Sri Lanka heading for unity govt

Moves follow resignations of top leaders, as experts stress confidence building

Sri Lanka is expected to have a unity government after both the country's president and prime minister offered to resign, and some analysts have lamented the nation's slide into bankruptcy.

To salvage the country from its economic and political crisis, public confidence needs to be restored, they said.

President Gotabaya Rajapaksa on Saturday informed the country's parliamentary speaker Mahinda Yapa Abeywardena that he would resign from office on Wednesday, the Sri Lanka Mirror reported.

The speaker's office said that Rajapaksa disclosed his decision following a request made by political party leaders.

Prime Minister Ranil Wickremesinghe had agreed to resign earlier in the day after party leaders in parliament urged both him and the president to step down. A statement from the prime minister's office said Wickremesinghe announced he would resign when all parties had agreed on forming a new unity government.

If both president and prime minister resign, the parliamentary speaker will take over as temporary president, according to the country's constitution.

On Saturday protesters stormed the president's residence and office, and the prime minister's house was set on fire.

"The current economic predicament has given rise to the severe political and economic downturn and unrest," said Bernard Goonetilleke, chairman of the Sri Lankan think tank Pathfinder Foundation.

The country's economic plight has been two years in the making, and "it was seen and discussed widely but not acted upon by the authorities concerned", he said.

Sri Lanka announced in April that it was suspending repayment of foreign loans due to a foreign currency shortage. Its foreign debt amounts to $51 billion, of which it must repay $28 billion by the end of 2027.

Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, said: "It is clear that the situation in Sri Lanka has tilted to a point of no return. A breakthrough resolution is needed not only to bring the country forward but to redress the many economic problems that have beset the country in recent years."

Sri Lanka faces a crisis of confidence, so people probably have no choice "but to take the matters into their hands to ignite radical changes", Loh said.

Sirimal Abeyratne, a professor of economics at the University of Colombo, said most of those protesting are young people who just want to have a job and build a good life for themselves.

Last week Sri Lanka's central bank announced key interest rates, the standing deposit facility rate and the standing lending facility rate, would rise by 100 basis points to tackle rising inflation, the highest in 21 years.

Talks between the International Monetary Fund and Sri Lanka last month ended without an agreement and Wickremesinghe announced later that the country was bankrupt.

Rajiv Biswas, Asia-Pacific chief economist for S&P Global Market Intelligence, said Sri Lanka will remain in a "severe macroeconomic crisis" until it can obtain external financing from either multilateral or bilateral sources to increase its foreign exchange reserves.

Goonetilleke said many international actors have used the island "as their stage" and that "financial support for political parties, trade unions and other activists has become a regular feature".

The population is burdened with rising consumer prices, including for fuel, and the loss of agricultural produce, "due to the shortsighted policies of the government", he said.

"As such, people cannot be further burdened."

Xinhua and Agencies contributed to this story.