Category: Sri Lanka

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Sri Lanka seeks India’s support for troubled agri sector

Last week, India handed a total of 3.3 tons of essential medical supplies to Sri Lanka…reports Asian Lite News

Sri Lankan Agriculture Minister Mahinda Amaraweera has sought India’s help for food security and environmental protection, according to a Sri Lanka publication.

Indian High Commissioner to Sri Lanka Gopal Baglay recently met the Sri Lankan Agriculture Minister.

The meeting came amid India’s continuous support to Sri Lanka to address the problems in the agricultural sector during the unprecedented economic crisis in the country.

Due to economic and political turmoil, large-scale protests have been taking place for months, leading to the ouster of former Prime Minister Mahinda Rajapaksa.

Last week, India handed a total of 3.3 tons of essential medical supplies to Sri Lanka.

These humanitarian supplies are in continuation of the Indian government’s ongoing support to the people of the crisis-ridden island nation in forms such as financial assistance, forex support, material supply and many more.

According to Indian High Commission, more than 25 tons of drugs and medical supplies which were donated by the Government and people of India during the last two months are valued at close to SLR 370 million.

This is in addition to the economic assistance of around USD 3.5 billion and supply of other humanitarian supplies such as rice, milk powder, kerosene etc.

These efforts testify to Prime Minister Narendra Modi’s ‘Neighbourhood First’ policy which places people-to-people engagement at its core.

Ongoing commitment to the people of Sri Lanka attests to the importance attached by the peoples of India and Sri Lanka for the well-being of each other.

In line with its “neighbourhood first” policy, India again came forward to help Sri Lanka during its economic crisis as High Commissioner to Colombo, Gopal Baglay on Friday handed a total of 3.3 tons of essential medical supplies to the 1990 Suwaseriya Ambulance Service.

Baglay said that External Affairs Minister S Jaishankar was apprised of the looming shortage of medical supplies faced by the Foundation during his visit to the Suwaseriya Headquarters in Colombo in March 2022. (ANI)

ALSO READ-Chinese contribution to the Sri Lankan financial crisis

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UN breather for crisis-hit Lanka

The Prime Minister further informed that he spoke with officials from the UN, Food and Agriculture Organization, World Food Program (FP), UN Development Program and the World Health Organization….writes SUSITHA FERNANDO

Amid the ongoing disastrous financial crisis with severe food, power and fuel shortages in Sri Lanka, Prime Minister Ranil Wickremesinghe told Parliament on Tuesday that the UN has planned to provide humanitarian assistance of around $48 million over a four-month period to the island nation’s food, agriculture and health sectors.

In his address, Wickremesinghe informed Parliament that the UN has arranged for a worldwide public appeal on Thursday seeking support to provide humanitarian assistance to Sri Lanka.

The Prime Minister further informed that he spoke with officials from the UN, Food and Agriculture Organization, World Food Program (FP), UN Development Program and the World Health Organization.

“Many representatives of these international organisations and other contries have agreed to support our country during this difficult time,” he told parliament.

He noted that a WFP study found that 73 per cent families in Sri Lanka have reduced their diet and food intake in the wake of the crisis which is the worst since the country gained independence from the British in 1948.

In his address, Wickremesinghe against thanked India for assisting Sri Lanka and urged the Parliamentary Committee on Public Finance to conduct an inquiry into the suspension of valuable projects granted by New Delhi and Tokyo for unknown reasons.

“Japan and India had agreed to supply us with two LNG power plants. The CEB (Ceylon Electricity Board) stopped those two projects without any justifiable reason. Japan had agreed to provide about $3 billion worth of projects to our country by 2019. All of these projects were put on hold for no reason,” the Prime Minister said.

“Despite this, India offered to help us in the face of the growing crisis. We express our respect and gratitude to them during this difficult time,” he said and highlighted New Delhi’s financial assistance worth over $3 billion since January to provide essential items, including food, fuel, cooking gas and medicines.

