Supreme Court 4 and 11 Aug dismissed lawsuits that sought to block restructuring of debt held by pensions. After parliament speaker argued courts do not have power to rule on parliamentary resolution, opposition leaders 11 Aug criticised alleged blow to separation of powers, arguing parliamentary approval had taken form of non-binding motion.

Inter-ethnic relations faced pressure. Significant tensions surfaced at contested site known in Tamil as Kurunthurmalai, and in Sinhalese as Kurundi in Mullaitivu district (Northern Province), where newly built Buddhist temple sits in close proximity to Hindu Athi Aiyanar temple. Eyewitnesses said Sinhala Buddhist monk and followers 18 Aug attempted to disrupt Tamil Pongal celebration at Hindu temple, despite permission from local magistrate. Sinhala nationalist legislator 22 Aug denounced magistrate in parliament, while second Sinhala nationalist MP 26 Aug led protest outside residence of Tamil MP for his role in supporting Hindu worship at Kurunthurmalai. In separate dispute, Buddhist monks 28 Aug disrupted govt meeting and threatened Eastern Province governor for his decision to halt construction of new temple in traditionally Tamil village in Trincomalee district.

Govt unveiled new policies aimed at inter-ethnic reconciliation. President Wickremesinghe 9 Aug announced series of moves to strengthen provincial devolution of power within terms of existing constitution. Wickremesinghe rejected opposition demands to hold provincial elections, now years overdue, proposing instead to first amend Provincial Council Elections Act.

Govt hoped to show commitment to inter-ethnic reconciliation with new policies, which Tamil leaders, families of disappeared and rights groups criticised; govt pursued economic reforms.

Govt unveiled policies purportedly to resolve country’s ethnic conflict. Ahead of President Wickremesinghe’s official visit to India 20-21 July, govt announced series of mostly repackaged policies designed to demonstrate its commitment to inter-ethnic reconciliation and lasting political solution to ethnic conflict. In meeting with Tamil parliamentarians on 18 July, Wickremesinghe presented 15-page document listing policies on land, detainees, missing persons, reparations and development initiatives for Northern and Eastern provinces; govt also included plan to strengthen provincial powers, established in Thirteenth Amendment that was drafted in 1987. Tamil leaders, who have almost universally criticised Thirteenth Amendment as inadequate, 18 July rejected proposal, which fell short of full implementation. Discussions at all-party meeting convened by president 26 July indicated lack of parliamentary consensus for his plans. Meanwhile, govt held series of meetings on proposed National Unity and Reconciliation Commission; families of forcibly disappeared and human rights organisations denounced plan as designed to win international support without addressing underlying factors that generated civil war. Sinhala nationalist activists 23 July disrupted peaceful commemoration of 40th anniversary of anti-Tamil pogrom in Colombo, which riot police later violently dispersed.

Parliament endorsed govt’s debt plan and economic reforms. Parliament 1 July approved govt’s Domestic Debt Restructuring plan, designed to complement and encourage debt restructuring with international creditors that is needed to meet International Monetary Fund (IMF) target for debt reduction; plan has generated widespread criticism for effectively imposing losses on workers’ retirement funds while leaving banks and their shareholders untouched. In brief visit 28 July, French President Emmanuel Macron reiterated support for expedited debt restructuring and economic recovery, a message echoed by Japanese FM Hayashi Yoshimasa during 29 July meeting with Wickremesinghe. Further progress was made in achieving reforms required by IMF’s bailout plan as parliament 19 July passed anti-corruption bill and bill to guarantee independence of Central Bank.

Tentative signs emerged of economic improvement, UN Human Rights Council reviewed govt’s accountability progress, and tensions surfaced in Tamil-majority Northern Province.

Economic and humanitarian suffering eased slightly. Figures late month showed inflation in June fell to 12% from 25.2% in April. With rupee’s value rising, Central Bank 1 June cut interest rates by 2.5%. UN and World Food Programme assessed that number of citizens who were “moderately acute food insecure” fell from 6.2m to 3.9m. Following brief visit, International Monetary Fund deputy managing director 2 June announced “economic recovery remains challenging” notwithstanding “tentative signs of improvement”. World Bank 28 June approved $700mn in budgetary and welfare support. Main opposition Samagi Jana Balawegaya (SJB) 29 June announced it would vote against the govt's proposals for domestic debt restructuring, made public same day.

