The Yahapaalana Legacy and Three Major International Events/Processes driving Sri Lanka to Bankruptcy

I sent Mr TRUTHSEEKER Two Questions, prefaced by a general statement: namely: “I am no good in economic assessments

Q-11 = I have no doubt that some or all of the Rajapaksas have accumulated monies …. AND that corruption at many levels of government had some draining impact, BUT has all that been a major factor?

Q 22 … Has’nt the USA induced IMF programme dating from 2009 or so –as payback for Sri Lanka’s temerity in rejecting Hilary Clinton’s programme** — been a MAJOR FACTOR in the present situation [after the pro-US Sirisena govt fell from power]?

…. with Lanka’s China-leanings being a further inducement towards this payback pressure?





TRUTHSEEKER responded thus, 26 April 2022

 Q11 = No corruption involved in this instance. The figures speak for themselves. There is no way any govt would have been able to avoid a financial meltdown given the massive payments put upon the country by the previous Yahapalana govt taking $12 billion in International Sovereign Bonds (ISBs) in their years of 2015-2019. This in addition to the rest of the external debt the country was carrying.

Unlike other debt taken, ISBs are very difficult to manage because they have to be paid out at maturity irrespective of any circumstances, since default is not an option with its concomitant damaging effects on the country’s creditworthiness. Whereas appeals are possible for restructuring or rescheduling other types of debt to multilaterals or bilaterals or institutions. The first is a ‘hard default’ if not paid on due date and the second ‘structured default’ is what we’ve now committed to through IMF program. But default it is and ratings agencies have downgraded SL further to abysmal level.

It was irresponsible of the Yahapalana govt to put this heavy ISB burden on Sri Lanka’s already poor economy. This legacy then made payments completely unsustainable with two years of pandemic and finally the Ukraine war has aggravated a condition that was already calamitous.

An important question they need to answer is what the Yahapalana administration did with the $12 billion taken?

–  There was no war to fight as in final years of 2005-2009

–  There was no reconstruction needed for every part of the country as in 2009-2014 resulting from destruction of 30 years of war.

–  There was no infrastructure development, no development projects set up, no connectivity projects, no urgently needed new power generation plants (the last one set up was the Norochcholai coal fired plant under MRs govt).

People have been told for political reasons that “corruption” was the reason for the financial crisis and are convinced money “stolen” would have been able to pay for essential imports. But have a look at payouts needed for maturing ISBs shown in the graph below vs govt income which had collapsed for past two years as a result of the pandemic’s impact:

–  $5 billion per year lost from tourist income

–  $5 billion per year lost from workers inward remittances

–  Exports coming down to a standstill practically, same as other countries 

–  38% of 2020 budget having to be allocated to Covid19 expenditure.

To be fair, what went wrong in the equation of trying to struggle through somehow without going to IMF was the completely unexpected Ukraine war breaking out in February. THAT was the last straw on top of pandemic.

But ultimately it was a question of choosing priorities – and imports of essential items should have been prioritised over debt repayments, whatever the default consequences or solutions entailed.

The reason for the govt finance people keeping on trying to somehow make the ISB payments as they fell due was because going to IMF causes so much hardship to a country’s poor people. As is now happening with depreciation, sky rocketing prices for imports of fuel, petrol, diesel, etc. People are going to get even more angry and violent when all this kicks in. The stability of the country is very much at threat – and may leave SL open to inimical influences.

Is this the IMF capitalist agenda at US bidding? Pakistan recently is a good example of manipulation. Imran Khan was inclining to China, but had to go to IMF for a bailout package as the backing gives credibility to creditors. So, $6 billion was approved, but only half at $3 billion was given until “stability” was achieved, and Imran Khan lost power. New govt came in and IMF immediately approved and gave $11 billion!


Q22 – Yes, the underlying agenda is political and not economic – regime change is being manipulated just as it was in 2015 when US funded it with $450 million spent via NGOs to get Yahapalana govt in. This time they are determined to get the Rajapakses out for good because MR and GR are the only ones who will stand up to international pressure, as proven in 2009, and are determined to keep SLs sovereignty safe. Geopolitical games are hard to withstand.


My Truthseeker piece details ISBs taken with dates of issue and maturity. One graph below shows trajectory of external debt taken from 1978-2019 under various govts. 






