Macro Analysis /
Sri Lanka

Sri Lanka: New president appoints interim cabinet; positive for policy direction

    Asia Securities
    22 November 2019
    Published byAsia Securities

    Sri Lanka’s newly elected President Gotabaya Rajapaksa appointed an interim, caretaker cabinet consisting of 16 members today. This followed his appointment of Ex-President Mahinda Rajapaksa as the prime minister. In addition to his post as PM, Mahinda Rajapaksa was sworn in as 1) Minister of Finance, 2) Economic affairs and policy development, 3) Buddhist affairs, 4) Cultural, 5) water supply and urban development, and 6) housing development. We believe the smooth transfer of power from the previous UNP administration is a key positive to establish stability soon after the presidential election. 

    The caretaker cabinet will be in place until parliamentary elections, which we expect by April 2020. We note that the earliest President Rajapaksa can dissolve parliament is March 1st 2020, paving the way for the general elections by April. We expect this to be followed by the 2020 budget reading in April/May 2020. 

    Given that some of the key portfolios of Finance, economic affairs and policy development is under Mahinda Rajapaksa, we expect near term policies to be targeted at boosting overall growth, which we perceive as a much needed positive. Furthermore, over the last few days, the President appointed several key ministry secretaries and provincial governors. In our view, this strengthens the process of policy implementation, supporting our view of policy certainty going into 2020. 

    We expect fiscal stimulus to take place in the form of higher government expenditure, specifically focusing on the agricultural sector in the near term.