The ongoing stand-off between the ruling United People's Freedom Alliance (UPFA) government and the judiciary has once again brought to the fore arguments against the controversial 13th amendment to the constitution, which established Sri Lanka's system of Provincial Councils (PCs). The government has remained circumspect about its rumoured plans to seek a repeal of the amendment. Were the system of PCs to be abolished, this could deal a further blow to prospects for longer-term reconciliation between the island's various ethnic groups, which has been predicated on the devolution of power.
The devolution of power to the PCs was originally mandated in the 1987 peace accord between Sri Lanka and India, and was later formalised in the 13th amendment to the constitution. Although the 1987 agreement was supposed to resolve the island's ethnic conflict, instead a protracted and bloody struggle erupted between the Indian peacekeeping force and Tamil separatist groups. Sinhalese nationalists have also blamed the devolution of power for furthering separatist goals.
Despite being approved by a two-thirds parliamentary majority in 1987, the full provisions of the 13th amendment have yet to be implemented. Successive governments have refused to cede to the PCs power over land and security personnel, regardless of mandates to the contrary under the terms of the 13th amendment.
The UPFA controls seven of the nine PCs outright, and is part of the ruling coalition in one of the others. However, elections have not been held in war-torn Northern province since it was carved out of North Eastern province in 2007, and the province has remained under direct government control.
Devolution remains central to the peace process
The issues surrounding the full implementation of the 13th amendment and the accompanying devolution of power have been central to various iterations of the peace process since 1987. Following the end of the civil war in 2009, the arguments for and against the full implementation of the amendment have also framed the mainstream debate over a political solution to Tamil grievances. The Tamil National Alliance (TNA, an umbrella group that serves to represent Tamil interests) has called for greater devolution of power than that specified in the 13th amendment, while simultaneously accusing the government of trying to scrap the amendment altogether. The Indian government is also keen to see the 13th amendment implemented, and has repeatedly sought-and, according to the Indian administration, received-assurances that this process will get under way. In January 2012 the then Indian foreign minister, S M Krishna, stated that the Sri Lankan president, Mahinda Rajapaksa, had assured him that he "stands by his commitment" to devolution going beyond the 13th amendment (known as 13 Plus). A visiting delegation of Indian parliamentarians claimed that they had received similar assurances from the island's president in April. However, the Sri Lankan media carried announcements by both Mr Rajapaksa and his spokesperson that 13 Plus had merely been discussed and that no promises had been made.
A government-appointed panel mandated to study the civil war, the Lessons Learnt and Reconciliation Commission, has also called for the implementation of the 13th amendment, as well as for the creation of a second national legislative chamber in the form of an upper house, presumably to be modelled along the lines of the US Senate.
However, despite the government's rhetoric on the international stage there has been scant progress on devolution in recent years. In the past few months rumours have once again begun to circulate that the administration is considering scrapping the 13th amendment altogether. Senior government figures, including the minister for economic development, Basil Rajapaksa, and the defence secretary, Gotabhaya Rajapaksa (both brothers of the president), have been quoted in domestic media as saying that the PCs are an obstacle to Sri Lanka's post-war development.
Controversy arises over the Divineguma bill
Whether or not the system of PCs hinders Sri Lanka's economic growth prospects, it has definitely acted to restrain the president's ambitions to expand centralised control. The controversial Divineguma (Life Upliftment) bill, which the government reintroduced in parliament in mid-2012, is a case in point. The measure attempted to amalgamate a range of existing rural-development and poverty-alleviation programmes under a new department, with the aim of streamlining their delivery. However, its opponents raised objections to the proposed transfer of powers from the PCs back to the federal government. When petitioned in August, the Supreme Court ruled that the bill must be approved by all of Sri Lanka's PCs, as it has a bearing on the powers devolved to them. The court's refusal to dismiss the petition has resulted in an increase in tension between the judiciary and the executive.
The Northern province proved an obstacle to the government's efforts to gain approval for the Divineguma bill from all of Sri Lanka's PCs. The UPFA secured approval on behalf of the Northern PC from the provincial governor, Major-General G A Chandrasiri, a presidential appointee. The TNA challenged the move, arguing that an unelected governor could not make such a decision, and the Supreme Court upheld the petition. The court's ruling has led to a further escalation in tensions between the judges and the executive, culminating in early November in a move by UPFA legislators to impeach the chief justice, Shirani Bandaranayake, in a development that threatens the nascent independence of Sri Lanka's judiciary.
