Lankan crisis

External Affairs Minister S Jaishankar’s visit to Sri Lanka comes at a time when the island nation is facing an unprecedented economic crisis. In Colombo primarily for the seven-nation BIMSTEC summit, the minister is also holding talks with Lankan leaders and sealing bilateral pacts. Dwindling foreign exchange reserves have led to a currency devaluation in Lanka, causing critical shortage of food, fuel and other essential items. The beleaguered country has to repay debt of about $4 billion during the rest of this year, way above its foreign currency reserves which fell to $2.31 billion by February. The Covid-19 pandemic derailed Lanka’s all-important tourism industry, even as misgovernance and overdependence on China have also contributed towards wrecking the economy.

India has been prompt in lending a helping hand. New Delhi recently announced to extend a $1-billion line of credit, following a $400-million currency swap. An additional line of credit of $1.5 billion to import essentials is on the cards, while the Rajapaksa government is negotiating $2.5 billion in credit support from China and has sought restructuring of debt payments.

Sri Lanka is an important ally for India, considering its strategic location in the Indian Ocean Region, where China has been flexing its muscles on the military and economic fronts. Pursuing its ‘Neighbourhood First’ policy, New Delhi must go all out to build goodwill in the region by doing a better job than Beijing in bailing out Sri Lanka. With no immediate relief or assistance expected from the World Bank and the International Monetary Fund, India’s eagerness to help a neighbour in dire straits is in stark contrast to China’s opportunism, exemplified by the circumstances under which Lanka had to hand over the Hambantota port on 99-year lease. Once the crisis subsides, Lanka will have to introspect about the reasons that made things come to such a pass. Colombo needs to pragmatically recalibrate its ties with Beijing to ensure that it doesn’t fall headlong into the debt trap all over again. At the same time, it should never undervalue the importance of having India on board as an all-weather friend.