Filed under accountability, american imperialism, authoritarian regimes, centre-periphery relations, economic processes, governance, historical interpretation, island economy, politIcal discourse, power politics, Rajapaksa regime, self-reflexivity, sri lankan society, trauma, truth as casualty of war, unusual people, vengeance, world events & processes

9 responses to “The Yahapaalana Legacy and Three Major International Events/Processes driving Sri Lanka to Bankruptcy

  1. San de Silvs

    Excellent article with valuable data.
    Thanks for sharing.

  2. Sanath de Silva

    Thanks for this excellent article as always.

  3. Chandra Maliyadde

    I wish to join the bandwagon to thank for the eye opening article. At the same time I wish to enlighten the Thuppahi constituency with the article below that I wrote in 2015 on Yaha Palanaya

    Yaha Palanaya or (Subha)Yasa Palanaya
    (Business Times – Sunday Times – 26.04.2015)
    (Financial Review – The Island -28.04.2015)
    A friend of mine told me years ago that Sri Lankans always live in the History. I was not old enough or matured enough to understand this then. Not that I am matured now but old enough to realize what my friend meant. True, we Sri Lankans love to read and repeat our history. Being yet another Sri Lankan, I am no different. I thought I would peep into our proud history to draw some parallels. Yes, I came across an incident and wondered whether “History repeats”.
    Chandha Mukaseeva was the king who ruled this blessed island for nearly ten years from 40 AD. Mahinda Rajapakse (MR) was elected as President 1965 years later and ruled for nearly ten years. Chandha Mukaseeva’s younger brother was Yasalalaka Tissa. He was known as “Yasa”. He assassinated King Chandha Mukaseeva and became king. Mind you this was several centuries before “Imperialist British Colonials” introduced democracy in this country. At that time the sword was the weapon used to overthrow a ruler. Maithree used the ballot to overthrow MR.
    King Yasa had been worried that his assassinated brother would come as a ghost and overthrow him. Some Parliamentarians say MR is hovering about as a ghost to recapture the power. King Yasa had a gatekeeper named Subha, who had similar features as the King. King decided to play a practical joke on his ministers and people (Oh! It’s such an old habit). King had the gatekeeper dress as the King and he himself dressed as the gatekeeper. The ministers and people paid homage to the gatekeeper believing him to be the real King. Seeing this, King Yasa (now disguised as the gatekeeper) could not stop laughing. At this point Subha asked the ministers why that gatekeeper is laughing. Ministers said “Your Majesty, he is laughing at you”. Then Subha ordered to put Yasa to death. Subha the gatekeeper became the King.
    The drama unfolded last few days on Amendments 19 and 19A to the Constitution bear some parallels to Subha–Yasa story. The crux of these two Amendments was the clipping of the Executive powers and the authority of the President (Yasa) and transferring them to the Prime Minister (Subha). Fortunately for President, Courts ruled otherwise. He will remain the king with reduced powers. Then there are others who oppose to Amendment 19 claim they are competent and qualified for consideration for the Presidency. So it appears that those who are against the Executive Presidency would not mind enjoying such privileges themselves.
    Amendment 19 is the first major Amendment moved to 1978 Constitution for over 35 years. There have been many broken promises and failed attempts to amend the Constitution during this period. It is a twist of fate that an Amendment is moved to remove the executive powers during the rule of President Maithree who uses his executive authority in the mildest manner. This is the first genuine effort made to amend the Constitution but it was done with an unusual hurry and a silence. Ordinary citizens were not aware of the nature, the gravity or the impact of changes proposed. After the court ruling, some Ministers have stated that there will be consultation and participation in the Amendment process and the august Assembly will convert into a Constitutional Assembly. They have become wiser, saner and sensitive after humiliated court ruling.
    There was a short period both Subha and Yasa were ruling the country by taking turns. Subha in the morning and Yasa towards the latter part of the day. Neither the Ministers nor the people knew who was in command as both of them claimed for the throne. Today it is Maithree and Ranil. Both call the Government as my Government. People who are not familiar with Concepts of National Government and Co-habitation are watching and waiting.
    Suppose the constitutional amendment 19 is passed vesting Executive powers with the Prime Minister. There is a distant possibility for MR to contest at the next General election and miraculously become the Prime Minister with SLFP majority. What he has tried and failed will be served on a platter to him.
