Flash Report / South Africa

South Africa emergency budget: Letting a crisis go to waste

  • Today’s emergency budget sees a consolidated deficit of 15.7% of GDP in 2020/21, slightly worse than market expectations
  • Necessary reforms are delayed until October’s MTBPS, wasting an opportunity to implement tough reforms
  • Markets have taken the news in stride, but we believe inaction portends an ongoing slide in debt dynamics moving forward

South Africa’s Finance Minister Tito Mboweni delivered the country's first-ever emergency budget via video stream to a mostly empty parliamentary chamber today. Markets were already prepared for the worst, with Mboweni announcing in April that the FY 20/21 deficit could swell into double digits amid massive revenue shortfalls and a leaked presentation by Mboweni at the National Economic Development and Labour Council last Friday showing preliminary estimates of debt reaching 80.5% of GDP this year and surpassing 100% of GDP by 2025.

At the event today, Mboweni announced a deterioration of the consolidated deficit to 15.7% of GDP this year (from 6.3% of GDP in 2019/20 and a preliminary 6.8% of GDP target), slightly wider than last week’s Bloomberg consensus of 13.7% of GDP.  

Meanwhile, gross public debt is now expected to rise to 81.8% this year from 63.5% of GDP in 2019/20, reaching a peak of 87.4% in 2023/24 under an "active" reform scenario, but continuing to rise north of 140% of GDP by the end of the decade under a "passive" policy scenario.

Pre-2020 anxiety over South Africa’s debt stock potentially breaching 60% of GDP and inability to consolidate the budget deficit below 4% of GDP now seem rather quaint. Admittedly, the seeds of fiscal slippage were already sown before the Covid-19 crisis, with the 2019/20 deficit of 6.3% of GDP far exceeding its 4.3% target amid rising transfers to key SOEs such as Eskom, the 2020/21 target revised up from 4.3% to 6.8% of GDP during this February’s budget statement, and the medium-term target pushed up from 4% to 5.7% of GDP.

Now the consolidated deficit is expected to consolidate from 15.7% of GDP this year to 9.2% of GDP in 2021/22 and 7.5% of GDP in 2022/23. Markets have taken this in stride, with the rand trading flat in the hours immediately following the budget and local/external rates largely unchanged. Markets had already priced in the news before the budget, with the 10-year government yield rising by c50bps over the past three weeks and the rand selling off by c5% over the past two weeks.

With the South African economy now projected to contract by 7.2% yoy in 2020, it has long been clear that revenue would fall far below initial forecasts. The main budget revenue is now expected to be cZAR304bn below the initial target in 2020/21, dropping to 22.6% from 25.8% of GDP. Whereas the February budget did not pencil in any tax increases in recognition that South Africa has probably passed the peak of the Laffer curve (with stagnant growth and a revenue/GDP ratio already amongst the highest in EM), the new budget envisions ZAR40bn of new tax measures over the medium term, which will make the growth recovery even more difficult.

Meanwhile, expenditure will see a net rise of ZAR36bn, with ZAR145bn in immediate on-budget Covid-19 relief measures, partially offset by reduction of ZAR109bn from the temporary suspension of baseline allocations and adjustments to the skills development levy. Factoring lower growth, expenditure will increase to 37.2% of GDP from 32.5%.  

While the government’s ability to accommodate the ZAR500bn (c10% of GDP) Covid-19 relief package (including ZAR190bn of main budget spending over the medium term, ZAR70bn in tax policy measures and a ZAR200bn loan guarantee scheme) is encouraging, there is an utter lack of tangible expenditure-side reforms when the hood is lifted up. The Treasury needs to implement spending reductions amounting to cZAR230bn in 2021/22 and 2022/23 followed by further reductions in 2023/24 to stabilise debt at 87.4% of GDP, but so far has delayed any specifics until October’s Medium-Term Budget Policy Statement (MTBPS).

In all fairness, an emergency budget isn’t exactly the right platform to enact widespread reforms and the urgency required to formulate an emergency budget that satisfies that immediate needs of South Africans reeling from the impact of Covid-19 raises the hurdle even more. But on the other hand, I can’t help but think that South Africa has missed a crucial opportunity to strike while the iron is hot.

