Sri Lankan finance minister Basil Rajapaksa’s visit to clinch a big-ticket loan from India has been postponed. Is this go-slow a deliberate strategy to signal China?
Sri Lanka’s economic crisis is aggravating each passing day – foreign exchange reserves have tanked and inflation has made food beyond the reach of the ordinary citizen.
Over the past six months, India has announced assistance to Sri Lanka of a US$ 500 million oil line of credit, a debt deferral of US$ 515 million and a currency swap to the tune of US$ 400 million. These are besides the COVID-19 relief in the form of rapid antigen test kits and liquid medical oxygen India has provided.
The line of credit that the island nation thought was a lifeline and fuel on credit. But this is yet to see the light of day.
India has sought a road map from Sri Lanka. But economists and bureaucrats besides the island nation’s central bank are yet to come up with a plan they can share with the Indian government. The roadmap needs to elaborate on how they country will overcome its economic crisis.
Importantly, the roadmap is also required to detail how bilateral economic plans will be implemented in the North and the East of the island.
There are strategic interests too – ranging from the harbour of Trincomalee to selling Donier surveillance aircraft for the Sri Lanka Air Force. Both issues are in a bureaucratic tailspin, toughened by prospects of an upcoming BIMSTEC summit in Colombo on March 30.
Sri Lankan finance minister Basil Rajapaksa’s visit to Indian has been postponed. This visit, say Sri Lankan officials, is important to clinch a big-ticket loan. But, there are others who say that the go-slow is a purposeful bureaucratic strategy to signal China.
India’s interests
India is also negotiating a few energy generation projects with Sri Lanka. Sri Lanka’s policy of moving away from coal-powered electricity plants has already jolted an earlier Indo-Japanese joint partnership plan in the country.
New Delhi is keen on a pact for solar-power projects in Trincomalee and in the Delft Island. The Delft Island deal is pending for some time since the Asian Development Bank tendered for interests. High decibel reactions from the Chinese embassy on the subject was matched by a low decibel visit to the island by Indian industrialist Gautam Adani whose business group has an interest in the project.
Sri Lanka’s economy has been in trouble since an abrupt government fiat to farmers to switch to organic farming. It caused a poor harvest and the government was suddenly saddled with huge financial costs of importing organic fertilisers
This was further aggravated by the COVID-19 pandemic that resulted in halting tourist arrivals to the emerald island. Inflows from tourism contribute largely to Sri Lankan foreign exchange. The pandemic also brought back Sri Lankan overseas workers who would otherwise have sent remittances back home.
The rising price of international petroleum crude in the past weeks has also added to the deteriorating economic situation.
Alluding to the delays in drawing up plans for closer cooperation with India, Sri Lanka foreign minister G L Peiris had said that these were due to “logistical issues and bureaucratic reasons”.
Those bureaucratic reasons are now proving to be too expensive for the island nation.
