CEYLON: BANDARANAIKE'S TIME OF TROUBLES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R002000210012-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Document Release Date: August 9, 2006
• Sequence Number: 12
• Publication Date: May 27, 1964
• Content Type: MEMO

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C E N T R A L I N T E L L I G E N C E A G E N C Y
27 May 1964
STAFF MEMORANDUM NO. 26-64: (Internal ONE Working Paper --
CIA Distribution Only)
SUBJECT: Ceylon: Mrs. Bandaranaike's Time of Troubles
SUMMARY
Worsening economic conditions and continued intra-party feuding
have weakened Ceylon's Sri Lanka Freedom Party (SLFP) government.
0
Fearing the loss of her majority, Frime Minister Bandaranaike is
seeking to gain new support from other political groups and to
keep defections from her own ranks to a minimum. On balance,
we believe Chat Mrs. Bandaranaike is likely to stay in office
until late 1964 and may even last until elections are due in
mid-1965, either by bringing some members of the Marxist opposition
parties into the government or by maintaining a tenuous unity
within the SLFP. However, the electoral prospects of the SLFP --
with or without Marxist support -- are poor. While the prospects
of the moderately conservative United National Party appear somewhat
better, the next elections are unlikely to produce a majority
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for any party. In the long run, Ceylon's democratically elected
governments will face increasingly severe challenges as the
nation's economic problems can probably be resolved only by the
adoption of unpopular austerity measures. Until some soluticn
is achieved, Ceylon will face the danger of, continued economic
deterioration and political instability.
1. The position of Mrs. Bandar.anaike's government has
steadily deteriorated during recent months. Continuing inflation,
labor unrest, rising unemployment, and shortages of consumer
goods have greatly reduced its popular support. Its generally
inept Government leaders are at a loss to know how to deal with
the nation's basic economic problems.* Indeed, even if they
# Ceylon lives by exporting raw materials and importing consumer's
goods (including half its food supply). In the last decade, export
earnings have remained constant but import costs have increased
nearly 30 percent. Courting popularity with the nation's expanding
population, the SLFP government has increased its expenditures
on food subsidies, consumers gocds and the like, leaving little
for capital investment projects. It has paid for them by deficit
financing (leading to the present inflation) and by going through
the nation's foreign exchange reserves -- which are now nearly
exhausted.
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were able to produce a program adequate to deal with these problems,
Prilne Minister Bandnranaike's Sri Lanka Freedom Party (SLFP) --
which holds only 82 of 157 seats in Parliament -- probably would
now be unable to unite in its support. Lacking strong leadership,
divided between advocates of moderate and extreme socialism, and
burdened with personal feuds, the SLFP is showing signs of
splitting into mutually antagonistic groups. Feecring the loss of
her majority, the prime minister proprogued Parliament for four
months in early March to gain time to improve her political
position.
Possible Courses of Action
2. The prime minister -- whose overriding concern has been
the retention of' power -- had several possible courses of action
open to her. She could attempt to establish authoritarian rule;
seek a coalition with at least some leaders of the Marxist United
Leftist Front (ULF); try to work with Dudley Senanayake's moderate
The United Left Front (with 20 members of Parliament) is a
loose amalgam of three Marxist parties, including the
Communists, (4 seats) the Trotskyite LSSP (13 seats), and
the Buddhist Nationalist MEP (3 seats). Formed in 1963,
it is more an undisciplined coalition of long estaii1.ished
political parties than a unified movement.
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conservative United. National Party (UNP); or try to reunite her
own SLFP. There are some indications that she explored the
possibilities of establishing a dictatorship -- possibly with
militant Buddhist backing. However, this was at least temporarily
dropped when she was unable to gain sufficient support, and when
rumors of such plans led the UPTP and ULF to mobilize their forces
against such a move. If overtures for a political coalition were
made to the UNP they were at best half-hearted. While Mrs. Bandaraiiaike'
personal outlook on economic and social matters is rot much different
than that of the UNP leaders, the bitter Bandar ana.ike-Senanayake
family feud overrides any such considerations.
3. Thus the most promising alternative of SLFP rule would
be a coalition with the ULF, or at least with some pants of it.