Wickremesinghe also stressed the need to rebuild ties with Asia’s three major powers — India, China and Japan — with whom relationships have been strained due to wrong political decision making.

“India, China and Japan are leading the list of countries that provide us with loans and assistance. Relations with these countries, which have always been strong, are now broken. Those relationships need to be rebuilt.”

Wickremesinghe also urged the International Monetary Fund to hold a conference to help unite Sri Lanka’s lending partners.

“We call on holding such a conference under the leadership of India, China and Japan will be a great strength to our country. China and Japan have different credit approaches. It is our hope that some consensus on lending approaches can be reached through such a conference,” he said.

Due to the financial crisis, Sri Lanka’s transportation sector has been badly affected due to the shortage of fuel, leading to weeks-long queues for petrol, diesel and kerosene oil triggering public protests.

Stating that “the next three weeks will be a tough time for fuel and gas supply”, the Prime Minister appealed to the people to limit unessential travel.

Wickremesinghe, who plans to present a revised interim budget, said Sri Lanka needs $6 billion to keep the country afloat for the next six months, adding that $5 billion is required to ensure day-to-day living and another $1 billion to strengthen the Sri Lankan rupee.

Followed by the Covid-19 pandemic, Sri Lanka is facing the toughest financial crisis in the post-independence era mainly due to dollar crunch lead by excessive money printing, ban on chemical fertiliser leading to a food crisis and excessive loans taken for a number of white elephant projects.

Last month, the crisis forced Sri Lanka to default on its debt for the first time in its history.

ALSO READ: Modi assures fertiliser to Lanka amid food crisis

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India, Japan join hands to help Lanka

Based on the outcome of the QUAD Leaders’ Meeting, the two leaders concurred to steadily promote practical cooperation in various fields to deliver concrete benefits to countries in the region…reports Asian Lite News

Prime Minister Narendra Modi and Japanese counterpart Fumio Kishida have joined hands to address the crisis in Sri Lanka.

Both the countries reached this agreement after the meeting on May 24, on the sidelines of the powerful regional grouping, the ‘Quadrilateral Security Dialogue’ (QSD) meeting, Colombo Gazette reported.

“They also discussed the situation in Sri Lanka and confirmed that they will cooperate with each other in light of the current economic crisis and deterioration of the humanitarian situation in the country,” the Japanese Foreign Ministry said in a statement.

At the meeting, the two leaders concurred that it is important for like-minded countries to work closely to further promote efforts to realize a “Free and Open Indo-Pacific” all the more because of the current circumstances amid difficult international situations.

Based on the outcome of the QUAD Leaders’ Meeting, the two leaders concurred to steadily promote practical cooperation in various fields to deliver concrete benefits to countries in the region. In light of this, they welcomed the signing of the USD 100 million loan facility between the Japan Bank for International Cooperation (JBIC) and the Export-Import Bank of India as an outcome of the Quad Vaccine Partnership, according to Colombo Gazette.

Even before this agreement, India was helping Sri Lanka to extricate from its economic crunch. India has sent assistance worth several billion US dollars to rescue the money-strapped Sri Lankan government accompanied by shiploads of humanitarian aid, cooking gas, large quantities of fuel, and medicinal supplies.

Besides the humanitarian and monetary assistance, India also extended USD 15 million to the Sri Lankan Government for promoting Buddhist religious activities, states Sathipattana. (ANI)

ALSO READ-Low tax regime another curse to Lankan economy

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Low tax regime another curse to Lankan economy

Sri Lanka’s economic outlook remains vulnerable to unprecedented inflationary pressures as massive debt overhangs have significant adverse spillover effects on the economy…reports Asian Lite News

Due to the introduction of a low tax regime in 2019 followed by the impact of COVID-19 on the country’s revenue, Sri Lanka’s economic outlook continues to be in a vulnerable state as the Island nation is facing the worst economic meltdown in its history.