As the old adage goes, one should never let a crisis go to waste. While the Treasury remains a pillar of institutional strength, the fiscal slide of the past decade has been borne in part of the inability of the Treasury to rise above the messy ideological fray of ANC politics and implement the tough fiscal reforms needed to stabilise the debt burden. Since "Nene-gate" in 2015, South Africa has faced several "come to" moments where things appeared dire enough for the Treasury to seize the reins and make hard decisions, but repeatedly those windows of opportunity have closed without any meaningful action. The economic crisis South Africa finds itself in now is worse than anything it has faced since the end of apartheid, and far outweighs the impact of the 2008 global financial crisis. If the Treasury can’t take the reins from the government and push forward with reforms now, then when?

While it may be tempting to give them the benefit of the doubt and wait for a transformative MTBPS in October, as we have seen time and time again in the past, the post-crisis momentum tends to fade rather quickly. Today was the day to announce a plan to reduce the government wage bill through negative real wage increases and cuts to the bloated headcount. Today was the day to announce concrete measures to reduce the fiscal burden of SOEs, including by considering previously unthinkable policies such as privatisation. Today was the day to announce concrete measures to reduce wasteful government spending. Instead, all we got were vague promises about reforms to be announced in October.

If the Treasury can deliver on much-needed reforms in the MTBPS and set debt back on a sustainable trajectory, then my doom-and-gloom predictions may prove unfounded. But I think it is more likely that the moment for major reforms has come and gone. As a rising risk premium continues to push up the cost of government borrowing, the fiscal space needed to right the ship will be increasingly consumed by a higher debt service bill. While markets remain relatively sanguine post-budget, the risk premium will only continue to rise as the prospects for reform look increasingly bleak. For now, we await the MTBPS in October to see if the government has the political will to correct course before it’s too late.


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Macro Analysis / Global

Lesetja Kganyago: The South African Reserve Bank, the coronavirus shock, and "the age of magic money"

Bank for International Settlements
18 June 2020

Good afternoon

It is now clear that the COVID-19 outbreak will produce the worst economic downturn in a century. We expect that 'the great lockdown' will cause output to contract by about 7% this year. The last time a figure of that magnitude appears in our data is 1931, during the Great Depression, when output fell by 6.2%. It had declined by 6.1% in 1930.

The South African Reserve Bank (SARB) has responded flexibly, quickly and aggressively to this crisis. So far, these actions have improved market functioning, and are supporting economic activity. However, the larger economic outlook remains uncertain. We are watching the data closely, and we are ready to act as appropriate, in accordance with our mandate.


 
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Macro Analysis / Ghana

Ghana: Digital payments pick up; central bank confident this is a "new normal"

  • The spread of Covid-19 in Africa is prompting countries to accelerate adoption of digital payment systems
  • Ghana electronic payments rose 81% in Q1 20; bank transfers contributed the bulk of growth due to a waiver on fees
  • Mobile money transactions picked up considerably but still behind Kenya; Other players are gearing up to challenge MNO's
Nkemdilim Nwadialor @
Tellimer Research
3 June 2020

At the May Monetary Policy Committee (MPC) meeting in Accra, the Governor of the BoG, Dr Ernest Addison, noted that the 3-week lockdown, which resulted in the absence of physical banking and physical payment systems in the country (as cash transactions are a possible conduit for the spread of COVID-19) resulted in an increase in the volume of digital payments in the first quarter of the year.

Digital payments that are captured by the Ghana Interbank Payment and Settlement Systems (GhIPSS) saw an 81% increase in transaction volumes in first quarter of 2020. These digital payment systems include credit cards, banking applications, digital cash, mobile payments, smartcard-based electronic payment systems (eg. fuel cards), and electronic billing.

Interbank transfers recorded the most impressive growth, with debit transfers up 170% yoy and 55% qoq, while direct credit transfers were up 18% yoy, which we think is attributable to the GhIPSS Waiving Fees On Interbank transfer charges till June 2020. This move by the regulator will translate into lower non-interest income for our Ghana banks coverage coverage in 2020 as transfer fees account for 30% of total fee income.

Mobile money in Ghana continues its upward trend, but still lags Kenya

Mobile money transactions on the other hand, stood at GHS94bn in Q1 20, up 15% yoy and 4% qoq, which we think was supported by the relaxation of know your customer (KYC) requirements for mobile money and the reduction of fees on mobile money transactions by the MPC committee during its March 2020 meeting.

