Hannah Ellis-Petersen in Colombo
Dilith Jayaweera can still recall the moment he realised Sri Lanka was hurtling, unstoppably, towards financial ruin.
It was around October 2021 and Jayaweera, a Sri Lankan media magnate and close friend of the Sri Lankan president, Gotabaya Rajapaksa, had invited Basil Rajapaksa, the president’s younger brother, who was also the finance minister, to join him for dinner.
There was little love lost between Basil Rajapaksa and Jayaweera, who had long mistrusted each other. But nonetheless, as the pair ate in his sleek Colombo office, the media mogul had some urgent questions for the man responsible for Sri Lanka’s economy. Was the country heading for a terrible crash?
“Basil couldn’t answer even my basic questions,” recounted Jayaweera. “He was giving very lousy answers – that we’ll find money from here, from there, saying it would all be fine to pay our debts. I saw then he really didn’t understand the economy at all; that it was done, dusted, finished for us.”
What came less than six months later was the worst economic crisis that Sri Lanka has experienced since independence in 1948. The suffering it has caused, as the treasury ran dry and the country became unable to import fuel, food and medicine, has left barely anyone on the island of 22 million people unscathed. According to the UN, Sri Lanka is facing a “dire humanitarian crisis”; many struggle for one meal a day, surgeries and cancer treatments are being halted, schools have shut and petrol sales have stopped as fuel has run out. “Our economy has completely collapsed,” the prime minister, Ranil Wickremesinghe, recently told parliament.
It has prompted an unprecedented political reckoning in Sri Lanka, focused largely on the Rajapaksa family dynasty, which has held power over Sri Lankan politics for two decades. Since March, mass protests have called for the resignation of the president. Mahinda Rajapaksa, his brother and a former prime minister and president, has already resigned because of the pressure, as have Basil Rajapaksa and several other family members who were in the cabinet or held political posts.
According to those who witnessed it from the inside, the story of Sri Lanka’s crisis is rooted in this family, who concentrated power to the point that the country came to resemble an autocratic family business, accountable to no one until it pushed the nation to bankruptcy.
As Sri Lanka began to unravel, the family became riddled with infighting and the once cordial relationship between the two brothers Gotabaya and Mahinda descended into bitterness as they both clung to power. On 9 May, the family divisions spilled out on to the streets as the country’s worst violence in more than three decades took place.
Cabinet ministers, opposition politicians, Rajapaksa aides and confidantes – many of whom still have vested interests and strong ties to various Rajapaksa family members – pointed overwhelmingly to Basil, the younger of the brothers and so-called strategist of the family, as the one who oversaw the downfall.
Operating first as a shadowy power broker behind the scenes before becoming finance minister, he was described by several ministers as having unparalleled influence over the president and cabinet, yet proved incompetent at running the economy and ignored multiple warnings that a financial meltdown was coming.
“Basil was the true power,” said Udaya Gammanpila, who was a cabinet minister between 2020 and 2022 before Basil had him removed in March for being publicly critical. “Gotabaya didn’t know how bad things were and Mahinda was getting old and not in the best health, he was just the figurehead. Everything was controlled by Basil.” Basil declined to be interviewed for this article and his close aides refused to speak on the record.
Sri Lanka’s economic problems began long before Gotabaya took power in late 2019. From 1977 onwards, successive governments built the country on a precarious foundation of debt. Imports overwhelmingly exceeded exports and a progressive but costly welfare state widened the deficit further, which was covered by more high-interest borrowing.
“This was a timebomb that had been accumulating for several decades now,” said Gammanpila. “Everything was built with borrowed, not earned, money.”
From 2005, when Mahinda was elected as president and the family began to dominate the political landscape, they, too, began rampantly borrowing, first to pay for Sri Lanka’s three-decade civil war against Tamil minority separatists, which was brought to a brutal end in 2009, then for a “super-growth” development spree of roads, airports, stadiums and power grids. GDP grew from $20bn (£16.6bn) to $80bn but more than $14bn was borrowed in the process, and all the Rajapaksas became mired in accusations of vast-scale corruption, from bribes to money laundering.
Mahinda lost the 2014 presidential election but the dynasty had no intention of relinquishing its hold on power. Basil, who was out on bail on corruption charges that were later dismissed, set about forming a new political party, the Sri Lanka Podujana Peramuna (SLPP). After an amendment to the constitution meant Mahinda was not allowed to run for a third term, it was decided – after considerable resistance by some in the family ranks – that Gotabaya would be their candidate in the November 2019 presidential elections. But, speaking in 2018, Basil made his intentions known. “The truth is that if Gotabaya comes forward it will be I who will run the country since he is new to politics,” he told local media.
