Sri Lanka's prime minister resigns as protests intensify

Sri Lanka’s prime minister has resigned after weeks of violent protests, leaving the government of his brother President Gotabaya Rajapaksa in turmoil amid an economic crisis that has taken the country to the brink of default.

Mahinda Rajapaksa stepped down on Monday as clashes escalated after his supporters attacked anti-government demonstrators and the government deployed military to the streets of the capital, Colombo.

The president, who imposed a nationwide curfew after declaring a state of emergency last week, asked for his older brother’s resignation in a bid to stem the protests and pave the way for a cross-party government.

But analysts said the move could backfire, adding to the pressure on the president himself to quit. Senior opposition leaders have said they will not work with him.

Protesters first took to the streets in March, calling for the Rajapaksa family-led government to quit as Sri Lanka was plunged into crisis with double-digit inflation and crippling shortages of basics such as food, fuel and medicine, causing a dramatic decline in living standards

The country was at “a critical juncture”, said Dimantha Mathew, head of research at First Capital Holdings financial group in Colombo.

He said while Mahinda’s resignation could pave the way for a resolution to the political crisis there was “mounting pressure now for even the president to resign”, despite a curfew being imposed.

Mahinda has been one of Sri Lanka’s most consequential and divisive leaders. As president, in 2009 his government ended Sri Lanka’s 30-year civil war with a ruthless military campaign to crush the island’s Tamil separatists. But he was voted out of office in 2015 amid public perceptions of corruption and authoritarianism in his administration.

After a spell in opposition, the Rajapaksa family continued its domination of modern Sri Lankan politics when Gotabaya was elected to the presidency in late 2019, on a wave of voter anger over the Easter bombings that killed nearly 300 people.

But protesters and opposition groups now accuse the Rajapaksa family of leading Sri Lanka into the currency crisis. A sharp tax cut implemented shortly after coming to power eroded the government’s revenue base, prompting a cascade of rating downgrades that left Sri Lanka unable to refinance its international debts, which total about $50bn.

Fast dwindling foreign currency reserves, which the finance ministry last week said had fallen as low as $50mn, have led to everything from medicine shortages to blackouts as generators struggle to import enough fuel to keep power running.

Sri Lanka said last month it would suspend international bond payments and began talks with the IMF, World Bank and bilateral creditors including India and China to restructure debt and take over emergency loans. It owes about $8bn in foreign debt repayments this year, according to the finance ministry.

Additional reporting by Mahendra Ratnaweera in Colombo