However compared to peers like Kenya, whose mobile money transactions as at December 2019 stood at cUS$90bn (84% of GDP), Ghana still lags behind with its 2019 mobile money transactions in 2019 at cUS$50bn (81% of GDP). Also, in terms of active customers – accounts which transacted at least once in the 90 days prior to reporting – Kenya recorded 28.9 million (61% of the population) compared to Ghana’s 14.8 million (49% of the population).

But Ghana is ahead on certain metrics. Ghana outperforms Kenya in terms of agent network, boasting a whopping 226,000 agents (62 customers per agent) compared with Kenya’s 205,328 agents (141 customers per agent). This suggests that mobile money agents in Ghana can still scale up their customer reach to drive growth.

Market implications

We think markets with high levels of digital infrastructure (and cash-based transactions) are most able to sustain a switch to electronic payments. A further driver is policy direction from government and its agencies, such as allowing the public to pay taxes, levies and fees through electronic payment channels. This would result in efficiency in revenue mobilisation and should help migrate Ghana into an electronic payment society.

Scale-up digital means of doing business: A large proportion of the businesses in Ghana are SMEs, and a lot of SMEs do not have strong/established electronic payment systems that work effectively and efficiently. The immediate challenge for these businesses is the adoption and scaling up of digital payment systems to eventually make digital payment the regular mode of payment.

Competition for mobile money: Mobile network operators (MNOs) MTN, AirtelTigo and Vodafone currently dominate the mobile money landscape in Ghana with a current total market share of c96%.  Their rise has been supported by a high unbanked population (c50% of the adult population is unbanked), a strong agent network and regulatory backing. As banks (Ghana Commercial bank - GCB) and other fintechs (Zeepay) slowly encroach on the space, they will provide increased competition to the MNO-led mobile money business model. Although considering the wide reach of MNO-led services, especially MTN MoMo (MTN's mobile money platform whose operations contribute c20% of total revenues) we do not see an immediate threat to their dominance.

Emphasis on combating cybercrime: Ghana lost cUS$9.8 million to criminal activity in 2019, and about US$105 the year before. Ghana was recently added to the European Union (EU) list of blacklisted countries for money laundering. As such, Ghana needs to improve its AML (Anti-Money laundering), CFT (countering terrorism financing) and KYC (know-your-customer) guidelines and compliance. The government also needs to establish institutions to take the lead in putting in place the legislative frameworks and policies to maintain secure electronic payment systems. We think the newly established Fintech and innovations office of the Bank of Ghana will be tasked with this.


 
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Macro Analysis / Kenya

Kenya budget: Ambitious targets, but can they deliver?

  • Kenya’s recently released 2020/21 budget balances ongoing shocks with ambitious consolidation
  • However a history of fiscal slippage calls feasibility into question
  • Kenya must act quickly to keep debt sustainable
Patrick Curran @
Tellimer Research
15 June 2020

Last Thursday marked the annual East African Community (EAC) budget day, with Kenya releasing its FY 2020/21 budget alongside its East African peers. Slippage was expected amid the triple shocks of Covid-19, locusts and flooding, with the 2019/20 deficit now slated to expand to 8.3% of GDP from the initial (June 2019) target of 5.6% and updated (February 2020) target of 6.3%. However, the slippage is marginally less severe than predicted under the latest IMF staff report in May, which saw the deficit rising to 8.6% in 2019/20. Further, the projected 2020/21 deficit has been reined in from 7.8% to 7.5%, and the outer target in 2023/24 has narrowed from 4.9% to a more ambitious 3.6%. That said, Kenya has a long history of kicking the can down the road on fiscal consolidation, with the medium-term 3% target delayed in each respective iteration of the budget since at least 2016/17.

Kenya’s economy has proven to be impressively resilient to the myriad shocks it is currently facing, with the real GDP growth forecast revised down from 6.1% to a still-respectable 2.5% in 2020. This compares favourably to a forecast 1.1% contraction across all emerging & developing economies and 1.6% in sub-Saharan Africa, per the April 2020 IMF WEO (a WEO update is due 24 June and is likely to show a deeper global contraction than before). However, the forecast rebound to 5.8% in 2021 and 6.5% by 2024 is ambitious (especially amid concerns over the prospects for a global V-shaped recovery), and downside surprises would jeopardise much-needed fiscal consolidation plans. Discipline will therefore be required if Kenya’s debt is to be placed on a sustainable trajectory.

