In crisis, India emerges as Sri Lanka’s trusted neighbour
Since January 2022, India has provided $4 billion in loans, swaps and aid to Sri Lanka, facing its worst financial crisis
Two days ahead of Foreign Secretary Vinay Mohan Kwatra-led delegation’s visit to Sri Lanka to discuss with authorities of the island country about its economic situation, India on June 23 provided the crisis-hit country with more than SLR 3 billion worth of humanitarian supplies.
Since January 2022, India has provided $4 billion in loans, swaps and aid to Sri Lanka, facing its worst financial crisis since its independence in 1948. Burdened with over $50 billion loans from foreign creditors, Sri Lanka is struggling with a severe balance of payment crisis, resulting in huge problems in procuring grain, fuel, fertilizers and others.
On June 22, Sri Lankan Prime Minister Ranil Wickremesinghe spoke the truth in the Parliament. He said the island country’s economy has “collapsed completely” and that it is not able to purchase imported fuel, even for cash, due to heavy debts. “We are now seeing signs of a possible fall to rock bottom,” the Sri Lankan Prime Minister said.
As a first responder to Sri Lanka’s worst crisis, India has provided all that could help the island country in easing its pain. “India will always be guided by the best interests of the people of Sri Lanka expressed through democratic processes,” Ministry of External Affairs Spokesperson Arindam Bagchi said. Besides, monetary support, India has offered fuel, food and medicines to the island country where a series of policy mistakes, including cut in direct taxes in November 2019, abolition of few other taxes, lockdowns due to Covid-19 pandemic and non-arrival of tourists, resulted in hurting its revenue situation.
For India, Sri Lanka presented a challenge and it took it seriously. It provided 40,000 metric tons of fuel, and the supplies of rice, milk powder, and pharmaceuticals. In addition to this, the island nation was provided with 400,000 metric tons of cooking gas and 40,000 metric tons of fuel. A few weeks ago, it extended $55 million to the farmers of crisis-hit Sri Lanka.
In the meanwhile, the International Monetary Fund has held two rounds of talks with Sri Lanka. First, in between May 9 to 24, it conducted a virtual mission with Sri Lankan authorities and also held meetings with Sri Lanka’s Central Bank Governor Nandalal Weerasinghe, secretary to the Treasury Mahinda Siriwardana and representatives of the private sector. Second round of IMF talks with Sri Lanka held on June 20. “Today, I met the visiting IMF Team and commenced discussions. Looking forward to reaching a staff level agreement and finalizing the program soon,” Sri Lankan PM Ranil Wickremesinghe in his tweet on June 20.
On June 30, the IMF issued a statement, saying its talks with Sri Lanka had been “constructive” and would soon grant preliminary approval for a desperately needed financial support package to the country. It has not committed how much it will give to Sri Lanka, but the island country is seeking up to $4 billion to import essential items and pay creditors. India is playing a big role in bringing the IMF and Sri Lanka on one table. It is behind influencing Japan, Australia and the US to support the island country at its moment of the worst crisis. This has all helped India in not only plucking Sri Lanka out of China’s clutches, the crisis has also allowed New Delhi to win hearts of common Sri Lankans.