Sri Lanka: Background and Issues for Congress




Updated December 18, 2023
Sri Lanka: Background and Issues for Congress
Background
former prime minister, as president, in accordance with Sri
The Democratic Socialist Republic of Sri Lanka is a
Lanka’s constitution.
constitutional democracy situated off the southeastern tip of
Figure 1. Sri Lanka in Brief
India’s Deccan Peninsula and proximate to key sea lines of
communication in the Indian Ocean. The Biden
Administration has identified Sri Lanka as occupying a
“strategic location in the Indian Ocean” and “in the middle
of the geopolitical competition for influence.”
Sri Lanka (known as Ceylon from 1948 to 1972) has been a
democracy since its independence from the United
Kingdom in 1948. During the Sri Lankan government’s 25-
year-long war on the Tamil militant separatist Liberation
Tigers of Tamil Elam (LTTE), the government expanded
executive power, militarized Tamil-majority districts, and
limited media and civil society freedoms. Since the war’s
2009 end, few of those policies have been rescinded. Since
2008, U.S. policy has focused on broadening Sri Lanka’s
democratic institutions, promoting good governance and
human rights, and facilitating post-war reconciliation.
U.S. policymakers, including in Congress, also 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
Source: World Bank; CIA World Factbook.
(2019-2022), Sri Lanka’s government relied on China to
In March 2023, the International Monetary Fund (IMF)
support its fight against the LTTE and numerous post-war
finalized an agreement with the Wickremesinghe
development projects, causing some observers to express
government to extend a US$3 billion loan, provided that Sri
concern about the potential for the PRC to exert economic
Lanka address its financial shortfalls and renegotiate its
and military influence in a key part of the region.
external debt. In September, the IMF delayed release of the
second $330 million tranche of its bailout loan due to
Sri Lanka’s 2022 Twin Crises
concerns about shortfalls in government revenue; it
In early 2022, Sri Lanka experienced its worst economic
approved the release in December, noting “commendable
crisis since independence. Inflation reached 60%, the
progress” toward debt sustainability. Some analysts say the
currency depreciated by over 80% against the U.S. dollar,
government’s decision to raise taxes and cut expenditures
foreign reserves dropped almost to zero, and the
on government services rather than press for greater debt
government defaulted on its debt. Gross domestic product
forgiveness from international lenders is causing hardship
contracted by roughly 7.9%, poverty doubled (to 25% of
for the Sri Lankan people. Government data shows the
the population), and half a million jobs were lost. The crisis
economy grew by 1.6% in the quarter from July to
is rooted in years of corruption and growing indebtedness.
September, the first expansion since 2021.
The COVID-19 pandemic, global inflation, and government
actions such as tax cuts exacerbated the crisis.
2024 National Elections
In March 2022, thousands of Sri Lankans began protesting
Sri Lanka’s ongoing economic hardship is complicating
the government’s handling of the eco
plans for national elections. According to Sri Lanka’s
nomy, which had
resulted in rapidly rising inflation, fuel shortfalls, medicine
Constitution, presidential elections must be held by October
shortages, and rolling blackouts throughout the country. On
2024, and parliamentary elections must be held by August
April 1, 2022, Gotabaya Rajapaksa declared a state of
2025. Wickremesinghe, however, in February 2023
“indefinitely postponed” local elections, due in March
emergency and gave the military sweeping powers to arrest
and detain demonstrators. On April 12, the government
2023, citing the cost of conducting polls.
announced it was defaulting on its foreign debt of $51
Wickremesinghe has indicated he will seek reelection and
billion. The imposition of a curfew and announcement of a
in October 2023 announced that both presidential and
military “shoot to kill” order failed to quell protests, and in
parliamentary elections would be held in 2024, and local
July both Gotabaya and Mahinda Rajapaksa (who was
elections may be held in 2025. He set up a commission to
serving as Prime Minister) resigned; Gotabaya fled the
examine and recommend possible electoral reforms, a move
country. Parliament elected Ranil Wickremesinghe, a
that opposition politicians say may be intended to influence
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Sri Lanka: Background and Issues for Congress
the outcome. It is not clear if the commission will finish its
Sri Lanka-China Relations
work prior to the national elections.
Under both Rajapaksa’s, Sri Lanka turned to China for
financing and investment—in part because growing
Human Rights and Post-War Reconciliation
international condemnation of its war on the LTTE limited
Sri Lanka has struggled to manage ethnic, religious, and
its options—and Sri Lanka became an important part of
economic divisions among its citizens for most of its
China’s Belt and Road Initiative. China, through state-
history, and the government has at times adopted laws
owned entities such as the China Export-Import (EXIM)
discriminating against minority communities. From 1983 to
Bank, financed numerous initiatives in Sri Lanka—
2009, the LTTE fought to establish a separate state or
including the port at Hambantota, which Sri Lanka leased to
internal self-rule in the ethnic Tamil-dominated areas in a
China for 99 years when it was unable to repay the debt.
civil war that may have cost up to 100,000 lives, displaced
China’s defense ties with Sri Lanka also grew substantially
hundreds of thousands of people, and saw serious human
during the civil war, especially in its final phase, when the
rights violations committed by both sides.
