Updated October 17, 2023
Sri Lanka: Background and Issues for Congress
Background
In March 2022, thousands of Sri Lankans began protesting
The Democratic Socialist Republic of Sri Lanka is a
the government’s handling of the economy, which had
constitutional democracy situated off the southeastern tip of
resulted in rapidly rising inflation, fuel shortfalls, medicine
India’s Deccan Peninsula and in close proximity to key sea
shortages, and rolling blackouts throughout the country. On
lines of communication in the Indian Ocean. The Biden
April 1, 2022, Gotabaya Rajapaksa declared a state of
Administration has identified Sri Lanka as occupying a
emergency and gave the military sweeping powers to arrest
“strategic location in the Indian Ocean” and “in the middle
and detain demonstrators. On April 3, most of his cabinet
of the geopolitical competition for influence.”
resigned, and, on April 12, the government announced it
was defaulting on its foreign debt of $51 billion. The
Since its independence from the United Kingdom in 1948,
imposition of a curfew and announcement of a military
Sri Lanka (known as Ceylon from 1948 to 1972) has
“shoot to kill” order failed to quell protests, and in July
struggled to manage ethnic, religious, and economic
demonstrators stormed the homes of several government
divisions among its citizens. From 1983 to 2009, the Tamil
officials, including the President’s official residence. Both
militant separatist Liberation Tigers of Tamil Elam (LTTE)
Gotabaya and Mahinda Rajapaksa (who was serving as
fought to establish a separate state or internal self-rule in
Prime Minister) resigned, and Gotabaya fled the country in
the ethnic Tamil-dominated areas in a civil war that may
mid-July 2022. Parliament elected Ranil Wickremesinghe
have cost up to 100,000 lives, displaced hundreds of
as President, in accordance with Sri Lanka’s constitution.
thousands of people, and seen serious human rights
violations committed by both sides. (Sri Lanka has never
Figure 1.Sri Lanka in Brief
allowed an independent investigation into the conduct of
the war and associated human rights violations, despite
pressure from the United Nation Human Rights Council.)
Since 2008, U.S. assistance to Sri Lanka has focused on
supporting the country’s democratic institutions, promoting
good governance, and facilitating post-war reconciliation.
U.S. policymakers, including in Congress, have raised
concerns about the Sri Lankan government’s growing ties
to the People’s Republic of China (PRC, or China) over the
past two decades. Under former Presidents Mahinda
Rajapaksa (2005-2015) and his brother Gotabaya Rajapaksa
(2019-2022), Sri Lanka’s government relied on China to
support its fight against the LTTE and numerous post-war
development projects, causing some observers to express
concern about the potential for the PRC to exert economic
and military influence in a key part of the region.
Sri Lanka’s 2022 Twin Crises
In early 2022, Sri Lanka experienced its worst economic
crisis since gaining independence; annual inflation reached
60%, the currency depreciated by over 80% against the U.S.
Source: World Bank; CIA World Factbook.
dollar, and, with foreign reserves dropping almost to zero,
the government defaulted on its debt. Sri Lanka’s gross
domestic product contracted by an estimated 7.9% that
President Wickremesinghe moved to address the country’s
year, poverty rates doubled (to 25% of the population), and
debt crisis and make economic reforms. In March 2023, the
half a million jobs were lost. The economic crisis is rooted
International Monetary Fund (IMF) finalized an agreement
in years of corruption, poor economic policy, and growing
with the Wickremesinghe government to extend a US$3
indebtedness. The COVID-19 pandemic, global inflation,
billion loan, subject to a series of conditions that Sri Lanka
and government actions have exacerbated the crisis. In
address its financial shortfalls and renegotiate its external
2021, for example, then-President Gotabaya Rajapaksa
debt. In September 2023, however, the Sri Lankan
imposed a ban on chemical fertilizer and ordered the
government failed to secure IMF agreement to release the
country’s farmers to use only organic fertilizers. Domestic
next $330 million tranche of its bailout loan due to concerns
rice production fell 20% in the first six months after the ban
about shortfalls in government revenue. Some analysts say
went into effect and domestic prices for the dietary staple
that the government’s decision to increase taxes and reduce
surged by around 50%. Production of other export crops
expenditures on key government services to close the
such as tea, rubber, and coconut was similarly affected.
funding gap already is causing hardship for the Sri Lankan
people and pushing professionals to emigrate.