Human Rights Council continued accountability oversight as govt pledged further progress. In oral update to 53rd session of UN Human Rights Council (UNHCR) on 21 June, Deputy High Commissioner Nada Al-Nashif called on authorities to “directly acknowledge past violations and undertake credible investigations and prosecutions, alongside other accountability measures”, with “the international community play[ing] a complementary role”. Ahead of meeting, President Wickremesinghe 8 June reviewed “progress of initiatives” on govt’s “Reconciliation Action Plan”. Justice Minister 18 June signalled Truth and Reconciliation Commission draft will be circulated in July. Eight prominent international human rights and rule of law NGOs 16 June strongly criticised “ongoing violations of fair trial rights” of lawyer and human rights defender Hejaaz Hizbullah, who was arrested in 2020 under Prevention of Terrorism Act.

Inter-communal tensions rose in Tamil-majority Northern Province. Tensions rose to dangerous levels over disputed area in Northern Province where Buddhist stupa – known as Kurundi Vihara – has recently been built with military assistance and against court orders, reportedly blocking access to long-standing Hindu pilgrimage site. Prominent Buddhist nationalist organisations 21 June gathered “in defence of” Kurundi Vihara. Police 7 June arrested Tamil legislator and Tamil National People’s Front Leader Gajendrakumar Ponnambalam at his Colombo residence on charges of “obstructing police duties” following altercation on 2 June with plainclothes police in Jaffna, in Northern Province.

Govt continued engagement with international lenders for economic recovery and promoted initiative to end ethnic conflict, as country marked 14 years since end of civil war.

Dialogue with International Monetary Fund (IMF) and creditors continued. After parliament late April approved in non-binding resolution govt’s agreement with IMF for $3bn fund, senior IMF staff 15-23 May held meetings to review progress, praising govt for having “already started implementing many of the challenging policy actions” but forecasting 3% contraction in economy this year. Members of Paris Club of bilateral donors 9 May held their first formal debt-restructuring negotiations co-chaired by Japan, France and India, which was attended by 26 nations, including Chinese govt observer.

Amid widespread scepticism, govt pursued initiatives to address decades-old ethnic conflict. President Wickremesinghe 1 May reiterated his determination “to address the ethnic problem”, adding, “I hope to reach a mutually agreeable solution by the end of this year”. After meeting Wickremesinghe, Tamil leaders 15 May expressed disappointment at lack of progress on devolution of power and failure to call long-overdue elections for provincial councils, with one parliamentarian describing talks as “nothing but a time-wasting tactic”. Cabinet 29 May approved proposal for Truth-Seeking Commission, drawing on experience of South Africa’s truth commission. Following series of controversies – including arrest of prominent comedian – over statements allegedly insulting Buddhism, Wickremesinghe 29 May ordered police to establish special police unit to “investigate into and act on persons or groups that disrupt religious harmony”.

Activists commemorated 14th anniversary of civil war’s end. Organisers mid-May held events across north and east to mark end of civil war on 18 May and remember tens of thousands of Tamil civilians believed to have been killed in final months of conflict. Sinhala nationalist activists 18 May violently disrupted low-key, multi-ethnic and multi-religious ceremony in capital Colombo to commemorate all those killed in war. In response to Canadian PM Justin Trudeau’s “Statement on Tamil Genocide Remembrance Day” on 18 May, foreign ministry summoned Canadian high commissioner to condemn Trudeau’s “arbitrary and erroneous” remarks.

Govt engaged international lenders on economic recovery amid strikes against austerity, while govt’s new “anti-terrorism” powers provoked widespread opposition.

