COLOMBO: Two years after an economic meltdown, tourists are returning to Sri Lanka – a good sign for business owners like Tariq Nassim.
His ice-cream parlour, within Galle Fort, a tourist attraction in the south of the island, is beginning to see customers again, even though their numbers do not match up to pre-pandemic figures.
“With the economic crisis, we have not picked up any more,” the 62-year-old told Reuters.
Sri Lanka’s economic crisis erupted after the island’s dollar reserves depleted, leaving it unable to buy essentials including fuel, fertiliser and machine.
It saw rampaging inflation hit 70 per cent, power tariffs rise 65 per cent and the currency depreciate by 45 per cent.
Exhausted by hours’ long power cuts, snaking lines at fuel stations and hospitals running out of medicine, thousands of angry protesters marched in Sri Lanka’s capital, Colombo, occupying the president’s office and residence, forcing former president Gotabaya Rajapaksa to flee the country and later resign.
Parliament elected his successor, Ranil Wickremesinghe, who has charted a tentative recovery underpinned by a $2.9 billion programme from the International Monetary Fund (IMF) and a $25 billion foreign debt restructuring – bringing about single digit inflation and interest rates.
Sri Lanka is expected to grow 3 per cent in 2024 for the first time since its economy shrank 7.8 per cent during the height of the crisis.
Tourism is a growth beacon earning $1.5 billion and attracting 1.2 million visitors up to July. The island hopes to close the year at 2.3 million arrivals, on a par with 2018.
But the relative stability may be put to the test when 17 million Sri Lankans head to the polls on September 21 to elect a president for the next five years.
Voters are likely to pick a winner from a winnowed down list that comprises Wickremesinghe, opposition leader Sajith Premadasa, and Marxist-leaning parliamentarian Anura Kumara Dissanayake.
Presidential hopefuls are facing the first political litmus test since the financial crisis with analysts struggling to pick a front runner.
Undercurrents of the people’s uprising – popularly referred to as the “Aragalaya – that deposed a sitting president for the first time in Sri Lanka’s history, will also play a key role with some predicting at least a partial protest vote.
The upshot of the crisis has also seen voters moving away from traditional party politics resulting in a significant floating vote that is proving tricky to track.
“We are not in for a period of stability. We are going to have a fair amount of instability and tension,” Dr. Paikiasothy Saravanamuttu, Executive Director at the Center for Policy Alternatives, said.
All the main candidates have said they may tinker with taxes linked to the IMF programme. At the same time, the new president will have to steer Sri Lanka through another around of taxes, improve anti-corruption measures, and repay foreign debt.
“Whatever party comes in, the challenges are still the same,” economist Shiran Fernando said.
“If they don’t deliver on those areas, then that cautious optimism might turn into pessimism,” he added.