Gotabaya, an austere, devout and straight-talking military man, was the opposite to his older brother, the charismatic and politically savvy Mahinda. He had attracted the backing of an influential group of intellectuals, business leaders and academics, who believed he would forge his own path from the previous Rajapaksa regime. However, Gotabaya’s experience in politics was limited; he had only held the unelected post of defence secretary in Mahinda’s administration, where he was celebrated for ending the civil war, despite accusations of war crimes.
As soon as Gotabaya took office, “the family took over; he was dancing only to their tune”, said Nalaka Godahewa, a former CEO turned SLPP MP who had backed Gotabaya. Basil loyalists were given the key cabinet portfolios and the family parachuted in PB Jayasundara, a bureaucrat who had a decades-long relationship with Mahinda and Basil, to become secretary and economic adviser to the president. Jayasundara had once been barred from holding public office, but that was later overturned.
“Gotabaya had no political experience and knew nothing about economics; he depended entirely on PB Jayasundara to run the economy,” said Charitha Herath, an SLPP MP who sat on several parliamentary finance committees. “The problem was, he was giving very bad advice.”
It was on his advice that Gotabaya implemented sweeping tax cuts in 2019, despite international warnings against it, causing government revenue to fall by more than a trillion rupees in two years. As Sri Lanka was hit by Covid, and money from tourism and foreign remittances dried up, Jayasundara pushed back against import bans and going to the IMF to restructure the country’s loans, even as debt repayments were mounting and warnings were given by the central bank monetary board from November 2020. He is also accused of feeding the president misleading information, including a cashflow statement – which Jayaweera said he saw himself during a meeting with Gotabaya in early 2021 – that presented a rosy picture of Sri Lanka’s outgoings.
The Rajapaksas’ grasp over the government tightened further after the SLPP swept the 2020 parliamentary elections. Mahinda became prime minister, while his son and heir apparent, Namal Rajapaksa, was brought into cabinet, as was the eldest Rajapaksa brother, Chamal.
“The Rajapaksas controlled the entire country,” said Asanga Abeyagoonasekera, a Sri Lankan political analyst and author. “The government became autocratic, ultranationalist and heavily militarised.”
They pushed through an amendment to the constitution that concentrated more power into the president’s hands and allowed for dual citizens to become MPs. Not long after, in July 2021, Basil – who is also a US citizen – was made finance minister, though several in the cabinet believed he had already been running the economy with Jayasundara behind closed doors.
According to several ministers, Basil swiftly became the de facto head of the cabinet. He would decide which cabinet papers were approved and had the last word on all big decisions, while Gotabaya and Mahinda – who was now in his mid-70s and had stepped back from decision-making – would nod along. “The president accepted whatever proposal Basil put before him,” said Vasudeva Nanayakkara, a leftwing MP who was a cabinet minister in Gotabaya’s ruling coalition until April this year.
Basil did not tolerate dissent in cabinet and under his watch, those in the cabinet and on financial oversight committees claim they were presented with misleading information about the country’s finances.
“I submitted 11 cabinet papers warning about the impending crisis,” said Gammanpila. “But whenever we raised an economic issue, Basil felt we were interfering with his work and he got offended. He repeatedly said that everything was fine. But in my assessment, he doesn’t have even a basic understanding about economics.”
Meanwhile, dysfunction reigned at Sri Lanka’s central bank. A glaring rift had developed between Basil and the bank governor, Ajith Nivard Cabraal. They refused to speak for months and blamed each other for the mounting financial problems. Cabraal began excessively printing money to try to fill the gaps in the treasury, triggering mass inflation.
Government bureaucracy was also in a state of disarray after Gotabaya had appointed military generals, some implicated in war crimes, to run 15 civilian government ministries, which proved autocratic and inefficient. Defence spending, higher under Gotabaya than during the civil war, further drained the treasury while his presidential order suddenly banning all chemical fertilisers resulted in agricultural devastation.
By the beginning of 2022, it was clear that Sri Lanka’s economy, in particular its reserves of foreign currency, was facing an unprecedented catastrophe. The country owed $51bn in foreign loans, of which it was expected to pay back almost $7 billion that year, but it was running out of dollars and had been locked out of all international markets to borrow any more.
As Sri Lanka struggled to pay for food, petrol and medicine imports and inflation kept soaring, people began to protest in droves. Internally, the Rajapaksa family were shocked that the anger on the streets was viscerally directed towards them. As the demonstrations grew, the president was advised that even if he would not go, others in his family needed to.