    There were no other two words coined during the last Presidential election like “Good Governance”. Every speaker on the stage talked of Good Governance. People who did not understand clapped after listening to an elaborate speech on good governance on the stage. Now some of them say we were worried that something was going to change with this Good Governance but luckily we hardly see any change other than the repetition of these two words in a stronger voice.
    Prior to the declaration of presidential election, there was a government. People were wondering whether there was an opposition; they criticized that the opposition was in a slumber; there was no opposition; leader of the opposition sips coffee with MR; Ranil had ruined the UNP; Ranil had ruined the opposition. Then with the crossover of Maithreepala Sirisena to opposition rank, a strong opposition emerged against MR’s strong autocratic Government. Opposition leveled series of allegations against Government ranks on bribery, corruption, commissions and unlawful acts. Elections came; a new President, a new Prime Minister and new Ministers were sworn in. But those who took the reins had forgotten that they are no longer in the opposition but in the saddle of Government. They continued their tirade of criticisms. Some are critical of the present regime while the rest is critical of the previous regime. People are clueless and lost to distinguish Government from opposition.
    People thought the days of MR are gone and over. But he has bounced back unexpectedly and unusual to any other leader lost in any previous election. He is hitting his strong head against several rocks. He tenders a public apology that he failed to take action against culprits. He repents over some of his bad associates. Then the ex-Chief Justice is going round apologizing for making a wrong judgment. They accuse themselves; at the same time they appeal for public support to come back. That is the status of our Executive and the Judiciary.
    When majority opposition tries to move a no confidence motion, minority Government threatens to dissolve the Parliament. No confidence motion is dropped; Parliament continues. President is the Head of SLFP. UNP Cabinet Ministers chase out SLFPers who are heading statutory bodies and appoint UNPers for such positions. One Ex-president gives a public lecture on how a defeated President should revert back to a private life while she is very much back in the public life.
    Every political party gets support of different groups during the election campaign. They may vary from socially condemned thugs to saints. After the election they act with authority. During the last election a large number of civil society organizations operating in different many fields joined the Good Governance campaign. This was unprecedented. After the new President had sworn in they felt a sense of ownership. They were under the impression that they were a part of the Government. During late J.R..Jayawardane’s period some thugs threatened judges with clubs and fists. Today civil society organizations do the same thing with soft methods. Remember how CJ Mohan Pieris was removed and Shirani Bandaranayake was brought in as Chief Justice. Next day she was asked to step down.
    Then we read and listen over the media about corruption and misdeeds. Someone is taken in for questioning. We laymen had been told that a person until found guilty is innocent. But Police media spokesman provides details to paint a bad image of the person questioned. We laymen are ignorant to know how much of that information could be the public domain.
    Subha and Yasa played their drama for a considerable period. It would have been like the 100 day programme. At the end of Subha and Yasa drama Subha killed Yasa and became the king. As it appears President Maithree should become the nominal Head. Someone else should become the Executive Head. Since the democracy has provided us with weapons such as ballot it could be used to dethrone the Executive President. Or someone who is not confident of becoming the Executive Head through the ballot might use other techniques such as constitutional amendments. Any way there is a possibility to end 100 day programme with a similar end. It may be wiser to be vigilant to check whether there is a Subha or several of them and who he or they are.
    J.R. Jayawardane has won the title of “cunning fox” for his master strokes in politics. It is said his nephew Ranil inherits at least a part of JRJ’s wisdom. He is known as the master stroke man in today’s politics. Even MR who was known as Machiavelli in current Sri Lankan politics could not bear the impact of Ranil’s latest stroke in nominating the common presidential candidate. The latest talk in the town is that Ranil has this time pecked on a banana tree.
    Well we are the spectators; and let us sit down and watch how the current form of Subha-Yasa drama would unfold.

