Sri Lanka, an island nation which was engulfed in a massive economic crisis has started recovering with the help of India. Expressing his gratitude to “trustworthy friend” India for saving Sri Lanka and preventing a “bloodbath” during its unprecedented economic crisis last year, Parliament Speaker Mahinda Yapa Abeywardena has said that not a single nation has extended that kind of assistance to Colombo as done by New Delhi.
Sri Lanka was hit by a catastrophic financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves. As the country struggled, locked in the throes of the crisis, India extended multi-pronged assistance of about USD 4 billion to it last year, through multiple credit lines and currency support, in line with India’s ‘Neighbourhood First’ policy.
In his address at the gala dinner reception hosted for delegates of the Indian Travel Congress, Abeywardena said India “saved us” during the financial crisis, otherwise, there would have been “another bloodbath for all of us”.
He said that, “Sri Lanka and India are very, very closely interconnected countries, culturally, nationally, and policy-wise, and above all, India has been a very close associate and trustworthy friend of Sri Lanka,” Abeywardena said, adding that when “we were in trouble”, India always helped out.
“And, even this time, today, I heard that India is willing to extend our restructuring of loans for 12 years. Never expected, and never in history, not a single country has extended that kind of assistance,” he said.
He recalled the helping hand lent by India during the period of trouble last year that devastated the Sri Lankan economy, pushing it into a debt crisis.
“I must tell you, during the trouble that we had last year, you (India) saved us, India saved us otherwise, there would have been another bloodbath for all of us. So, that is how India came to help us,” Abeywardena said.
India reiterated that it will keep helping Friend Sri Lanka
India has reiterated its willingness to play “a constructive role” in supporting Sri Lanka’s efforts for recovery from the worst economic crisis.
Addressing the inauguration ceremony of the Construction, Power and Energy Expo 2023 in Colombo on Friday, India’s Deputy High Commissioner Vinod K. Jacob said that recent developments in India-Sri Lanka ties have strengthened the friendship and all-around cooperation between the two countries.
He said that, “We were the first creditor nation in January this year to convey the financing assurances needed to kick start the IMF process. India will continue to play a constructive role as a Co-Chair of the Creditors Committee along with Japan and the Paris Club”.
How evil China entrapped Sri Lanka?
Sri Lanka’s fall into the dragon’s trap was triggered when China, taking advantage of the souring relations between Colombo and the Washington, started its aggressive courting of the Mahenda Rajapaksa government from the time he assumed office in 2005.
By 2007, the war against the LTTE was raging, and the island nation was facing increasing international criticism over human rights issues. The US significantly reduced its foreign assistance package, and neighbour India’s assistance was constrained by the Tamil sentiments back home.
The China was closely monitoring this situation, and sensing a good opportunity, it swooped in with a $37 million deal for Chinese ammunition and ordnance. This was followed in 2008 by the gift of six F7 fighters, JY-11 radar and anti-aircraft guns. By the time the war with the LTTE ended in 2009, relations with China were upgraded to a ‘strategic cooperative partnership’.
However, the deadliest move made by China in its strategic game was made in 2007 itself, when it got Rajapaksa to lease land at Hambantota for construction of a port at a cost of $1 billion. By 2014, Chinese aid and loans to Sri Lanka had exceeded a staggering $6 billion, which included the Colombo Port City Project (CPCP), the South Container Terminal at Colombo Port, an Exclusive Investment Zone 35 miles from Colombo port, and a railway project. The net had been cast. It now remained for China to commence reeling it in.
President Xi Jinping, in his September 2014 visit to Sri Lanka, did just that, and an agreement for Chinese companies to operate the by now bleeding Hambantota port was signed. With Sri Lankan debts to China in excess of $8 billion, the room for manoeuvre for the government of the day was already quite limited.
In the aftermath of the 2015 elections, China commenced courting not only the political parties, but also prominent Buddhist clergy in the island nation. This development was through the realisation of the influence of these religious figures in Sri Lankan domestic politics. Certain other factors threaten to push Sri Lanka deeper into the dragon’s trap.
Couple of years back, the IMF prematurely ended the $1.5 billion loan programme to the island nation. This was accompanied with the Covid pandemic, which delivered a terrible blow to Sri Lanka’s tourism industry, and that is from where this cascading effect of economic crisis triggered.
How India helped Sri Lanka?
India was the fist nation to lend helping hand to the Sri Lanka. India’s financial and humanitarian support worth $4 billion to Sri Lanka is far in excess of the total anticipated Extended Fund Facility of the IMF. India also helped Sri Lanka with Petroleum and Gas supplies.
India in January this year became the first country to hand over its letter of support for financing and debt restructuring of Sri Lanka to the International Monetary Fund (IMF). In May this year, 17 countries that have extended loans to Sri Lanka formed an official creditor committee’ co-chaired by India, Japan, and France, to discuss Sri Lanka’s request for debt treatment.
It was indeed India, which influenced France and Japan to chip in big time to help Sri Lanka in hour of crisis.
India was Sri Lanka’s largest trading partner in 2022. Sri Lanka’s exports to India have also grown. The use of Rupees for trade settlement is further helping Sri Lanka’s economy. India was once again the largest source of tourists for Sri Lanka last year with over 1,00,000 tourists. These are concrete steps to help Sri Lanka’s economic recovery and growth.
India is putting more money into Sri Lanka to make it stable
India and Sri Lanka are also in preliminary discussions on an undersea cable to connect the power grids of both countries and a fuel pipeline from southern India’s mainland to northern Sri Lanka – projects that could together cost at least $4 billion, according to officials on both sides.
In the energy sector, India’s state-run NTPC is working on a 100-megawatt solar power plant in Sampur in Trincomalee district after the two countries signed an agreement in March.
In the northwest of Sri Lanka, India’s Adani Group is awaiting regulatory approvals for two wind power projects worth $500m in Mannar region, Sri Lanka’s Power Minister Kanchana Wijesekera said in August.
Off the northwestern coast, ONGC Videsh Limited (OVL), the overseas arm of Delhi’s state-run Oil and Natural Gas Corporation, has set its sights on exploration licences, and has had multiple discussions with Sri Lankan authorities who are finalising regulations ahead of inviting bids from global companies,