Anura Kumara Dissanayake ditches dogma for economic pragmatism

Embraces private sector to stay on track with IMF bailout

By Marwaan Macan-Markar

COLOMBO – In a speech to thousands of supporters rallying for the May 1 Labour Day holiday this year, Sri Lanka’s leftist President Anura Kumara Dissanayake delivered an impassioned celebration of workers’ rights in a simple red polo shirt, behind him a sprawling backdrop featuring a yellow hammer and sickle set against a scarlet screen.

Three months later, barely a five-minute walk from that May Day rally, Dissanayake stepped into a different setting to mingle with a different crowd. Looking sharp in an all-black, formal shirt worn over pants, he rubbed shoulders with wealthy foreigners and Colombo’s uber-rich at the opening of the plush, multimillion dollar City of Dreams Sri Lanka casino at a luxury integrated resort.

The 56-year-old’s ability to navigate such contrasting worlds has earned him both praise and criticism since his rise from the political margins to claim the all-powerful presidency one year ago. The landslide win secured in last November’s general elections by his left-leaning National People’s Power (NPP) grouping went on to shatter the grip of entrenched political dynasties that had ruled the Indian Ocean island of 22 million people for nearly eight decades.

For all his leftist credentials, the president – often referred to simply by his initials, AKD – has confounded sceptics who feared a radical economic agenda would follow his election. Sticking to the tough terms of a $3 billion bailout package from the International Monetary Fund (IMF) needed to rebuild the country’s battered economy after its 2022 bankruptcy and sovereign default, the government, packed with previously untested ministers, has presided over a rising stock market, a steady currency and an influx of remittances from Sri Lankans overseas.

The NPP’s largest constituent party is the Marxist-Leninist Janatha Vimukthi Peramuna (People’s Liberation Front), a party that staged two violent uprisings, has a tight-knit politburo that determines policies and is known for its socialist economic agenda. But NPP insiders say that Dissanayake’s embrace of pragmatism over dogma was born of necessity as he began his term as the island’s ninth executive president with opposition parties predicting a doomsday scenario.

“We feared capital flight, the stock market crashing and the rupee rapidly depreciating,” Lakmali Hemachandra, a government lawmaker who chairs the parliamentary oversight committee on economic development and international relations, told Nikkei Asia.

“It was a worrying picture that the opposition had forecast, so our priority was to stabilize the economy and strike a balance with all sectors to prevent this economic crash.”

The irony of a left-leaning standard bearer, who grew up in rural poverty, ensuring calm as a sensible economic manager has been hard to ignore within Sri Lanka’s private sector, well aware of the politically challenging economic blueprint that Dissanayake inherited.

“They (the government) see the private sector as the engine of growth and have accepted that the government’s role is to create a better business environment to facilitate private investment,” said Krishan Balendra, chair and chief executive officer of listed company John Keells, Sri Lanka’s largest conglomerate. Its newest hotel in Colombo houses the City of Dreams Sri Lanka casino.

“That has generated business confidence … and also a bit of a surprise given how the NPP was viewed politically before last year’s elections.”

Dissanayake’s presidency is dotted with similar contrasts, prompting Colombo-based diplomats to tease out the significance of this political makeover. “He does not want to rock the boat, but be open and pragmatic,” the head of a Western mission told Nikkei. “He has prioritized stability to continue the country’s economic recovery path [rather] than ditch it for radical solutions.”

To be sure, opposition figures are not convinced. “AKD is having an identity crisis,” said Harsha de Silva, an economist and lawmaker of the Samagi Jana Balawegaya (SJB), a centrist party that heads the parliamentary opposition. “On the outside he has become a complete convert to the IMF and its liberal reform agenda, but they sang a different radical tune before the polls and that is not going to go away.”

But one year on, the economic reality has proved otherwise.

“The alarmists were proved wrong, because the new government kept the IMF program on track at the policy level, and it believes that it is good for us since the country is still not out of the woods,” said Indrajit Coomaraswamy, former governor of the Central Bank of Sri Lanka. “It also assured continuity by retaining key officials who had worked with two previous presidents since the (2022) crisis, rather than changing them.”

Dissanayake’s position on the IMF – an institution pilloried by his party during years in the opposition – has not been lost on senior officials of the Fund, either.

They acknowledge that Dissanayake’s choice was a break from the past, given that Sri Lanka had been to the IMF for bailouts 16 times before the current round – the second highest number in Asia after Pakistan – and previous governments almost abandoned half of the bailouts prematurely.

“Hard-earned gains were reversed. Growth faltered. The country cannot afford to repeat that cycle,” warned Gita Gopinath, then serving as the Fund’s first deputy managing director, during a mid-June conference in Colombo to assess Sri Lanka’s post-crisis economic rebound.