PRC government supplied radar systems and offensive
weapons such as fighter jets and air-to-air missiles.
In 2015, Maithripala Sirisena was elected President on a
united opposition platform promising at political and
China was slower than other foreign partners to react to Sri
economic reforms. Sirisena pledged to roll back executive
Lanka’s twin crises. Roughly 11% of Sri Lanka’s US$51
power, allow greater freedom of speech and media, pursue
billion external debt is to China, and Sri Lanka’s agreement
accountability and reconciliation related to the war,
with the IMF requires it to restructure its debt to make
promote clean governance, and adopt constitutional
payments sustainable. In early October 2023, PRC officials
changes to allow power sharing with the Tamil minority.
announced that China’s EXIM Bank had reached a
The Sirisena government began cooperating with United
preliminary agreement to restructure Sri Lanka’s debt.
Nations (U.N.) efforts to investigate rights violations during
the war, established an Office of Missing Persons, passed a
U.S.-Sri Lanka Relations and Congressional
Right to Information Law, and eased restrictions on the
Interests
media and civil society. The Obama Administration
The Biden Administration’s Sri Lanka strategy prioritizes
responded with programs to shore up Sri Lanka’s
advancing U.S. interests by “building a strong, long-term
democracy and assist reform and reconciliation efforts.
partnership with a Sri Lanka willing and capable of
protecting our shared interests in its region,” as well as
Sirisena quickly came under political pressure from the
supporting Sri Lanka’s democracy and post-war
Rajapaksa-linked opposition and backtracked on pledges to
reconciliation. The United States is Sri Lanka’s single-
allow international judges to participate in abuse
largest export market, accounting for approximately 25% of
investigations. Gotabaya Rajapaksa, who campaigned on a
Sri Lankan exports. Bilateral military cooperation includes
platform of Sinhalese nationalism, national security, and
port calls, a partnership to establish a Sri Lankan Marine
fighting Islamist extremism, defeated Sirisena in the 2019
Corp and a National Defense College, joint exercises, and
presidential election. Gotabaya then returned to “a
the donation of Coast Guard cutters to the Sri Lankan navy.
campaign of fear and intimidation against human rights
activists, journalists, lawyers, and other perceived
Since Sri Lanka’s crises in early 2022, the United States has
challengers,” according to Human Rights Watch.
announced nearly US$300 million in new support to the
country, including rice and other food assistance, fertilizer,
Since becoming president, Wickremesinghe has pledged to
and funding, and several senior Administration officials and
address Tamil and Muslim concerns, including devolving
have visited the country.
some autonomy to provincial councils. He has maintained
many of his predecessors’ policies, however, and some
Congress has actively shaped U.S.-Sri Lanka policy over
observers note he is pursuing new laws to stifle dissent and
two decades. Since 2008, it has limited defense engagement
curtail media and civil society freedoms.
in response to reports of human rights violations; it has
mandated that some foreign assistance funds be made
Sri Lanka-India Relations
available to Sri Lanka only if the Secretary of State certifies
Sri Lanka and India share historical, cultural, and religious
that the government is taking steps to protect human rights,
ties, and the two governments periodically express common
promote reconciliation, reduce the militarization of the
strategic interests. India is one of Sri Lanka’s largest
country, and investigate abuses, among other actions.
defense partners, and has advocated for reconciliation with
Members of Congress have since 2003 introduced
the Tamil community, which has close ties to the large
resolutions on Sri Lanka’s security and human rights, and
Tamil community in southern India.
held oversight hearings on executive policy. In 2016, the
India is among Sri Lanka’s largest trading partners
House Democracy Partnership approved a program with the
and
Sri Lankan parliament aimed at strengthening oversight,
leading foreign investors, with total Indian investment in
citizen engagement, and e-governance. In December 2023,
the country exceeding US$2 billion. The Indian government
has been Sri Lanka’s most active supporter in the
four Members of Congress introduced a bicameral and
wake of
bipartisan resolution expressing support for the peaceful
the 2022 twin crises. India has offered currency swaps,
democratic and economic aspirations of the people of Sri
lines of credit to import food, fuel, and medicine, and
Lanka (S.Res. 493 and H.Res. 926).
provided the first assurances to the IMF that it would
restructure Sri Lanka’s debt to enable the IMF’s nearly
Colin Willett, Section Research Manager
US$3 billion loan. Some analysts credit Indian assistance
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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