Sri Lanka introduced a low tax regime in late 2019 and the reforms included the reduction of tax rates of Value Added Tax (VAT), Personal Income Tax (PIT), and Corporate Income Tax (CIT), and narrowing tax bases of VAT and PIT, while introducing a plethora of tax incentives, such as tax exemptions for agriculture and Information Technology (IT) and enabled services, tax deductions and tax holidays resulting in an annual loss of around LKR 600 billion – 800 billion in tax revenue to state coffers, stated the Press Release.

The low tax regime, the impact of the COVID-19 pandemic on revenue mobilization, together with the pandemic relief measures, widened the budget deficit significantly to 11.1 per cent of GDP in 2020 and 12.2 per cent of GDP in 2021 from 9.6 per cent of GDP in 2019 and led to an increase in the government debt to GDP ratio to 100.6 per cent in 2020 and 104.6 per cent in 2021 from 86.9 per cent in 2019.

Therefore, these reforms are now being looked at as policies that led to a significant loss of government revenue, partly due to the spread of the COVID-19 pandemic in 2020/2021 and related developments, which affected the revenue generation process, ultimately resulting in the lowest revenue to GDP ratio in the region.

According to the official report, the fiscal imbalance has significant adverse spillover effects on the economy. Sri Lanka’s economic outlook remains vulnerable to unprecedented inflationary pressures as massive debt overhangs have significant adverse spillover effects on the economy.

The loss of access to international markets and the relatively low amount of other foreign exchange inflows to the government have created substantial issues in financing the government budget deficit.

In 2020 and 2021, the entire budget deficit was financed through domestic sources as there were net repayments to the foreign sources. Of the domestic sources to finance the budget deficit, the majority was obtained from the banking sources, particularly from the Central Bank of Sri Lanka. A continuous significant amount of Central Bank monetary financing has adversely affected the economy, particularly with the significant pressure on the inflation and the exchange rate.

At present, the situation has aggravated to a very critical level where the General Treasury has to increasingly obtain Central Bank financing to make the government expenditures, including a substantial part of interest, salaries and wages, pensions and Samurdhi payments etc. This is clearly unsustainable and hence the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022 and beyond to ensure macroeconomic stability to support the medium to long-term economic growth objectives of the country, the press release said. (ANI)

ALSO READ-World Bank approves $700 million to support Lanka

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Rice and milk powder sent by TN distributed in Jaffna

The Tamil Nadu state government’s support includes the distribution of 40,000 MT of rice and 500 MT of milk powder throughout Sri Lanka….reports Asian Lite News

Rice and milk powder provided by the Tamil Nadu government were distributed in Sri Lanka’s Jaffna city in Monday.

This will benefit half of the households (almost 1,00,000 families) in the city, the Consulate General of India in Jaffna said in a tweet.

The Tamil Nadu state government’s support includes the distribution of 40,000 MT of rice and 500 MT of milk powder throughout Sri Lanka.

The Consulate General of India tweeted about it, saying, “More Indian aid to Jaffna arrives! Consul General Shri Raakesh in presence of GA K. Mahesan commenced distribution of rice, milk powder in #Jaffna today. Close to 1,00,000 families, covering half the house holds in Jaffna, will benefit from Indian assistance.”

This comes a day after 15,000 litres of kerosene sent by India was gifted to 700 fishermen of Delft, Nainativu, Eluvaitivu & Analitivu. Part of this consignment will also power ferry service between islands, the Consulate General of India in Jaffna said in a tweet.

On Friday, India had handed over 25 tonnes of medical supplies worth over USD 700,000 to Sri Lanka as part of its ongoing efforts to help the island nation combat its worst economic crisis.

The same day, Sri Lankan Prime Minister Ranil Wickremesinghe had praised India for extending support amid the continuing economic crisis and expressed a desire to further strengthen ties between the two nations.

“I had a conversation with India’s Minister of Finance @nsitharaman today. I expressed our country’s appreciation for the support India has extended during this difficult period. I look forward to further strengthening ties between our nations,” he tweeted on Friday.