The public nature of the confrontation has once again brought to the fore the debate over the 13th amendment. The government contends that the TNA's decision to challenge the Divineguma bill is an indication that separatist sentiment is still alive in Sri Lanka, citing this as further reason to repeal the amendment. In addition, Sinhalese nationalist groups-including allies of the UPFA government, such as the National Freedom Front and the Jathika Hela Urumaya, which is led by Buddhist monks-have also repeatedly called for the 13th amendment to be scrapped.
For his part, the president has remained circumspect about his plans for devolution. On November 8th, in a statement to parliament, Mr Rajapaksa called for a "change in the PC system" without elaborating what this would entail. Subsequently, a government spokesperson, Keheliya Rambukwella, sought to allay fears by announcing that the government had no intention of repealing the amendment "for the time being". The president's promise to work towards meaningful reconciliation, and particularly to hold elections for the Northern PC in September 2013, would be rendered hollow should the 13th amendment, or indeed the system of PCs, fail to survive until then. The continued uncertainty prevailing on this issue, coupled with fears engendered by the UPFA's large majority in parliament, has darkened the prospects for longer-term peace on the island.
December 07, 2012
Mahinda Rajapaksa
Mr Rajapaksa of the Sri Lanka Freedom Party (SLFP) is Sri Lanka's president and head of the ruling United People's Freedom Alliance government. Following his triumph over the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers) in 2009, he remains highly popular. Mr Rajapaksa is viewed as a dedicated nationalist, and in economic terms as a left-leaning populist. Both positions appeal to the electorate, and especially to rural dwellers, Sinhalese people and poorer groups. He is closely associated with the eponymous Mahinda Chinthana policy, which focuses on promoting rural development. Although his hardline stance in the civil war appears to have been justified, his grasp of economic policy has occasionally seemed less deft. Given his personality-centred style of leadership, Mr Rajapaksa is likely to be held accountable for any government failures, in the same way that his popularity has been boosted by the administration's successes. Public concern over the rising cost of living thus poses a threat to his popularity.
The Rajapaksa family
One of the president's brothers, Gotabhaya, is secretary of defence. Another, Chamal, has been elected as parliamentary speaker, while a third, Basil, is minister for economic development and tourism. Between them, the Rajapaksa brothers dominate many of the most important sectors of the economy as well as the largest departmental budgets in government. In addition, Mr Rajapaksa's nephew, Shashindra (Chamal's son), has been appointed as chief minister of Uva province, and the president's son, Namal, entered parliament following the April 2010 general election. The family has strong ties to Hambantota in the south of the country. The region has recently seen a lot of development activity, including investments in a new port and an international airport.
Sajith Premadasa
Mr Premadasa, the son of a former president, Ranasinghe Premadasa, is increasingly spoken of as a likely future head of the main opposition United National Party (UNP), of which he is deputy leader. The UNP's current leader, Ranil Wickremasinghe, has repeatedly led his party to electoral defeat. Although Mr Wickremasinghe's power base in the UNP is still strong, he is likely to be forced out before the next presidential election in 2015 in favour of Mr Premadasa, who is seen as being more charismatic.
Sarath Fonseka
The former head of the armed forces, Mr Fonseka was a candidate in the 2010 presidential election but lost to Mr Rajapaksa. He aligned himself with the Marxist Janatha Vimukthi Peramuna (JVP) party and secured a seat in parliament at the 2010 general election, campaigning as the head of the JVP's Democratic National Alliance group, but was barred from the legislature following his conviction on corruption charges. Having served two years in prison, Mr Fonseka was released in mid-2012, having received a presidential pardon. He has since pledged to work with the opposition parties to seek to oust Mr Rajapaksa's government at the next general election. Mr Fonseka's legal troubles are far from over, however, and it remains to be seen whether the opposition parties will welcome his support, given that he is a divisive figure (particularly among minorities).