  4. K. K. De Silva

    Why did the yahapalana regime take us $ 12 billion in International Sovereign Bonds from 2015 to 2019? The response from a Minister of that regime appears here :

  5. Sanjeewa Jayaweera

    Thank you K K De Silva for posting the piece by Champika Ranawaka because that is precisely what happened.

    In nearly all developing countries after a certain point retiring debt is paid for by raising new debt. Basically borrowing from Peter to pay Paul.

    Had our country credit rating not been downgraded due to the stupid decision made by the Rajapaksa regime to reduce taxes and thus government revenue by nearly 30% they too would have borrowed to repay existing debt.

    In fact of the ISB’s that have been repaid since year 2000 all other than US 500 million has been for what was raised before 2015.True enough that the interest cost of the ISB’s raised between 2015-2019 has contributed to the outflow.

    In fact some of the ISB’s raised during the Yahapalana regime ensured that we had sufficient forex reserves to manage through the worst of the Covid crisis, otherwise what is being played out today would have been fast forwarded to 2020?

    For a moment I am not saying that Yahapalana did not make mistakes but this foreign currency crisis is entirely due to the stupid policy decisions made by the current lot.

    Whoever is writing as “Truth-seeker” is not living up to the pseudonym.

  6. Sanjeewa Jayaweera

    an article I wrote on 12 January 2020 expressing my concerns about the tax cuts. It was published in the Sunday Island but as they have subsequently updated their database the link is no longer available. However, a reader had uploaded it to an other website from where i got the attached link.

  7. Sanjeewa Jayaweera

    An article based on work done by Verite Research in demystifying the increase in Sri Lanka’s debt particularly between 2015 and 2019. It concludes that 89.8% was to pay the interest cost on accumulated debt taken prior to 2015.

  8. Truth is King

    This is an excellent article and should form the basis of further debate and discourse within the Sri Lankan intelligentsia as it is clear there is so much we don’t know as to what really happened. I agree the underlying agenda was political, not economic. It was about regime change – a colour revolution in fact. That is what all those protests about last year to remove Rajapakse from power.

    I can well understand people suffering hardships due to the economic crisis at the time, just as Sri Lanka was coming out of a global pandemic, which was a big factor in the cause of the crisis with the lack of tourism revenues and overseas remittances, and having to spend billions on COVID-19, to name a few examples given in the article. We heard the mantras of street protestors chanting corruption and “Gota go home”, and we heard calls from Sri Lankans demanding foreign governments arrest Gotabaya and his family, seize their assets and bank accounts and return “the billions”, without a shred of evidence of any wrongdoing, and in a heightened state of frenzy, so many Sri Lankans were fooled into believing this nonsense.

    I never bought into the corruption allegations, even though many Sri Lankans did. The economic crisis alone, given its true causes (i.e., IMF), was not a legitimate reason to remove Gotabaya. His removal was political disguised as “the will of the people” – and we saw the Director of the Centre for Policy Alternatives on Sri Lankan TV looking directly into the camera and advising protestors what they needed to do to remove Gotabaya from power, to pave the way for the more pro-American Ranil to take over as President. This confirms the CPA is an instrument of American foreign policy. In this context, I guess that is what “policy alternatives” means.

    And now Ranil is back in power committing Sri Lanka to further IMF loans which will take Sri Lanka down the rabbit hole at rapid speed. Worse still, his agreeing to IMF preconditions which allow the IMF to meddle into Sri Lanka’s political structure, to restructure governance in a way that is perfectly suited to Western-style neoliberal economics, which the CPA were also pushing for – and all of this in guise of removing a democratically elected leader on the basis of trumped up mismanagement and corruption allegations – neither of which were fundamental causes of the crisis. That is what the US have been after for years and all those protestors waving Sri Lanka flags were unwitting instruments to achieving it. It was a colour revolution after all. Ranil has sold Sri Lanka out to Western interests for thirty pieces of silver – the going rate for betrayal.

  9. Edward T Upali

    My thanks to “Truth Seeker” and “Truth is King” for explaining Sri Lanka’s recent economic and political crises in easily understandable language. Their writings confirmed my layman’s view that the political crises were engineered by outside forces led by foreign and local NGOs, anti Rajapakse political elements as well as expat LTTE groups – who are still fighting the 2009 war.

    Those of us who are old enough can still remember how the legally elected governments of Chile and Argentina were overthrown by “military coups & peoples movements ” similar to those of the ‘Aragalaya”. An attempt was also made to overthrow the elected government of Sri Lanka (SL) in 1962.

    My view of SL’s economic crisis was that it was the result of a) financing of debt payments using International Sovereign Bonds (ISBs) during the Yahapalana gov, b) the adverse impact of COVID on Tourism – the main foreign exchange earner of the country, and c) the reduction of $ income transfers from workers in the Middle East.

    However, what promoted Sri Lanka (SL) to borrow money using financial instruments like ISBs is not very clear, as the Central Bank of Sri Lanka is full of highly qualified economists and bankers, who could have advised otherwise.

    SL was probably forced to use ISB’s to pay off its loans due to the current tight lending policies of the World Bank (WB) and other international lending agencies. As a rule, WB and other Agencies do not extend concessionary loan rates to middle income countries.

    In 2014-15 Sri Lanka’s per capita income had already reached those of an upper middle income country, despite the debilitating effects of a 30 year LTTE war. Moreover, the GDP of the country was increasing by annual growth rates of over 6%. This rosy outlook may have prompted the Yahapalanaya gov to borrow in the international bond market, although it was a risky move. Further, no one expected or knew of the world-wide effects of the COVID pandemic.

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