Earlier, on May 22, Indian High Commissioner to Sri Lanka Gopal Baglay had handed over more than SLR 2 billion worth of rice, milk powder and medicines to Sri Lankan Foreign Minister Prof G L Peiris in Colombo.

This was the first incoming consignment under the larger commitment of 40,000 MT of rice, 500 MT of milk powder and medicines by the Government of Tamil Nadu. This commitment translates to more than SLR 5.5 billion, the Indian High Commission had said.

The supplies are meant to be distributed among beneficiaries across the country including Northern, Eastern, Central and Western Provinces by the Government of Sri Lanka.

Last month, India advanced an additional USD 500 million credit line to Sri Lanka to help the neighboring country import fuel as it has been having trouble paying for imports due to a sharp drop in its foreign exchange reserves, which has resulted in a depreciation of its currency and spiraling inflation.

Sri Lanka is experiencing its biggest economic crisis since its 1948 independence. Long lines for gasoline, cooking gas, and other commodities have formed as a result of a catastrophic scarcity of foreign reserves, while power outages and skyrocketing food costs have added to the people’s agony.

The economic crisis has sparked a political crisis in Sri Lanka, which led to the resignation of the whole government, including ex-PM Mahinda Rajapaksa, and the appointment of a new Prime Minister Ranil Wickremesinghe. (India News Network)

ALSO READ: ‘Crisis-ridden Lanka’s Parliament to be strengthened’

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‘Crisis-ridden Lanka’s Parliament to be strengthened’

The angry people torched over 50 houses of government politicians, including houses of ex-PM Mahinda Rajapaksa, as the violence killed nine persons, including an MP, besides injuring over 200 others…reports Asian Lite News

Sri Lanka Prime Minister Ranil Wickremesinghe on Sunday stressed that the crisis-ridden nation’s Parliament should be strengthened with more powers as done in India and other countries.

Making a special statement, Wickremesinghe proposed that a system similar to that of pre-independence state council should be introduced to monitor public finances and create powerful and stronger laws to enable the Parliament to exercise monetary powers.

“Now we need to change the structure of our Parliament and create a new system by combining the existing system of Parliament or the Westminster system and the system of State Councils. In those cases, the Parliament can participate in governing the country,” the PM stated.

“First of all, the existing laws need to be strengthened in order to give those powers to Parliament in the exercise of monetary powers. Following the example of countries such as the United Kingdom, New Zealand and India, we are proposing a stronger and more powerful law,” Wickremesinghe said in the televised public speech.

Suffering from severe financial crisis, Sri Lankans launched non-stop street fights for more than 50 days with violent resistance by the Rajapaksa government and his supporters.

The angry people torched over 50 houses of government politicians, including houses of ex-PM Mahinda Rajapaksa, as the violence killed nine persons, including an MP, besides injuring over 200 others.

Former PM Mahinda Rajapaksa and his cabinet was forced to step down as President Gotabaya Rajapaksa appointed Wickremesinghe from the opposition as PM.

During his address, Wickremesinghe also stressed that there were two major issues in the political spheres — constitutional change with 21st Amendment to weaken the powers of Executive President and strengthening the Parliament, and to abolish the Executive Presidency.

He charged that functioning of the Parliament has been paralysed due to the weakening of the Parliamentary powers by the 20th Amendment which was introduced by Mahinda Rajapaksa’s government.

“There is an allegation that even though the ruling party had a majority in the Parliament, it neglected the work of the Parliament. Everything was systematically controlled by the Cabinet ministers,” Wickremesinghe said.

To face the economic crisis, the premier proposed to appoint five committees to monitor public finances and find solutions to the problems faced by banks and financial institutions, besides appointing 10 other supervisory committees.

The backbenchers of the Parliament are to appoint the chairpersons of the total 15 committees which have to be responsible for the Parliament.

Wickremesinghe also invited the youth who had been protesting for over 50 days to join the 15 committees.

The PM proposed to establish a National Council consisting of the Speaker, the Prime Minister, the Leader of the Opposition and the leaders of the major parties to form policies for the country.