September 24, 2012
Official name
Democratic Socialist Republic of Sri Lanka
Form of state
Executive presidency based on the French model
The executive
The president is the head of state, with executive powers. Elected for a term of six years by universal suffrage, the president may dissolve parliament at any time once a year has passed following a legislative election. Following a constitutional amendment, there is now no limit on the number of terms that a president may serve
National legislature
Unicameral legislature; the 225 members are directly elected for six years under a system of modified proportional representation
Local government
Under the 13th amendment to the constitution, passed in 1987, extensive powers have been devolved to nine directly elected provincial councils with a view to meeting Tamil demands for greater autonomy. The United People's Freedom Alliance (UPFA), which rules at national level, dominated provincial council elections in 2011
National elections
The president and parliament are elected for six-year terms, but elections may be called early provided that certain constitutional conditions are met. In the 2010 presidential election the UPFA candidate, Mahinda Rajapaksa, secured re-election by a clear margin, winning around 58% of the vote; an estimated 74.5% of the electorate voted. The next presidential election will take place by November 2015, and the next parliamentary election must be held by April 2016
National government
Mr Rajapaksa, of the Sri Lanka Freedom Party (SLFP, the main component of the UPFA), was elected for his first term as president in 2005 and was re-elected in January 2010. The UPFA was again victorious in the April 2010 parliamentary election, securing 60.4% of the vote; this gave it 144 seats in the legislature. Following a number of changes in party affiliation, the UPFA now holds 161 seats in parliament
Main political organisations
Governing coalition: the UPFA, now based mainly around the People's Alliance (PA), which itself is built around the SLFP. Other main parties: Janatha Vimukthi Peramuna (JVP), United National Party (UNP), Sri Lankan Muslim Congress (SLMC), Tamil Makkal Viduthalai Pulikal (TMVP) and Tamil National Alliance (TNA)
Main members of the government
President; also in charge of defence & finance: Mahinda Rajapaksa
Prime minister: D M Jayaratne
Key ministers
Agriculture: Mahinda Yapa Abeywardena
Defence secretary: Gotabhaya Rajapaksa
Disaster management: A H M Fowzie
Economic development: Basil Rajapaksa
Foreign affairs: G L Peiris
Industry & commerce: Rishad Bathiyutheen
Irrigation & water resources management: Nimal Siripala de Silva
Justice: Athauda Seneviratne
Petroleum industries: Susil Premajayantha
Post & telecommunications: Jeewan Kumaranatunga
Power & energy: Champika Ranawaka
Public management reforms: Ratnasiri Wickramanayake
State resources & enterprise development: P Dayaratne
Central bank governor
Ajith Nivard Cabraal
December 13, 2012
Outlook for 2013-17
Review
December 13, 2012
Fact sheet
| Annual data | 2011 | Historical averages (%) | 2007-11 |
| Population (m) | 21.1 | Population growth | 1.0 |
| GDP (US$ m; market exchange rate) | 58,902 | Real GDP growth | 6.5 |
| GDP (US$ m; purchasing power parity) | 116,602 | Real domestic demand growth | 7.3 |
| GDP per head (US$; market exchange rate) | 2,798 | Inflation | 10.7 |
| GDP per head (US$; purchasing power parity) | 5,539 | Current-account balance (% of GDP) | -5.1 |
| Exchange rate (av) SLRs:US$ | 110.6 | FDI inflows (US$ m) | 638.6 |
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Background: Ceylon was a British colony from 1815 to 1948, when the island gained independence. It was renamed Sri Lanka on becoming a republic in 1972. Mahinda Rajapaksa of the Sri Lanka Freedom Party (SLFP) has been president since 2005. The SLFP is the largest element of the ruling United People's Freedom Alliance (UPFA) coalition, which won the April 2010 parliamentary election. Almost three decades of civil war in Sri Lanka ended when the government conclusively defeated the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers) in 2009.
Political structure: Sri Lanka is a parliamentary democracy, but the presidency is the main seat of power. The president and parliament serve maximum terms of six years. The UPFA currently dominates the legislature and has managed to wield a two-thirds majority to alter the constitution. These changes, agreed in 2010, strengthened further the authority of the already powerful presidency, notably by removing the limit on the number of terms that a president can serve.
Policy issues: Sri Lanka has made impressive progress on privatisation and reform of its tax, tariff and foreign investment regimes under past governments. Reducing the fiscal deficit, containing inflation and promoting development, especially in rural areas, are the UPFA government's main goals. In late 2010 Mr Rajapaksa announced a major reform of the tax system that aims to increase revenue. In 2009 the government signed a Standby Arrangement with the IMF, thus buying time to address the island's chronic trade deficit. Following its military victory against the LTTE, the government has emphasised the importance of reconstruction work and the need to resolve Tamils' political grievances, but its commitment to the latter goal has been questioned by its critics. State expropriation of private assets in 2011 has raised concerns.
Taxation: The top corporate tax rate was cut from 35% to 28% in April 2011. The highest rate of personal income tax also fell, to 24%. Indirect taxes are the main source of tax revenue, but direct tax revenue is likely to rise as the tax net is widened.
