Sri Lanka’s President Defies Calls to Resign as Crisis Deepens

(Bloomberg) -- Supporters of Sri Lankan President Gotabaya Rajapaksa said he will not resign under any circumstance after his government was left with a minority in parliament, making it tougher to resolve an economic crisis that has brought people to the streets.   

Rajapaksa is struggling to assemble a team to seek a bailout from the International Monetary Fund after his finance minister resigned within 24 hours of being sworn in. The former military officer repealed a five-day-old emergency order late Tuesday as crowds of protesters defied the proclamation that had given him sweeping powers to detain people and seize property.

The protesters' calls for the leader to resign were reflected in parliament with 42 lawmakers from the ruling coalition saying they will vote as independents, leaving the government with less than the 113 needed to maintain a simple majority. However, the remaining legislators supporting Rajapaksa said the leader will not be stepping down.

“I would like to remind that 6.9 million voted for the president,” Johnston Fernando, the chief government whip, said in parliament Wednesday. “We are saying as government, that under no circumstance, will the president resign. We will face this.” 

With a minority in parliament, a new prime minister can be appointed by the president to replace his brother Mahinda Rajapaksa, or snap elections can be called. 

The speaker, a Rajapaksa ally, earlier rejected the opposition's proposal for parliament to ask the president to step down, saying it had no democratic right to do so, the Daily Mirror reported. He reiterated the president's offer for the opposition to take part in an interim government to resolve the crisis that has seen inflation accelerate to the fastest pace in Asia. 

Opposition groups have repeatedly refused to join a caretaker government after the entire cabinet resigned following street protests by citizens. They first want to see a change to the country's constitution that will limit Rajapaksa's wide-ranging executive powers, which include calling for elections mid-way through a five-year parliament term and appointing and firing government officials and judges. 

Rajapaksa, who usually issues late night gazettes, has yet to address parliament and the country over the political situation. 

In a blow to the administration, Finance Minister Ali Sabry resigned in less than 24 hours after he was appointed by Rajapaksa. He would have been a key member of the team negotiating with the IMF and local media reported that negotiations were ongoing for his replacement. 

Global asset managers including Fidelity Investments and T. Rowe Price Group are staring down the risk of default. Holders for which data is available are estimated to own 4% of the outstanding debt, and the amounts would constitute a small portion of the firms' overall assets.

The Sri Lankan rupee plunged 4.5% to 312 per dollar on Wednesday, a record low. The 5.875% dollar bond maturing in July dropped nearly 6% to trade at 56 cents on the dollar, the lowest since it was issued a decade ago. Neuberger Berman, who is the biggest holder of those bonds, said it will continue to hold the debt as the recent selloff has made prices relatively attractive.

The protests, which started last month, were initially against shortages of food, surging living costs and 13-hour power cuts but have now become calls for Rajapaksa and his family to step down. Last week, a crowd gathered at the president's private home and clashed with the police that initially prompted the emergency declaration.

Sri Lankans have defied the curfews and continued to gather across the country, holding up placards that say “Gota, Go Home.” Dozens of them were gathering near the homes of the prime minister and former cabinet members as well as the heavily-guarded parliament house on Tuesday.

In a reflection of the economic squeeze, Sri Lanka temporarily closed its embassies in Oslo and Baghdad, and the consulate general in Sydney due to the “foreign currency constraints faced by the country.”

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