He said the National Council could talk about the decisions of the Cabinet, reorganisation of the Parliament and it will have the right to summon the Cabinet of ministers and the chairmen of the committees.

“According to the new system we have proposed, the President will be held accountable to the Parliament. The Cabinet of ministers woll also be accountable to the Parliament, and the same goes for the National Council. The 15 committees and oversight committees will also be accountable to the Parliament,” Wickremesinghe said.

ALSO READ-Lanka’s ailing medical system gets a boost from India

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‘India’s support has been critical’

“I think Wickremesinghe is trying his level best to run the country in a chaotic situation–the financial crisis, Mahinda Rajapaksa’s resignation, the emergency and people’s suffering.”…Dr Srimal Fernando interacts with Rahul Kumar

From a thriving economy with the highest human development indicators in South Asia at one time, Sri Lanka has slipped considerably over the past one year. With a new government in place, led by the Prime Minister Ranil Wickremesinghe, who also became its Finance Minster just two days back, the world’s eyes are on the island nation.

India Narrative speaks with Dr Srimal Fernando, Colombo-based international affairs advisor on New Regional Diplomacy, about the direction the new government is taking, India’s big brother image and how Wickremesinghe plans to steer the country out of its worst-ever financial crisis.

Sri Lankan author and international affairs advisor on New Regional Diplomacy, Dr Srimal Fernando.


Excerpts from the interview:

Q: India seems to have sent considerable foreign aid to Sri Lanka over the past few months. How do the people view this support, or are they still suspicious of the big neighbour?

Fernando: Well, people might have harboured suspicion about India when Sri Lanka was stable. Now the reality is that it was only India who provided support, nobody else did.

The government had requested traditional powers for aid but none responded.

India has extended a line of credit of $2 billion under the Neighbourhood First policy with another $1.5 billion of support to Sri Lanka in the past few months.

A lot of this aid is catering to people who are vulnerable and are from the lower economic strata. People appreciated the food and the dal that was sent by India.

I think Indian help has brought stability to the political set-up and somewhere it also helped in maintaining the security of Sri Lanka. Oil sent by India also helped us considerably. In the last 2-3 months the public has appreciated India’s sincere help.

Because of its influence, India has the capacity to convince the IMF and other donors. The Indian Finance Minister had put in a word at the IMF in Washington when our previous Finance Minister Aly Sabry was talking to IMF for aid.

Q: How do you see Mr Ranil Wickremesinghe’s appointment as the Finance Minister? Do you think this will send the right signals to international donors?

Fernando: The Prime Minister plans to present an interim budget in six weeks. He will create a proper roadmap that takes the country out of the current situation. The budget is likely to slash down on infrastructure projects — expressways and roadways that are expensive and are not needed right now.

Wickremesinghe also plans to recruit new advisors who will draft a proposal for the International Monetary Fund (IMF).

He will try to give something to the lower middle class and the vulnerable people. He also plans to cut down on unnecessary government expenditure.

Currently, the government does not have the rupee revenue, therefore, to maintain a stable economy, it the government needs to print one trillion Sri Lankan rupees. I think Wickremesinghe is trying his level best to run the country in a chaotic situation–the financial crisis, Mahinda Rajapaksa’s resignation, the emergency and people’s suffering.



Q: Has there been any progress in Sri Lanka over humanitarian aid and long-term support to the country after Wickremesinghe took over as the Prime Minister?

Fernando: The situation has been very bad. There was a wave of problems when Wickremesinghe took over as the Prime Minister. The number of protestors was increasing by the day and the situation had turned violent.

Now government departments are being managed. There has been a bit of stability since he took over. There is clarity in running the government.

There is a plan. The Prime Minister has already appealed to the international community for donations. The common man is frustrated but people now think that the new prime minister will change things. Simultaneously, many people are unhappy that Wickremesinghe is with the old government of the Rajapaksas.

Q: Why do the “Gota Go Gama” protestors want President Rajapaksa to quit even after the far-reaching changes in the government?