Foreign trade: According to the IMF, the trade deficit (on a balance-of-payments basis) expanded sharply in 2011, to US$7.7bn, from US$3.5bn in 2010. Exports rose from US$8.6bn in 2010 to US$10.6bn in 2011, but imports grew even faster, increasing from US$12.1bn to US$18.2bn, amid strong expansion in domestic demand.
| Principal exports 2011 | % of total | Principal imports 2010 | % of total |
| Textiles & garments | 41.3 | Mineral products | 22.4 |
| Tea | 14.7 | Machinery & equipment | 22.0 |
| Diamonds & gems | 5.4 | Textiles | 12.8 |
| Petroleum products | 5.2 | Base metals | 1.8 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| US | 21.5 | India | 21.9 |
| UK | 12.1 | China | 10.7 |
| Italy | 5.9 | Singapore | 7.8 |
| Germany | 5.1 | Iran | 7.3 |
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December 14, 2012
Data and charts: Annual trends charts
December 13, 2012
Sri Lanka: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: The president, Mahinda Rajapaksa of the Sri Lanka Freedom Party (SLFP), is idolised as the man who in May 2009 defeated the rebel Liberation Tigers of Tamil Eelam (Tamil Tigers). He was re-elected for a second six-year term in January 2010. The ruling United People's Freedom Alliance (UPFA, of which the SLFP is the main component) also won a landslide victory in the parliamentary poll in April 2010 and has performed strongly in elections for provincial councils in 2011-12. The government is not expected to face any significant parliamentary challenges during the remainder of its six-year term, given its exceptionally large majority. Mr Rajapaksa runs a highly personalised, populist administration. His position was strengthened in 2010 by a constitutional amendment that increased the president's powers and reduced checks on his office while simultaneously removing the term limit for the presidency. A simmering conflict between the judiciary and the executive came to a head in November 2012, when lawmakers sought to impeach the chief justice, Shirani Bandaranayake, alleging that she had acted unconstitutionally. The previously compliant judiciary has locked horns with the government in recent months, making a series of rulings that have been considered unfavourable to the UPFA.
ELECTION WATCH: Mr Rajapaksa was re-elected for a second term in January 2010 by a substantial margin, although he faced accusations from international observers and advocacy groups that he had used state resources to support his campaign. The UPFA also won a landslide victory in the parliamentary election in April 2010, and has dominated polls for provincial councils and local authorities in 2011-12. The next presidential contest is due in 2015. Having scrapped the limit on the number of presidential terms that an individual can serve, Mr Rajapaksa is likely to be the UPFA's candidate and will be strongly placed to win a third consecutive term. The next parliamentary election is due by 2016. Speculation abounds that the government is considering a snap poll, perhaps in 2013, in an attempt to secure a renewed popular mandate.
INTERNATIONAL RELATIONS: Relations between the UPFA and Western governments will remain tense, given concerns about the deterioration in the island's human rights environment during the final phase of the civil war-a process that has still not been fully reversed. The Economist Intelligence Unit nevertheless expects an improvement in Sri Lanka's relations with Western countries in the latter half of the forecast period as respect for human rights on the island improves. Ties with India have come under strain in recent months following India's vote in support of a US­backed resolution at the UN Human Rights Council calling on Sri Lanka to investigate fully the death of Tamil civilians towards the end of the civil war. Disputes between the island and India's southern state of Tamil Nadu over fishing, training of Sri Lankan military personnel in India and reports of mistreatment of Sri Lankans visiting the state have caused the relationship to fray further. But both India and China will remain important sources of funding for infrastructure projects and military assistance, although the terms may be less favourable than those applying to concessional loans from established aid donors.
POLICY TRENDS: Although Mr Rajapaksa and the UPFA are leftward-leaning, the government has declared that improving the business environment will be a priority in the next five years. However, vacillation over policy implementation remains a problem. Moreover, the government has a pronounced tendency to interfere at the microeconomic level, favouring certain enterprises and directing their business activities. In 2011-12 the administration undertook a programme of tax reform, simplifying and cutting taxes. In the budget for 2013, introduced in parliament in November 2012, the government announced a series of new tax measures, including a "nation-building" tax, in addition to increasing taxes and customs duties in certain sectors, in a bid to raise revenue as a proportion of GDP. The direction of policy reform is therefore uncertain. Reducing the fiscal deficit will remain a key priority under the IMF assistance package that is currently supporting Sri Lanka's foreign reserves. Securing balance-of-payments stability will rely on reducing the level of foreign borrowing (which is financing a large proportion of the fiscal deficit at present) and attaining greater amounts of foreign investment.