Foreign investors have taken note.

“One clear indicator of the business climate in Sri Lanka (under the Dissanayake administration) is the stock market, [where] the benchmark CSE All Share Price Index has gained 85%,” said Ruchir Desai, fund manager at Hong Kong-based Asia Frontier Capital, speaking earlier this month. “This is a reflection of the recovery in the economy backed by pragmatic policies, [resulting in] significant improvement in both business and consumer confidence.”

Sri Lanka’s central bank forecasts that 2025 will see the country record a current account surplus for the third consecutive year. Gross domestic product growth hit 5% in 2024, and is expected to be followed by 3.5% in 2025 and 3.1% in 2026. And by December 2024, external reserves had reached $4.7 billion, bolstered by a spike in tourism earnings and overseas worker remittances, helping to outstrip the IMF’s target of $4.6 billion in reserves by that date.

Still, the AKD administration is coming in for flak for a perceived slow pace of structural reform.

“Sri Lanka needs annual growth of 5% to build our reserves to do more than paying our foreign debt,” said opposition lawmaker de Silva. “If there is no reform, there will be no new investment and no new jobs, because growing at 3% is a recipe for disaster.”

Observers reckon that Dissanayake still has the political goodwill to sell an economic reform package – and should press ahead with it.

“The president has led by example and the public still has great trust in him, so he easily can push ahead with reforms,” said Murtaza Jafferjee, chair of the Advocata Institute, a Colombo-based policy think tank. “We cannot miss this moment because another might not come.”

On the upside, small and medium-sized businesses in Colombo are taking note of changes in their engagement with the state sector that favour transparency in a bid to reduce corruption — in his election campaign AKD made the case that the rampant graft of previous regimes had fuelled the country’s 2022 economic meltdown.

“More transactions have to be done online through a digital platform, making things more transparent,” said Sriyantha Cooray, who runs a medium-sized company producing batteries for vehicles. “So, when you make a bid to supply the government through a tender process, there is no physical contact, and the results of the winning and losing bids are published online.”

The first half of 2025 has seen the country’s anti-graft commission receive 3,836 new complaints, marking a spike from the previous year and a reflection of the changing political culture.

“Public trust in the (anti-corruption commission) has perhaps increased significantly,” said Lasanthika Hettiarachchi, interim senior manager, advocacy and research, at Transparency International Sri Lanka (TISL), the local branch of the global anti-corruption watchdog.

But the anti-graft drive, which TISL notes has resulted in arrests of a wide swathe of officials, from former powerful ministers and senior bureaucrats to ranking police officers, has also been dogged by a question among veteran analysts in Colombo: Is this a smokescreen to distract from the NPP’s inability to deliver on material benefits for Sri Lankans impoverished by the crisis?

“Their focus on anti-corruption and accountability could become a distraction from falling short of their commitments to deliver on their economic pledges to the public,” said Paikiasothy Saravanamuttu, executive director of the Centre for Policy Alternatives, a Colombo-based think tank.

A failure to bring down rampant poverty is a case in point. An August report by a UN agency found Sri Lanka’s poverty rate had soared to 24.5%, double the pre-crisis figure in 2019, despite the macro-economic recovery. Half of Sri Lankan households, the report said, were skipping meals or limiting the size of their meals.

Earlier this year, the World Bank also flagged concerns over poverty.

“While Sri Lanka’s economy is bouncing back stronger than expected, a significant portion of the population — about a third — remains in poverty or is at risk of falling back into poverty,” David Sislen, World Bank division director for Maldives, Nepal and Sri Lanka, wrote in a report. “To ensure this recovery works for everyone, especially those who have been hit hardest, Sri Lanka can focus on policies that create jobs and support the poor.”

This kind of sustained economic pain is a challenge for Dissanayake, concede voters who backed him and his party.

“They may be honest and have good intentions, but they are still having difficulty to deliver on the promises to the people,” said Yasodhara Bogamuwa, a 65-year-old retired government official who lives in a suburb of Colombo. “People were expecting this economic problem affecting households to be solved faster.”

But the prospect of an opposition backlash tapping into such economic pain appears remote for now, according to political insiders.

“They (the opposition) are all in disarray, are leaderless or grappling with leadership struggles,” said one person with knowledge of the situation, requesting anonymity, citing the sensitivity of the matter.

“The only pushback Dissanayake and the NPP may face, for now, is from dissension within their own ranks.”

– Marwaan Macan-Markar is Asia regional correspondent, Nikkei Asia where this article was initially published