Fernando: You see initially, both — the people and the opposition parties wanted then prime minister Mahinda Rajapaksa and the government to quit because of the financial mismanagement and the crisis in the country. That has already happened.

The protestors and the main opposition parties also want the President to resign.

They are demanding changes in the powers of the President. They want the 21st amendment to the Constitution to be carried out so that the wide-ranging presidential powers can be curtailed. This is something that not just the opposition parties want, but even the breakaway groups of the government want–that the presidential powers should be reduced.

The protestors are angry over corruption–they are going to the offices of the police, asking them to arrest the corrupt people. The protestors also want the money earned through corruption to be brought back and the corrupt politicians to be jailed.

Q: How are people at the grassroots level coping with the scarcity of food and fuel?

Fernando: Our situation is somewhat like that of Zimbabwe.

Inflation has crossed 33 per cent. Food prices have gone up by around 50 per cent. The cost of living has gone up substantially. There are no essential drugs. People are having a tough time due to little power, little gas, 6-7 hour queues for fuel.

Sri Lanka has essentially been a welfare State. We had free education, free healthcare and subsidised transport. However, our food and fuel have to be imported. Because of the issue of fertiliser last year, our food production fell because of which we face food shortage.

We need a reforms based approach — where we first address the needs of the vulnerable people rather than cushioning the rich people. I think there is hope among the people.

(The content is being carried under an arrangement with indianarrative.com)

ALSO READ: Lanka’s ailing medical system gets a boost from India

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Lanka’s ailing medical system gets a boost from India

A 25 ton consignment of drugs, including some life-saving medicines, valued at SLR 260 million were handed over to Sri Lanka, a report by Susitha Fernando

Sri Lanka’s medical system, ailing with the shortage of over 270 drugs including some life-saving medicines, received a boost on Friday with the receipt of a 25 ton consignment of drugs valued at SLR 260 million.

Acting Indian High Commissioner to Sri Lanka, Vinod K. Jacob handed over the consignment and other medical supplies donated by the Indian government to Health Minister Keheliya Rambukwella in Colombo.

“Indian Naval Ship (INS) Gharial, a 5600 tons Landing Ship was deployed for the delivery of humanitarian assistance materials expeditiously as part of Mission SAGAR IX,” the High Commission said in a statement.

The medical consignment was donated in response to requests made by various organisations and hospitals spread across different parts of the country, it said.

“Another large consignment of medical supplies for use by Teaching Hospital, Peradeniya was earlier delivered on board INS Gharial on April 29, 2022. These humanitarian supplies are in continuation of Government of India’s ongoing support to the people of Sri Lanka in multiple forms such as financial assistance, forex support, material supply etc. These efforts testify Prime Minister Narendra Modi’s ‘Neighbourhood First’ policy which places people-to-people engagement at its core.

“These are complemented by the people of India who have also been donating generously to their brothers and sisters in Sri Lanka. Ongoing commitment to the people of Sri Lanka attests to importance attached by the peoples of India and Sri Lanka for the well-being of each other,” the HC noted.

Faced with dollar crunch early this year, Sri Lanka, which was delaying opening of letters of credit (LoC) to import medicines and medical equipment, used India’s $1 billion credit line to open LoCs to purchase medicine among other essential items.

Since January, the Indian Ocean island nation’s closest neighbour has assisted it with over $3.5 billion financial support.

“I had a conversation with India’s Minister of Finance @nsitharaman today. I expressed our country’s appreciation for the support India has extended during this difficult period. I look forward to further strengthening ties between our nations,” Prime Minister Ranil Wickremesighe tweeted on Friday night.

He also thanked India and other Quad member countries for taking the lead in setting up the foreign aid consortium to help his country which faces its post-independence worst ever economic crisis.

“Assistance from India and Japan: I am grateful for the positive response from India and Japan on the proposal made for the Quad members (United States, India, Japan, and Australia) to take the lead in setting up a foreign aid consortium to assist Sri Lanka,” the PM tweeted.