The ULF members of Parliament have supported (as steps in the right
direction) those socialist measures Mrs. Bandaranaike has adopted.
Elements of the ULF have had no-contest electoral agreements with the
SLFP and some ULF officials have actually served in coalition
cabinets with the Prime Minister's late husband. Further, some ULF
leaders -- led by N. M. Perara, head of the LSSP -- now publicly
advocate entering the government with practically no prior conditions.
Claiming they can best enhance their own election prospects by
demonstrating their efficiency and freedom from corruption, they
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are eager to bec.ci.ze Cnbinet ministers immediately.
4. However, not all of the Marxist leadership favor a
coalition with the SLFP. Many will a ree to it only if the Prime
Minister adopts their extremist program of socialization and
nationalization -- which she is not now likely to do. Others
feel that too close an association now with the ever more unpoFular
SLFP would ruin their prospects in the next elections. The "United"
Left Front is so badly divided on this issue that it may itself
break up, with some of its members entering the government and
others remaining in oppositon to their former colleagues. The
Communists and the MEP generally oppose a coalition at this time --
unless their most extreme conditions are met -- while important
elements of the LSSP favor it.
5. Mrs. Band.arana.ike also has serious doubts about the
desirability of bringing the Communist Party or the MEP into the
government -- the former because of its foreign ties, and the latter
because of her personal dislike of its leader. Further, a number of
Mrs. Bandaranaike's own followers are against a coalition with the
ULF and might bolt their Party were one arranged. There are up to
20 conservative MP's in her Party who might depart were she to
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agree to a radical swing to the left. On the other hand, were she
to bring a few of the more moderate Marxists into the government,
with only modest concessions to their point of view, the prime
minister could keep most of her present following. A tactically
astute politician, she is now trying to meet the challenge of getting
as much new support as she can, while losing as little of what she
already has.
6. If she is unable to get the backing of some or all of
the ULF, she has few if any alternate sources of parliamentary
support. The UNP will not cooperate, and has coo few seats of
its own to form a coalition with any right wing SLFP dissenters
plus others now in the opposition. The Feder c! Party,* will not
permit its 15 MP's to work with the SLFP unless the government's
stringent Sinhalization program is relaxed. There is little chance
of this being done.
# The Federal Party is the spokesman of the large Tamil speaking,
Hindu minority who occupy the northern part of the island.
Advocating regional autonomy and linguistic equality, it is
opposed by all the other political groups, who get most of their
support from the Sinhalese speaking, Buddhist majority in the
country.
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7. On balance, we believe that Mrs. Danderanaike will stay
in office until late 1961, and may even last until her parliamentary
term expires in July 1965. She hopes to do so by bringing N. M.
Perera and some of his LSSP followers into the government without
making any major changes in the government's present programs.
She clearly hopes a coalition with leftist elements will reduce
the danger of damaging strikes -- a hope which may be unrealistic
since most unions are controlled by those leftists opposed to a
coalition. While the LSSP has not yet agreed to enter the government,
Ferera strongly desires to become a cabinet minister, and probably
will be able to get the backing of most of the 12 other LSSP members
of Parliament. In this event, the Prime Minister would probably
be able to keep defections from her own Party to a minimum. Most
if not all of the more conservative SI'P members, mollified by the
exclusion of the more extreme Marxists, and apprehensive about their
making further inroads, would probably stay on in the hope of
preventing a more drastic swing to the left. Even if a few SLIP
refuse their support, their numbers would probably not be enough
to bring down the government.
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8. Even if the LSSP's backing cannot be obtained, Mrs.
Bandaranaike may be able to continue in office for a time. At the
present time, her rivals (particularly the UNP) feel that their
election prospects get better each month that her ever-more unpopular
government stays in cffice. Not yet confident of winning an electoral
majority, they could refuse to bring down the government until the
scheduled elections become due. The SLIP, on the other hand,
fearing apoor showing at the polls, could reunite and hang on as
long as possible, hoping all the while that conditions will improve.
Exploiting the normal politician's desire to stay in office as long
as possible, Mrs. Bandaranaike may be able to force a tenuous
unity on the SLFP for the next six months or year.