In early April, to the fury of Basil, Gotabaya asked for the resignation of all Rajapaksas who held government positions, except Mahinda. However, this did little to ease public anger and Gotabaya quickly became convinced the only way to secure stability was for Mahinda also to also step down as prime minister.
Those on the inside say Mahinda agreed to resign on three or four occasions, but would then return to his inner circle – including his wife and two sons who were in politics – to be persuaded he did not need to go. “This kept on happening for about two weeks,” said Godahewa. Frustration and anger grew between the two brothers.
“The relationship between Gotabaya and Mahinda had always been very cordial, very loving and paternal,” said Nanayakkara. “But towards the end, as Gotabaya told Mahinda in so many words to step down, it was very, very bitter.”
It was on 9 May, during a rally at the prime minister’s Colombo residence – a few days after Mahinda had finally agreed to go – that the rupture between the two brothers came to a head. Some described the meeting as a farewell to Mahinda, others as a show of strength to demonstrate to Gotabaya that it was Mahinda who was still the true political magnet of the family.
Arranged by Basil, Mahinda’s son Namal and their close cabinet allies, hundreds of Mahinda’s loyal grassroots supporters were bussed into the prime minister’s residence. But as witnesses and video footage testify, the meeting quickly got out of hand. Riled by chants of “Whose power? Mahinda’s power” and the government’s chief whip, Johnston Fernando, calling out “let’s start a fight … he [the president] should hand power over to us”, some of the supporters charged out of the gates, led by several SLPP MPs.
They marched towards Galle Face, the anti-government protest camp where thousands had been gathering to demonstrate for weeks, and began violently beating hundreds of protesters and setting alight their tents.
As reports of the attacks reached Gotabaya Rajapaksa, who was at home in Colombo, he exploded in anger. The night before, having already had concerns about the gathering, he had given instructions to the chief of police to be ready with officers, teargas and water cannon.
“The president was screaming over the phone to the senior DIG, asking why the hell haven’t you prevented these people entering Galle Face,” said Godahewa, who was holed up at Gotabaya Rajapaksa’s home for two days as it all took place. “He was shouting: ‘I’m the president, you do what I say, somehow stop these people.’”
But, according to police and ministerial sources, the police chief held back from taking action against the mobs attacking Galle Face, having been told by his seniors that this was a family matter between Mahinda and Gotabaya and it was safer for police to not be seen to take sides.
By the time the police responded, the spark of violence had been lit, engulfing Sri Lanka in some of the worst attacks in decades. A mob tried to storm the prime minister’s residence, leaving him barricaded in his bedroom with his sons and allies until he was evacuated by special forces at 4am. The houses of more than 70 SLPP MPs and Rajapaksa allies were set alight and an MP was beaten to death by a mob. Many believe militant political elements who wanted to bring down the government seized the opportunity to launch a coordinated attack.
Gotabaya also appeared to have lost control of the military, who failed to intervene, many said out of fear by top brass that they would be held accountable if anyone was killed. “I saw how much the president pleaded with the army chief to take action, saying: ‘Send troops, do something,’” said Godahewa, whose own house was burned down. “The president was so frustrated because everybody’s house was burning and the army was not stopping them.”
In the aftermath, the Rajapaksas were a family divided: Gotabaya and Chamal, the eldest of the brothers, on one side, and Basil, Mahinda and his sons Namal and Yoshita on the other. Gotabaya blamed those around Mahinda for stirring up violence with “that stupid meeting” and publicly Chamal condemned Mahinda for not resigning earlier. Privately those close to Basil pushed the narrative that Gotabaya was not up to the job any longer.
Those around Gotabaya – who was frequently described as “out of touch” with the mood of the people – believe he still has no intention of stepping down as president, even though he cuts an isolated figure; this week he was driven out of the parliament chamber by chants of “Gota Go Home” by MPs.
Some said he was staying put out of a militaristic obligation to duty and preserving the Rajapaksa name, while Godahewa said that “in his mind, he’s still naively determined to have a positive legacy”.
The future of the Rajapaksa dynasty now looks increasingly uncertain. A new amendment to the constitution has been submitted to cabinet for approval, which will reduce presidential powers and once again ban dual citizens holding office. Basil initially put up a fierce resistance to it but last month pre-emptively stepped down as an MP, though other SLPP MPs continue to try to halt it and it has been criticised for not going far enough.
Yet some remain unconvinced Sri Lanka has permanently thrown off the shackles of dynastic politics. “The Rajapaksas are known to play the long game, so I couldn’t say for sure if this will be the end of them – look at the Philippines, there’s a Marcos back in power after 30 years,” said Herath. “But right now, there’s no place left for them here.”