ALSO READ: Modi assures India’s continued support for Sri Lanka

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Need policy decisions based on export-oriented economy: SL PM

The Prime Minister made this statement when he met the heads of banks on May 26….reports Asian Lite News

Amid Sri Lanka’s economic meltdown, Prime Minister Ranil Wickremesinghe has elucidated the need to make policy decisions based on an export-oriented economy.

Expressing his wish to pull the island nation out of the looming crisis, he said that these policies can assist the export industry to overcome the current economic crisis facing the country.

The Prime Minister made this statement when he met the heads of banks on May 26.

“About seventy countries are facing difficulties in the current global crisis and Sri Lanka is ranked first amongst those countries,” Wickremesinghe said, adding, that there are many challenges to be faced in the future, both locally and abroad.

However, the Prime Minister also explained that Sri Lanka has a small window in which if the correct policies are taken we can reduce the impact.

The discussion was joined by the Governor of the Central Bank and a number of local and foreign bankers alongside Prime Minister Ranil Wickremesinghe while they discussed definitive solutions to the nation’s problems until an agreement reaches the International Monetary Fund.

As the economy is in no good state, it is evident that there is a high risk of rising international interest rates. The danger of rising international food prices is also being observed at this moment.

Sri Lanka is facing its worst economic crisis since independence with food and fuel shortages, soaring prices, and power cuts affecting a large number of the citizens, resulting in massive protests which culminated in the resignation of former Prime Minister Mahinda Rajapaksa on May 9. (ANI)

ALSO READ: Modi assures India’s continued support for Sri Lanka

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Debt-ridden Lankan economy may take long time to revive

This year Sri Lanka needs to repay over USD 1.5 billion to China alone for debt servicing…reports As;ian Lite News

The failure of Sri Lanka’s economy due to faulty economic planning bore fruit for China’s strategic ties as the island nation is caught in a vicious cycle of Chinese loans.

Upon shocks of the Covid-19 pandemic and the Russia-Ukraine war, Sri Lanka’s over-reliance on China as a development partner proved wrong as China’s predatory debt diplomacy increased the foreign debts of the nation and amplified the crisis.

As Sri Lanka slid into a foreign exchange crisis, China just came forward with a proposal for a paltry USD 500 million concessionary loans for 10 years to deal with the economic fallout of the pandemic and showed a willingness to renegotiate only a handful of Chinese debt, standing close to USD 6.5 billion and constituting more than 10% of Sri Lanka’s total foreign debt over USD 50 billion, Dailymirror reported.

Additionally, China did not entertain Sri Lanka’s request for debt deferment of around USD 2.5 billion saying there is no such provision in their financial system, instead it evinced interest to consider providing a loan to repay debt due to it.

This year Sri Lanka needs to repay over USD 1.5 billion to China alone for debt servicing, the report stated further.

Sri Lanka’s economic crisis is self-made as the nation’s infrastructure development was based on borrowing while its foreign exchange earnings remained highly dependent on tourism which crashed due to covid.

Colombo, in its efforts to speed up its economic growth, resorted to quick fixes whereas China strengthened its manufacturing base and promoted exports at the same time.

Moreover, a better strategy for Sri Lanka would have been to ask for assistance from multilateral agencies on soft terms instead of Chinese loans near commercial terms.

According to Dailymirror, the World Bank recently agreed to provide USD 600 million in assistance to help the country meet requirements for essential imports, however, if the country resorted to World Bank loans for infrastructure development at cheaper rates rather than Chinese loans earlier, it could have avoided such a crisis.

At this time when China is dithering, crisis-hit Sri Lanka has only one option to explore, i.e. to seek USD 3-4 billion International Monetary Fund (IMF) assistance.

Sri Lanka’s economy has been in a free fall since the COVID-19 pandemic due to the crash of the tourism sector as well as foreign exchange shortage which has led to food, fuel, power and gas shortages and has sought the assistance of friendly countries for economic assistance. (ANI)

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