Revenue & spending plans and Covid stimulus measures

Before taking a step back to look at the big picture, it is worth diving into some of the finer points of the budget. Firstly, to cushion the impact of the pandemic the government has implemented several measures including:

  • Lowering the VAT rate from 16% to 14%;

  • Reducing the turnover tax rate from 3% to 1% in order to support SMEs; and

  • Reducing the corporate and personal income tax rates from 30% to 25% and providing 100% tax relief for those earning less than KES 24k per month.

The IMF estimated that these measures will cost 0.4% of GDP in 2019/20, which combined with stimulus spending of 1% and lost revenue of 0.9% due to slower growth will bring the total fiscal cost of Covid-19 to 2.3% of GDP in 2019/20. This is slightly below the average response of 2.7% of GDP for frontiers and smaller EMs, and well as below the 5% for larger EMs and 20% in the G7 (see our 13 May report comparing fiscal responses during the coronavirus pandemic).

In 2020/21, the tax relief measures are expected to cost KES172bn (1.5% of GDP). In this light, Kenya’s plan to consolidate the deficit by 1.5% of GDP between 2019/20 and 2020/21 is impressive, and compares favourably to the 1% of GDP consolidation the IMF forecasts between 2020 and 2021 across sub-Saharan Africa. To recoup part of the revenue loss the government plans to reduce tax exemptions, a necessary step given their exorbitant cost totalling 6% of GDP and associated economic distortions.

In addition, the government aims to promote exports by increasing import duties across several key sectors and providing tax waivers for imported inputs for sectors in which Kenya is perceived to have a competitive advantage. In total, this will net an additional KES39bn (0.3% of GDP) of revenue. While the extra revenue is much needed and the goal of increasing manufacturing from 8% of GDP to 15% by 2022 is commendable, we think it would be better achieved via positive incentives for exporters rather than protectionist import substitution policies that tend to create perverse incentives.

All things considered, revenue is expected to remain relatively constant in nominal terms but to drop from 18.6% of GDP in 2019/20 to 16.8% in 2020/21. Meanwhile, total expenditure is expected to fall from 27.2% of GDP in 2019/20 to 24.7% in 2020/21. Encouragingly, capital expenditure comprises one-third of the budget envelope, with government achieving the spending reduction by reallocating funds from slow-moving projects to other priority areas and clamping down on unnecessary recurrent spending.

The government also plans to mobilise KES200bn (1.8% of GDP) of PPP financing by 2020/21 by amending the PPP Act to remove unnecessary barriers, helping to reduce the burden placed on government by ambitious infrastructure plans. Other promising structural reforms highlighted in the budget statement include:

  • Approval of new public procurement regulations and roll-out of a new e-procurement platform by December 2020; and

  • Creation of a technical team to review the challenges facing SOEs and propose remedial actions with an eye to reducing contingent liabilities (currently c1.6% of GDP) and clearing any existing arrears.

Medium-term fiscal outlook and financing plans

Accounting for everything above, the budget deficit is expected to rise from 7.5% of GDP in 2018/19 to 8.3% in 2019/20. While this is well above the initial target of 5.6% outlined in last June’s budget, it is only 2% of GDP wider than the pre-Covid estimate of 6.3% outlined in the February Budget Policy Statement (BPS) and compares favourably to the deterioration expected across many developed and emerging markets. The IMF expects budget balances to deteriorate by 7.8 percentage points of GDP across advanced economies between 2019 and 2020, 4.2% in emerging and developing economies and 2.7% in SSA, far above the 0.8% slide expected in Kenya. However, this could be partly due to Kenya’s fiscal year running from July to June, with only about three months of post-Covid activity incorporated into the 2019/20 budget compared to nine months for countries with a January to December fiscal year.

To finance the deficit, Kenya will issue KES347bn (US$3.3bn, or 3.1% of GDP) of new external funding with the balance coming from domestic sources, in line with the desired 40/60 external to domestic financing mix outlined in the government’s medium-term debt strategy. Around 60% of external funding will be concessional debt from multilateral sources, including a recently agreed US$739mn Rapid Credit Facility (RCF) from the IMF, US$1bn of direct budget support from the World Bank, and US$210m from the AfDB.

