By Uditha Jayasinghe

COLOMBO (Reuters)

Sri Lankan President Anura Kumara Dissanayake's sweeping coalition election win this week underscored increasing support for his leftist policies. However, he is challenged by the need to guide the nation through financial recovery with a largely inexperienced group of lawmakers.

Dissanayake's coalition, the National People's Party (NPP), previously held only three seats in parliament but achieved a landslide victory in the recent general election, securing a two-thirds majority in the 225-member house.

With this significant mandate, the 22 million citizens of Sri Lanka are looking to him to implement measures aimed at combating poverty and overcoming the worst financial crisis the nation has faced since gaining independence from British rule in 1948.

Dissanayake, who hails from a modest farming background in the southern city of Thambuttegama and holds a degree in physical science, triumphed over political elites to secure his presidential term in September.

His coalition, primarily composed of new political entrants, decisively defeated candidates from the opposition led by Sajith Premadasa's Samagi Jana Balawegaya party and seasoned lawmakers allied with the former President Ranil Wickremesinghe.

Nevertheless, his pledges to reduce taxes and provide enhanced welfare support to millions living in poverty may conflict with the ongoing implementation of a $25 billion debt restructuring initiative and efforts to advance a $2.9 billion agreement with the International Monetary Fund (IMF).

"The president has a huge mandate now to carry through the reforms but also huge expectations from the people," noted Bhavani Fonseka, a researcher at Colombo's Centre for Policy Alternatives. "This is unprecedented; we haven't seen this kind of victory before. People voted for a change."

Despite outlining a manifesto that emphasizes a homegrown strategy for addressing Sri Lanka's economic troubles, Dissanayake has adopted a more conciliatory stance since occupying the presidency. He indicated that any modifications to the IMF program would be made in consultation with the fund and expressed his commitment to ensuring debt repayment. His administration has maintained dialogue with the IMF and progressed on a preliminary agreement with bondholders reached earlier in September.

A third review of the IMF program was postponed due to the parliamentary elections. The new government is anticipated to intensify negotiations with the IMF, and fiscal targets established under the program will likely be incorporated into a budget set to be presented to parliament early next year.

"We think it is unlikely that Dissanayake is emboldened by this sweeping victory to unveil a market-unfriendly set of policies that might be truer to his Marxist roots," stated Tellimer Insights in an analyst note. "All of his actions and rhetoric so far… have demonstrated his acknowledgment that there is little alternative but to continue down the path of policy course correction."