Govt discussed plans for economic recovery with international stakeholders. International Monetary Fund (IMF) and World Bank 10-16 April held annual meetings in Washington, U.S., where govt and Central Bank officials met wide range of international lenders and development agencies. Finance ministers of Japan, India and France 13 April announced formation of committee of bilateral creditor govts to pursue debt restructuring negotiations with Sri Lanka; Japan said negotiation platform was open to all creditors and expressed hope China – Sri Lanka’s largest bilateral creditor – would join amid concern over its absence. Private bondholders met officials on reworking over $12bn in outstanding bonds.

Parliament approved IMF recovery plans amid strike action. Parliament 26-28 April debated and approved non-binding resolution to support implementation of IMF’s Extended Fund Facility; largest opposition party abstained. In response to possible strike action by teachers, President Wickremesinghe 19 April threatened to use emergency powers to declare education essential service, where strikes are banned, and initiate legal action against teachers; Wickremesinghe 17 April declared power, fuel, postal and health as essential public services.

Govt paused controversial Anti-Terrorism Act, following strong domestic and international reaction. Govt postponed bill’s introduction and promised consultation on legislation that would establish exceptionally broad definition of terrorism and grant executive and security agencies unprecedented powers of arrest and proscription; bill has been denounced as attack on democratic rights by international and national human rights groups and faced reported diplomatic backlash from Western govts. Tamil political parties 25 April organised one-day general strike in Tamil areas to protest bill as well as “Sinhalisation” of Muslim and Tamil-majority areas in north and east, amid increasing allegations of govt-supported land grabs.

In other important developments. U.S. State Dept 26 April sanctioned former navy commander W. Karannagoda for his alleged role in abduction and murder of 11 Tamil and Muslim men in final years of civil war. Country 21 April commemorated fourth anniversary of Easter Sunday suicide bombings amid widespread protests and senior Catholic officials criticising perceived lack of justice and proper investigation.

International Monetary Fund (IMF) authorised bailout loan, granting govt access to international lines of credit, while postponement of local polls continued to fuel political tensions.

IMF approved bailout loan amid strikes and protests over hardship. Executive Board of IMF 20 March formally approved Extended Fund Facility bailout package, paving way for release of first of nine tranches totalling $3bn, and additional lending from World Bank, Asian Development Bank and bilateral donors; decision followed debt-restructuring assurance given by China on 6 March. President Wickremesinghe 22 March presented agreement to parliament and discussed difficult debt-restructuring negotiations. Austerity policies mandated in part by IMF continued to provoke strikes and protest during month. Notably, public sector staff at hospitals, banks and ports 1 March walked out in protest of newly enacted income tax hikes amid soaring living costs. Nationwide strike reportedly backed by opposition National People’s Power took place 15 March.

Dispute over local polls’ postponement prompted opposition. After local polls initially scheduled for 9 March were postponed last month due to govt’s refusal to provide funds, Supreme Court 3 March issued restraining order preventing treasury chief and Wickremesinghe in his capacity as finance minister from “withholding funds allocated in the 2023 budget for the purpose of conducting local government polls”; multiple court challenges followed as govt failed to comply with Supreme Court’s order. Bar Association of Sri Lanka 11 March expressed “grave concern” over undermining judiciary’s independence. Responding to protests against postponement last month, Core Group members of UN Human Rights Council 7 March expressed “concerns over heavy-handed responses to peaceful protests”.

Govt unveiled alternative to controversial prevention of terrorism act. Govt 22 March published “Anti-Terrorism Act” – long-awaited draft law designed to replace much-criticised Prevention of Terrorism Act – that was quickly condemned by local and international human rights organisations for over-broad definition of terrorism and expanded executive powers of detention and proscription. FM Ali Sabry and Justice Minister Dr. Wijeyadasa Rajapakshe 21-25 March undertook “fact-finding” visit to South Africa to study country’s Truth and Reconciliation Commission, amid rising expectations govt will initiate its own process in coming months.

Tensions spiked as govt claimed funding shortfall, forcing indefinite postponement of local elections; police crackdown on pro-election protesters killed opposition politician and injured over dozen.