This leaves about US$1.3bn of financing that the government will need to procure from other sources. To help plug the gap, the government will issue its first ever “Sovereign Green Bond” to finance major infrastructure projects in 2020/21. However, that still leaves a likely external funding gap. While Kenya’s stated desire is to shift away from commercial and towards more concessional financing sources, issuance of a new Eurobond in 2020/21 therefore remains a possibility. With Egypt’s US$5bn issuance in May 4x oversubscribed and the issuance pipeline in SSA more or less drying up, there would probably be demand to soak up an issuance. Kenya’s 2024s currently trade at mid z-spread of c680 basis points, a c120bps premium to Egypt’s newly issued 2024 as of close of business on 12 June despite slightly stronger credit ratings (one notch higher, at ‘B+’, per S&P and parity for Moody’s and Fitch).

Looking forward, the government remains committed to narrowing the budget deficit to 6.1% of GDP by 2021/22 and 3.6% by 2023/24 via contained growth in non-core recurrent spending and enhanced revenue mobilisation. While the consolidation plans are encouraging and notably more ambitious than the IMF’s May estimate for the 2023/24 deficit of 4.9%, Kenya has a history of failing to adhere to overly ambitious fiscal consolidation plans and we therefore see achievement of this target as unlikely. An early sign of government's willingness to adhere to targets will be

Over the past decade, Kenya has been able to achieve consistently high rates of real growth averaging 5.9% on the back of its investment-led growth model. However, it is unclear how much of Kenya’s strong growth has been due to public versus private sector investment, and consequently whether that growth can be maintained in the absence of a continually large government spending envelope. The removal of the cap on lending rates in November 2019 has created space for the private sector to pick up the slack (with private sector credit growth rising steadily from 3% at the end of 2018 to 9% in March 2020), but it is unclear if the associated rise in economic activity will be enough to offset a more contractionary fiscal stance.

Further, there is evidence that many of Kenya’s flagship investment projects may by white elephants, with the US$3.2bn Mombasa-Nairobi standard gauge railway project experiencing last-mile constraints that make it more expensive than road transport and therefore economically redundant. If Kenya’s public investment drive fails to yield positive economic returns, then growth and revenue could surprise to the downside as the government begins to scale back spending. In any case, average real GDP growth of 5.9% over the past decade has failed to translate to tangible fiscal consolidation, with the budget deficit averaging 6.6% of GDP over the same period.

Debt sustainability analysis

Government claims that Kenya’s public debt is sustainable and remains committed to its 2020 Medium Term Debt Strategy, which recommends a shift towards concessional external borrowing and a lengthening of domestic debt maturities.

Total public debt is projected by the IMF to have reached 64.7% of GDP by the end of 2019/20, including 33.4% of GDP external debt and 31.3% domestic. Kenya’s external debt stock is almost evenly split between multilateral, bilateral and commercial sources, though almost 75% of bilateral debt is due to non-Paris Club sources (mainly loans from China to finance the standard gauge railway). Rather than pursuing debt relief through the G20’s DSSI initiative, we think it more likely that Kenya will opt for ad hoc bilateral relief with major creditors such as China given its high reliance on commercial debt and the potential stigma attached to DSSI participation that could jeopardise future market access.

The IMF last conducted a DSA on Kenya in May, flagging a high risk of debt distress but saying that it remains sustainable. Public sector debt is projected to rise from 61.7% of GDP in 2019 to a peak of 69.9% in 2022, which – after applying a 5% discount rate per IMF norms – remains below the 70% PV threshold for countries (like Kenya) classified with a strong carrying capacity.

That said, Kenya’s debt service burden remains concerning with debt service rising to 21.3% of revenue in 2019, double the emerging and developing country average of 10.7%. In addition, the premise of debt sustainability is based on what we believe to be overly optimistic fiscal consolidation projections. While our forecast sees debt rising to a peak of c71% of GDP in 2022/23 if the IMF’s fiscal targets are met, it continues rising to 85% of GDP by 2024/25 if the primary balance is held constant at its 10-year average.