9. Whether backed by a coalition or not the government's
policies are likely to be about the some. as in recent years.
Basically, they will be a continuation of the present ineptly
administered one of neutralism in foreign policy and some degree
of socialism at home. Ceylon's immediate and critical problem --?
the near exhaustion of her foreign exchange reserves -- will likely
be met by requests for more foreign aid coupled with further austerity
measures at home. These measures will probably be at best
palliatives rather than remedies for the very serious economic
problems which the country faces.
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10. It is possible that these problems have so badly hurt the
present government that it will be unable to get -- or to keep for
very long -- a working majority. Should this happen, the Prime
Minister will probably dissolve Parliament, and call for elections
to be held four months later -- ruling by decree in the interim. In
any case, elections must be held by July 1965, and Mrs. Bandaranaike
cannot look forward to them with optimism.
11. Their outcome -- whenever they will be held -- is by no
means certain, but some trends have become apparent. The UNP is
stronger than was four years ago.* It has greatly expanded its
organization throughout the country, has set up a program of
cultivation of the nation's youth, has inaugurated an effective
propaganda campaign. It has wooed, with some success, the power-
ful Buddhist groups which formerly opposed it. Further, it is now
able exploit the manifest public dissatisfaction with worsening
economic conditions in the country. However, parts of the ULF
In July 1900 it got 38 percent of the popular votes, but only 30
Parliamentary seats, while the SLIP won 75 seats with only 34
percent of the popular vote -- due largely to its no contest
agreement with the LSSP and the CCP. As the winning party, the
SLFP was able to name the six appointed members of parliament.
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(in particular the LSSP) and the SLFP may well again have no-contest
agreements against the UNP, which will be considered the front runner.
12. Recent mun4 ipal and by-elections indicate that the ULF-
SLIP electoral combination has lost some of its magic, and that the
UNP will put up a better showing than before. However, the latter
party is not assured of winning a majority of the seats in
parliament. Its opposition, while ti-maker than before, may still be
just strong enough to prevent it from getting a majority, and no
party will then be able to form a government. The task of finding a
stable, strong regime in such a case will be an extremely difficult
one, and Thrthe-r elections may have to be called. On the other hand,
if the SLFP suffers a szrious schism, or if it cannot join hands
again with all the ULF parties, the UNP stands a good chance of
winning a majority. Were it to come to power, its programs vould
be little different -- albeit somewhat more conservative -- from
those of the present government.
There were two by-elections in 1963 and in one, the UNP tool:
a seat away from the SLFP; in the ocher, the ULF, supported
by the SLFP defeated the UNP, but by a narrower margin than in
1960.
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Some Longer Run Implications
13. In the long term, any freely elected government will face
serious problems and will have only limited means of attacking them.
Ceylon's expensive and economically harmful food subsidy programs --
which consume over 30 percent of the national budget, and other
similar social welfare measures have been a major factor in
bringing on the present crisis. However, their abolition would
mean political suicide to the Party that tried it. The result is
that any government will be hampered by domestic and international
factors from initiating a rational program of long-term economic
development. The latter would entail expanded public and private
capital investment to bring about that economic growth which Ceylon
has not had for a decade. A UNP government probably would attempt
to move in this direction, but unless a significant improvement in
Ceylon's terms of trade occurred it probably would have only limited
room for maneuver in such matters.
14. Thus there is little prospect for improvement in economic
conditions. At best, things will continue as they are now; more
likely will be a slow, continuing decline in living standards. The
public, already dissatisfied, will become more so. The possibility
of more and more extremist measures being taken to overcome these
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difficulties cannot be discounted. At present, Mr. Bandaranaike
is opposed to the nationalization of Ceylon's tea, rubber and
cocoanv.t plantations (which provide the nation with most of its
foreign exchange), but she, or a succeeding government may take
this step eventually. Similarly, despite the many rumors of the
prime minister planning to seize power and become Ceylon's first
dictator, there is little likelihood of her now doing so. However,
the prospects for a dictatorial regime will improve if the present
democracy proves itself unable to meet the challenges which the
country faces.
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