Govt invoked financial crisis, forcing election commission to postpone local polls. Ahead of local elections scheduled for 9 March, cabinet 13 Feb approved President Wickremesinghe’s proposal to limit govt expenditure on credit to five “essential” categories, which excluded election expenses. Election Commission next day was forced to suspend postal voting and 24 Feb announced vote’s indefinite postponement. Election monitoring groups, Bar Association and opposition parties condemned govt’s decision, while Wickremesinghe 23 Feb confirmed “we have no money” for elections and denied vote was ever properly scheduled. Police 20 Feb dispersed people protesting move in capital Colombo led by main opposition Samagi Jana Balawegaya party; opposition National People’s Power member 26 Feb died from injuries sustained in police attack on protest previous day that injured over dozen.

Govt marked Independence Day amid dissent and widespread strife. Amid high inflation and severe recession, govt was roundly criticised for spending $500,000 on military parade to mark 75th anniversary of independence on 4 Feb; police violently dispersed Colombo sit-in protesting cost. Tamil communities in north and east same day held demonstrations demanding end to “occupation of the Tamil homeland” and began four-day march from northern city Jaffna to eastern town Batticaloa. Govt employees continued protests over income tax hikes. Further compounding hardship, Ceylon Electricity Board 15 Feb announced increase in electricity prices by average of 66%, which threatens collapse of small and medium-sized businesses. Efforts to secure financial bailout continued: notably, media reports 17 Feb claimed International Monetary Fund was considering approving bailout before China agrees to join debt restructuring deal.

Protest leader released amid UN Human Rights Council session. Authorities 1 Feb released on bail student activist and protest leader Wasantha Mudalige after five and a half months of detention under Prevention of Terrorism Act (PTA) and other laws. UN Human Rights Council same day began scheduled Universal Periodic Review; many states praised govt for its commitment to reform and reconciliation, while U.S., UK, Canada, New Zealand and Norway urged govt to repeal PTA.

Govt slashed spending amid economic strains and efforts to secure international bailout loan, while continuing initiative to address decades-old ethnic conflict.

Govt cut back spending amid deep recession. Amid falling govt revenues, President Wickremesinghe 10 Jan instructed all ministries to cut 5% of their allocated budgets for 2023, with priority given to salary and pension payments to public sector employees. State Minister of Defence Premitha Bandara Tennakoon 13 Jan made surprise announcement that army personnel would be reduced by one third over 2023, falling to 135,000 from 200,000. In positive step, India 16 Jan informed International Monetary Fund (IMF) that it will support debt restructuring process, marking progress toward finalising bailout loan. Chinese Vice Minister Chen Zhou 16 Jan indicated “some good news soon” regarding debt restructuring. Wickremesinghe 27 Jan prorogued parliament until 8 Feb, when new policy program is due to be announced.

Govt continued discussion of initiative to address ethnic conflict. Wickremesinghe 15 Jan reiterated govt’s “hope to fully implement the 13th Amendment of the constitution”; successive governments have failed to implement key provisions since amendment was made law in 1987. Tamil National Alliance (TNA) parliamentarian M.A. Sumanthiran 16 Jan said, “Nobody takes it with any seriousness because it has been constantly promised.” Wickremesinghe also said govt was “discussing appointing the Truth and Reconciliation Commission (TRC)”. Talks between govt and TNA, however, appeared stalled following former’s failure to meet deadlines for releasing Tamil prisoners held under Prevention of Terrorism Act and releasing private land held by military.

Local elections preparations resumed, Supreme Court ruled on 2019 bombings. Following govt attempts to delay local govt elections, Election Commission 21 Jan announced polls will be held on 9 March. In landmark ruling, Supreme Court 12 Jan ruled that former President Maithripala Sirisena and four other senior officials had violated fundamental rights of petitioners by failing to act on warnings received in advance of 2019 Easter bombings. In first by foreign govt, Canada 10 Jan imposed sanctions on former Presidents Mahinda Rajapaksa and Gotabaya Rajapaksa for “gross and systematic violations of human rights during armed conflict in Sri Lanka”.

