India has a lot to gain by helping Sri Lanka

The IMF has disbursed $333 million, the first tranche of the loan to be disbursed over four years, subject to Sri Lanka implementing the reform package it has agreed to.

India was the first bilateral creditor to agree to restructure its own debt and the Sri Lankan envoy who met India’s Finance Minister Nirmala Sitharaman highlighted this point, looking forward to continued cooperation between the two countries.

Bilateral creditors have to agree to restructure their own debts for the IMF to provide relief to a debtor nation – it does not want the credits it grants to be used to fully repay the debt of bilateral creditors. be done for If a single country refused to restructure its debt, all other creditors would be left looking as the funds used to meet the external financing needs of the debtor nation would, instead, be held by that single creditor. Went. This is why China’s reluctance to restructure its debt to Sri Lanka rattles Colombo.

This is not particularly bad news for New Delhi. Under the Rajapaksa, Sri Lanka grew closer to China – so much so that it got a major Belt-and-Road project, the Hambantota port, at its southern tip. As expected, it proved to be a commercial dud, and Colombo was unable to repay the loan taken out for the project from the port’s revenue. It did not have enough resources to repay loans from other sources as well, and eventually the Hambantota port and its surrounding 15,000 acres of land were given to China on a 99-year lease.

Sri Lanka’s economy was badly mismanaged by previous governments, including those led by Gotabaya Rajapaksa, under whom things got so bad that the people revolted, captured his palace and sent him into exile last July . India gave emergency loan to the country and started rupee trade with it. It will continue to be an attractive option for a country that is short of foreign exchange. India is in a position to supply three different types of goods that are important to Sri Lanka – fuel, food and medicines. It can also supply a growing variety of electronics manufactured in India by global brands.

Such a vigorous trade partnership would help India reduce China’s influence on the island nation, which lies just 54.8 km from its southern tip across the Palk Strait. This would give New Delhi more room to maneuver on areas of critical interest, such as its treatment of Sri Lankan Tamils ​​and, coordinate policy and action against Islamic extremists seeking to radicalize peaceful Muslim populations in South Asia.

On Easter Sunday in April 2019, three churches and three luxury hotels in Colombo were bombed by Islamic fundamentalists, triggering a sectarian reaction fueled by militancy. It is not in India’s interest that its southern neighbor becomes a hotbed of Islamic fundamentalism.

Friendly relations are important for coordination of policy with the government of the neighboring country. India will be able to act on another front important not only for the good of Sri Lanka but also for its survival – climate change.

India can provide important assistance to Sri Lanka in building resilience in green technologies, as well as financing everything from infrastructure, agriculture and climate change exposure.

Sri Lankan President Ranil Wickremesinghe has a tough task on his hands right now. Unions are on the war path, opposing some of the reforms already implemented under the terms of the IMF. Taxes have been raised, fuel subsidies have been reduced and the exchange rate has been liberalized towards market-determined levels.

Wickremesinghe has the turmoil of the recent past with which to warn Sri Lankans about the cost of sticking to unsustainable policies. India’s support is vital for the Sri Lankan President to stand his ground and survive the current round of popular unrest.

India’s proactive support, rupee-trade opportunities, and overall strategic potential bode well for Sri Lanka’s emergence from the current economic crisis on the basis of a strong partnership with India.