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Sri Lanka: Background and Issues for Congress
Human Rights and Post-War Reconciliation
Sri Lanka-China Relations
In 2015, Maithripala Sirisena defeated Mahinda
Under the government of Mahinda Rajapaksa, Sri Lanka
Rajapaksa’s bid for reelection, running on a united
turned to China for financing and investment—in part
opposition platform aimed at political and economic
because growing international condemnation of its war on
reforms. Sirisena pledged to roll back executive power,
the LTTE limited its options. Strategically located in the
allow greater freedom of speech and media, pursue
Indian Ocean, Sri Lanka is an important part of China’s
accountability and reconciliation related to the war,
Belt and Road Initiative. China, through state-owned
promote clean governance, and adopt constitutional
entities such as the China Export-Import (EXIM) Bank,
changes to allow power sharing with the Tamil minority.
financed numerous major infrastructure initiatives in Sri
The Sirisena government began cooperating with United
Lanka—including the deepwater port at Hambantota, which
Nations (U.N.) efforts to set up an independent
Sri Lanka leased to China when it was unable to repay the
investigation of human rights violations during the war,
debt. China’s defense ties with Sri Lanka also grew
established an Office of Missing Persons, passed a Right to
substantially during the civil war, and cooperation
Information Law, and eased restrictions on the media and
accelerated in the war’s final phase, when the PRC
civil society. The Obama Administration responded with
government supplied radar systems and offensive weapons
programs to help shore up Sri Lanka’s democracy and assist
such as fighter jets and air-to-air missiles.
Sirisena’s reform and reconciliation agenda.
China was slower than other foreign partners to react to Sri
Sirisena quickly came under pressure from the Rajapaksas’
Lanka’s twin crises. Roughly 11% of Sri Lanka’s US$51
political camp, however, and he backtracked on pledges to
billion external debt is to China, and Sri Lanka’s agreement
allow international judges to participate in investigations of
with the IMF requires it to restructure its debt to make
war-time abuses. He ultimately appointed Mahinda
payments sustainable. In early October 2023, PRC officials
Rajapaksa as his Prime Minister. Gotabaya Rajapaksa, who
announced that China’s EXIM Bank had reached a
campaigned on a platform of Sinhalese nationalism,
preliminary agreement to restructure Sri Lanka’s debt.
national security, and fighting Islamist extremism, defeated
Sirisena in the 2019 presidential election. Gotabaya quickly
U.S.-Sri Lanka Relations and Congressional
returned to “a campaign of fear and intimidation against
Interests
human rights activists, journalists, lawyers, and other
The Biden Administration’s Sri Lanka strategy prioritizes
perceived challengers,” according to Human Rights Watch.
advancing U.S. interests by “building a strong, long-term
partnership with a Sri Lanka willing and capable of
Since Wickremesinghe became President in 2022, he has
protecting our shared interests in its region,” as well as
pledged to address the Tamil community’s concerns,
supporting Sri Lanka’s democracy and post-war
including devolving some autonomy to provincial councils.
reconciliation. The United States is Sri Lanka’s single-
He has continued many of his predecessors’ policies,
largest export market, accounting for approximately 25% of
however, and some observers note he is pursuing additional
Sri Lankan exports. Bilateral military cooperation includes
laws to stifle dissent and curtail freedom of the media and
port calls, a partnership to establish a Sri Lankan Marine
civil society. Wickremesinghe “indefinitely postponed”
Corp and a National Defense College, joint exercises, and
local elections, due in March 2023, by refusing to fund the
the donation of Coast Guard cutters to the Sri Lankan navy.
polls. His government introduced a new internet safety bill
that critics say gives broad new powers to the police and
Since Sri Lanka’s crises in early 2022, the United States has
curtails freedom of expression. The next presidential
announced more than US$270 million in new support to Sri
election is due to be held before September 2024, and
Lanka, including rice and other food assistance, fertilizer,
Wickremesinghe has indicated he intends to seek reelection.
and funding. Several senior Administration officials have
visited, including United States Agency for International
Sri Lanka-India Relations
Development Administrator Samantha Power.
Sri Lanka and India share long-standing historical, cultural,
Congress has actively shaped U.S. Sri Lanka policy over
and religious ties, and the two countries’ governments have
the two decades. Since 2008, it has limited defense
periodically seen themselves as having strategic interests in
engagement in response to reports of human rights
common. India is one of Sri Lanka’s largest defense
violations; it also has mandated that some foreign assistance
partners, and the government in New Delhi actively
promoted an end to Sri Lanka’s civil war. India has also
funds be made available to Sri Lanka only if the Secretary
of State certifies that the government is taking steps to
advocated for reconciliation with the Tamil community,
protect human rights, promote reconciliation, reduce the
which has close ties to the Tamil community in India.
militarization of the country, and investigate abuses, among
India is among Sri Lanka’s largest trading partners and
other actions. Congress over the last two decades has
leading foreign investors, with total Indian investment in
introduced resolutions on Sri Lanka’s security and human
the country exceeding US$2 billion. The Indian government
rights situation, and held hearings to conduct oversight of
has been Sri Lanka’s most active supporter in the wake of
executive branch policy. In 2016, the House Democracy
the 2022 twin crises. India has offered currency swaps,
Partnership approved a partnership with the Sri Lankan
lines of credit to import food, fuel, and medicine, and
parliament focused on strengthening legislative oversight,
provided the first assurances to the IMF that it would
citizen engagement, and e-governance.
restructure Sri Lanka’s debt to enable the IMF’s nearly
US$3 billion loan. Some analysts credit Indian assistance
Colin Willett, Section Research Manager
with helping Sri Lanka avoid an even worse crisis.
IF10213
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Sri Lanka: Background and Issues for Congress
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