ECONOMIC GROWTH: Sri Lanka's prospects have been improved considerably by the ending of the civil war in 2009, and the economy expanded by an average of 8.1% a year in 2010-11. However, a poor monsoon (as many as 15 of the country's 25 districts were affected by drought conditions) and weaker external demand dampened economic expansion in 2012, with real GDP growth estimated to have slowed to 6.7%. Reduced rural incomes and the weakening of the Sri Lanka rupee (which made imports more expensive) are expected to have held back private consumption growth this year. Meanwhile, government consumption growth strengthened in line with the administration's efforts to alleviate the negative impact of inclement weather on farmers.
INFLATION: Price pressures have remained acute in the past year, owing to a variety of factors. Food products account for more than 40% of the consumer price index, and food price increases are thus a crucial determinant of overall inflation. Sri Lanka remains a net importer of food, and the weakness of the local currency has made imports more expensive. In 2013 the annual average rate of consumer price inflation is forecast to slow to 5.4% as the Sri Lanka rupee stabilises and global food and fuel prices decline. Modest supply-side improvements in 2014­17 should limit the pace of price increases to an average of 6.4% a year. However, our forecast carries downside risks. Reducing the fiscal deficit remains a priority under the IMF assistance package that is currently supporting the country's foreign reserves, and the government is likely to come under pressure from the Fund to reduce its food- and fuel-subsidy bill. In addition, monetary policy is biased towards supporting growth and any premature easing of policy could fuel inflationary pressures.
EXCHANGE RATES: Since the move to a lightly managed float in February 2012, when the Central Bank of Sri Lanka abandoned the trading-band system, the value of the Sri Lanka rupee has fallen sharply. Confidence in the currency has been damaged by the country's large trade deficit and by weak demand in the EU and the US. The Sri Lanka rupee depreciated by an estimated 13.5% against the US dollar in 2012, and is forecast to weaken by a further 2% in 2013, to average SLRs130.3:US$1. As export growth accelerates and foreign investment inflows pick up, the local currency will hold broadly steady against the US dollar in 2014-17.
EXTERNAL SECTOR: Sri Lanka's merchandise exports have been adversely affected by lower global prices for several of the country's major exports, including tea and rubber, as well as weakening demand from its major export markets, the US and the EU. The drought in Sri Lanka, in addition to having a negative impact on tea production, also reduced hydropower generation in 2012, necessitating greater imports of oil for the production of electricity. Merchandise export revenue is forecast to grow by an average of 6.5% a year in 2013-17, having contracted by an estimated 7.7% in 2012. The import bill, which fell by an estimated 4.3% in 2012 owing to the government's imposition of higher tariffs to curb imports, will rise by an average of 7.7% a year in the forecast period, outpacing export growth. The merchandise trade deficit is expected to widen steadily to stand at US$12bn in 2017, from an estimated US$7.7bn in 2012.
December 10, 2012
Country forecast overview: Highlights
December 14, 2012
Land area
65,610 sq km
Population
20.7m (2010 mid-year government estimate)
Main towns
Population in '000 (2010)
Colombo (capital): 2,553
Kandy: 1,431
Gampaha: 2,177
Kalutara: 1,135
Kurunegala: 1,563
Ratnapura: 1,125
Climate
Tropical
Weather in Colombo
Hottest month, May, 26-31°C (average daily minimum and maximum); coldest month, December, 22-29°C; driest month, February, 69 mm average rainfall; wettest month, May, 371 mm average rainfall
Languages
Sinhalese, Tamil, English
Measures
The metric system is now predominant
Currency
Sri Lanka rupee (SLRs); SLRs1 = 100 cents. Average exchange rate in 2011: SLRs110.6:US$1
Time
5 hours 30 minutes ahead of GMT
Fiscal year
January-December
Public holidays
January 8th (Duruthu Full Moon Poya Day); January 16th (Tamil Thai Pongal Day, observed); February 4th (National Day); February 7th (Navam Full Moon Poya Day); February 10th (Milad-un-Nabi, observed); February 20th (Maha Sivaratri Day); March 7th (Medin Full Moon Poya Day); April 5th (Good Friday and Bak Full Moon Poya Day); April 12th-13th (Sinhala and Tamil New Year); May 1st (May Day); May 5th-7th (Vesak); June 4th (Poson Full Moon Poya Day); July 3rd (Esala Full Moon Poya Day); August 1st (Nikini Full Moon Poya Day); August 19th (Eid al-Fitr, approximate); August 31st (Adhi Nikini Full Moon Poya Day); September 29th (Binara Full Moon Poya Day); October 26th (Eid al-Adha, approximate); October 29th (Vap Full Moon Poya Day); November 13th (Deepavali); November 27th (Il Full Moon Poya Day); December 25th (Christmas Day); December 27th (Unduwap Full Moon Poya Day)
March 20, 2012