Kenya’s debt could potentially become unsustainable at this level, with both the PV of external debt to exports and PV of public debt to GDP indicators breaching IMF thresholds and debt service rising to nearly 40% of revenue by 2024/25. In such a scenario, we think Kenya would risk losing access to the commercial debt markets it has relied on to finance its large deficits in recent years. That said, strong demand for Egypt’s recent external issuance despite a debt burden approaching 85% of GDP shows that Kenya could potentially retain market access in the absence of consolidation for at least several years longer. Likewise, continued access to concessional borrowing sources will likely be predicated on the reversal of the income tax cuts laid out in this budget, which are meant to be a temporary stimulus rather than more 'permanent' revenue measure. With a debt stabilising primary deficit of c1% of GDP (compared to 4% currently), we view a fiscal tightening of roughly three percentage points of GDP as necessary over the medium-term to set debt on a sustainable path.


 
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Macro Analysis / United Kingdom

Listen: The UK’s profound economic challenge

ING Think
9 July 2020
EUROPE: UK Chancellor Rishi Sunak has laid out the next phase in the government’s response to the Covid-19 pandemic, as the economy reopens after a three-month lockdown and the worst slump in 300 years. But will the plans work? In this podcast, ING's Developed Markets Economist James Smith shares his thoughts.

 
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Strategy Note / Sri Lanka

Sri Lanka: Waiting for election and IMF; cheap stocks but fiscal derailment

  • Sri Lanka requested US$800m as a condition-free loan to deal with Covid-19 (RFI) on 30 April but no IMF decision yet
  • With fiscal control already derailed, expectations had dimmed for final (US$200m) tranche of conditional IMF loan (EFF)
  • Sri Lankan stocks are cheap but so are Asia and FM peers; fiscal, FX and IMF uncertainty may not be resolved by election
Hasnain Malik @
Tellimer Research
5 June 2020

In May, the Sri Lankan stock market finally re-opened after an ad hoc 51-day hiatus. To turn more positive, we need to see, in June, a parliamentary election (that cements the grip on power of the Rajapaksa brothers, President Gotabaya and Prime Minister Mahinda) and the positive resolution of negotiations with the IMF (where the sticking point is whether the government, led by the Rajapaksas, is prepared to rein in its fiscal populism).

Fiscal derailment means IMF-induced policy credibility even more important

In one sense, the larger the majority commanded in Parliament by the Rajapaksas, the more credible the commitment they make to the IMF. Beyond the uncertainties of any election, the problem here is that the Rajapaksas are associated with pro-business, pro-growth policies and with economic stress resulting from the Easter 2019 terror attack and Covid-19 on tourism and the oil price fall on GCC remittances, the onus likely falls back on to government largesse, if growth remains their priority.

Sri Lanka requested US$800m as a condition-free loan to deal with Covid-19 (rapid finance facility) on 30 April, but there has been no IMF decision yet. With fiscal control already derailed, expectations had already dimmed for disbursement of the final (US$200m) tranche of the existing conditional IMF loan (extended fund facility) – and the local IMF mission chief publicly confirmed the end of this program this week (according to Bloomberg).

Note that one of Sri Lanka's largest bilateral loans, eg US$3.5bn from Japan issued at the same time as the IMF EFF in Q2 2016, was originally contingent on the IMF program – it is not clear how a shift from an IMF loan that is conditional upon the recipient country meeting specified policy metrics (EFF) to one that does not (RFI) impacts access to this sort of bilateral loan (let alone access to the eurobond market).

The apparent delay in the IMF's response to Sri Lanka's RFI request is a stark contrast from the experience of other countries that are in an existing program (Pakistan), have recently exited one (Egypt) or were not near one (Bangladesh).

Parliamentary election

On 2 March, President Gotabaya Rajapaksa dissolved Parliament (six months before its full term) and announced an election on 25 April. In mid-April, the Election Commission announced a postponement until 20 June due to Covid-19. On 2 June, the Supreme Court dismissed petitions challenging the dissolution of Parliament. The Election Commission is scheduled to announce a confirmed date for the election on 8 June.

The exact composition of the outgoing Parliament was made unclear by the creation of a new political party by the Rajapaksas since the last parliamentary election (2015), the SLPP, and the multiple floor crossings of MPs at the end of 2018 when Mahinda Rajapaksa was briefly appointed prime minister (by then President Sirisena).

As in all Sri Lankan elections, the core battle is over the Buddhist, Sinhalese majority (70-75% of the population). Other key factors include the perceived economic, anti-corruption and security failures of the previous UNP-led government, the time elapsed since the failed attempt to fast-track Mahinda as prime minister, momentum from Gotabaya's presidential election victory (in November 2019) and the organisational prowess of the SLPP (demonstrated in the February 2018 local election victory).

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