Govt pursued plan to exit near-unprecedented economic hardship facing millions, and renewed calls to political parties to endorse plan to address decades-old ethnic conflict.

Govt sought relief amid acute economic and humanitarian crises. Inflation fell from record levels but remained high at 57% in Dec; govt 15 Dec reported economy shrank 11.8% in July-Sept quarter, marking second-worst quarterly contraction ever. World Food Programme and UN Food and Agriculture Organisation early Dec reported that 6.3mn people (30% of population) were food insecure, while over 60% of families were eating less, and eating cheaper, less nutritious food. World Bank 6 Dec confirmed its decision to renew govt’s eligibility for concessional loans from International Development Association; President Wickremesinghe same day presided over roundtable discussion with World Bank, Asian Development Bank, International Monetary Fund and Asian Infrastructure Investment Bank, who were later reported to have endorsed a “coordinated assistance program” to address economic crisis. Central bank governor 20 Dec confirmed debt restructuring negotiations with bilateral creditors were progressing more slowly than hoped. Meanwhile, parliament 8 Dec approved budget with comfortable majority of 123 votes (out of 225), winning support from most of now-fragmented Sri Lanka Podujana Peramuna (SLPP) party led by Rajapaksas.

Govt provided accelerated initiative to address ethnic conflict. At All-Party Conference held 13 Dec, Wickremesinghe reiterated his appeal for all political parties to agree on solution to ethnic problem by country’s 75th anniversary on 4 Feb, specifically by: addressing immediate concerns of Tamils, especially in north and east; establishing “truth-seeking” process to address legacy of war and conflict-related violence; and constitutional reforms to strengthen devolution of power to provinces. Despite positive responses from party leaders in attendance, scepticism is high they can achieve consensus so quickly on issue that has violently riven Sri Lankan politics for decades. Wickremesinghe 21 Dec met Tamil National Alliance leaders for follow-up discussions on release of prisoners and land.

Local election preparations continued. Elections commission chief 28 Dec announced that nominations for local govt elections would be called before 5 Jan, with vote held before 10 March.

Govt maintained harsh response to dissent, expressed willingness to address Tamil demands and introduced new budget amid ongoing economic strains.

Govt continued hard line on protests and rejected early elections. Police 18 Nov used water cannons and tear gas to disperse large crowd of students attempting to deliver petition to UN, protesting detention of two student leaders under Prevention of Terrorism Act (PTA); court previous day extended leaders’ detention, which Amnesty International 18 Nov denounced as “targeted persecution” that has “chilling effect on civil society”. President Wickremesinghe 23 Nov rejected widespread calls for early elections, telling parliament he would “impose emergency law and deploy the military” if protesters try to “topple the government”.

Govt made some overtures to civil society groups and Tamil politicians. Govt during month held ministerial meetings and consultations with civil society groups on revised draft of proposed “anti-corruption act” aimed at including provisions of UN Convention against Corruption and other international norms. Wickremesinghe 10 Nov invited Tamil leaders for discussion, pledging to address their decades-long demands ahead of 75th independence day on 4 Feb 2023; Tamil politicians expressed scepticism at initiative but did not reject it. Justice Minister Wijeyadasa Rajapakshe 20 Nov confirmed govt was drafting new counter-terrorism law to replace PTA.

Amid ongoing economic hardship, govt introduced budget. Wickremesinghe 14 Nov presented 2023 budget to parliament – approved by wide margins in initial votes – aimed at reducing fiscal deficit in line with preliminary deal struck with International Monetary Fund in Sept; budget primarily relies on tax hikes, while maintaining high spending on police and military. Govt statistics released 21 Nov showed inflation slowing slightly to 70.6% in Oct, following record 73.7% in Sept. Meanwhile, debt restructuring talks appear to have made little headway, imperilling govt’s ambition to finalise restructuring by year’s end; govt postponed another round of talks with creditors scheduled for 17 Nov reportedly to allow officials time to prepare. UK Parliament 9 Nov adopted resolution expressing concern over “reports of increased militarisation and human rights violations” and urged govt to reduce high defence spending.