The Hindu Editorial Vocabulary– Jan 17, 2022; Day 215

Friend in need: On India-Sri Lanka ties

India and Sri Lanka have shown an ability to quickly act on promises to each other

External Affairs Minister S. Jaishankar’s virtual meeting with Sri Lanka’s Finance Minister Basil Rajapaksa on Saturday, with an assurance that India will support Sri Lanka “in all possible ways for overcoming the economic and other challenges posed by COVID-19 pandemic”, was significant and timely. A crucial (vital to the resolution of a crisis) week lies ahead for the Sri Lankan economy, when President Gotabaya Rajapaksa must make a decision on whether to service debts to bonds with an instalment of $500 million due on January 18, or to default for the first time ever, given the island’s precarious (Fraught with danger) finances. Mr. Gotabaya is expected to address Parliament this week on how he will deal with the economic crisis. This includes a credit crunch (a sudden sharp reduction in the availability of money or credit from banks and other lenders), a slump (A noticeable deterioration in performance or quality) in GDP spurred (Incite or stimulate) by COVID-19 losses to tourism, exports and remittances, foreign reserves that dwindled (Become smaller) from $7.5 bn in 2019 to $1.6 bn in November 2021, and pending debt repayments of more than $7 bn expected in 2022. The most immediate problems come from rising unrest (A state of agitation or turbulent change or development). In the preceding weeks, the Rajapaksa government reached out to India and China, which are most likely to help given their respective interests in the island. Mr. Gotabaya even received a visit from Chinese Foreign Minister Wang Yi, who discussed a full debt restructure (a process used by companies, individuals, and countries to change the the terms on loans to make them easier to pay back) of Sri Lankan borrowings. Beijing has also extended a currency swap (a foreign exchange transaction that involves trading principal and interest in one currency for the same in another currency) arrangement of $1.5 billion. It was to India, however, that Mr. Rajapaksa turned with a humanitarian (Marked by humanistic values and devotion to human welfare) appeal and SOS. Mr. Jaishankar, Finance Minister Nirmala Sitharaman and Mr. Basil decided on a “four-pronged” initiative, that included Lines of Credit (LoC) towards the import of fuel, food and medicines, currency swap and debt deferrals from India to Sri Lanka, as well as the conclusion of the Trinco-oil farms project.

Matters have moved swiftly since Mr. Basil’s visit and it is heartening that the Trincomalee project MoU was signed earlier this month after decades of delays. Subsequently, India has extended $400 million under the “SAARC currency swap” arrangement and agreed to a partial deferral of a $500 million settlement from Sri Lanka by two months; the $1.5 bn LoC for essential imports is reportedly under way. It would be naive to assume that New Delhi’s assistance will paper over other problems in the complex relations between India and Sri Lanka. Amongst other issues, the friction over fishermen’s rights and pending political solution for war-torn Tamil areas remain sticking points, while concerns over Colombo’s strategic ties with China have often led to open disagreements. It is important to note, however, that in times of peril, New Delhi and Colombo have established a robust channel of communication and demonstrated an ability to act on promises quickly, proving that adage about friends (and neighbours) in need.

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