Sri Lanka seeks urgent help
from India as its net foreign exchange reserves plunge to an all-time low of
$1.2 billion, barely enough to pay for a month’s imports.
R Hariharan December 18, 2021 14:48:30 IST
https://www.firstpost.com/india/colombo-sends-financial-sos-to-delhi-but-india-wants-lanka-to-first-walk-the-talk-on-china-10220561.html?fbclid=IwAR1YJNk4u9NI8zPztc6yu8dtkdCdLL5PuATENpf8vPdLOTj9LFuMcjKcl-c
Even as Sri Lankan Parliament was
debating the annual budget presented by Finance Minister Basil Rajapaksa, he
flew off to New Delhi, for a two-day visit on 1 December, to seek urgent help
from India to ward off an impending economic collapse of the country. This drew
a sarcastic comment from former Prime Minister Ranil Wickremesinghe. Speaking
in Parliament he said, “We have had past Presidents, who have also served as
finance ministers parallelly, but they have always attended the Budget debates.
We have never seen finance ministers leaving the country while crucial public
finance matters are discussed. Our finance minister went to India and came
back. We don’t know if he went to beg from India as well.”
But Basil Rajapaksa had no other option but to seek urgent help
from India as Sri Lanka’s net foreign exchange reserves have plunged to an
all-time low of $1.2 billion, barely enough to pay for a month’s imports. The
unprecedented shortage of essentials from oil to rice to cereals and medicines
was making people restive. The Sri Lankan minister probably came with a lot of
expectations, because India in the past had met such requests from Sri Lanka to
meet not only critical requirements of food grains, medicines and petroleum
resources, but also to assist in debt servicing.
In contrast to China, which of late has gone public to express its
displeasure on some of the actions of Sri Lanka, India under Prime Minister
Narendra Modi has never publicly aired its misgivings, even when the Rajapaksas
had disregarded India’s sensitivities on critical issues affecting its
interests. Instead, India chose to convey it through diplomatic channels.
The visiting Sri Lankan minister had two rounds of talks with his
Indian counterpart, Nirmala Sitharaman, and External Affairs Minister S
Jaishankar. He also met with the minister for petroleum and natural gas Hardeep
Puri and the NSA Ajit Doval. But curiously, though Sri Lanka media had said he
would be meeting Prime Minister Narendra Modi, such a meeting never took place.
A charitable view of it could be, the Indian PM’s schedule loaded with
international and domestic political engagements could not accommodate the
meeting.
According to the SLHC press release on the visit, the two sides discussed “four pillars for short- and medium-term cooperation”. However, in reality the “four pillars of cooperation” are “four streams of resuscitation” for Sri Lanka state. The four pillars are a mix of four packages for India’s financial support and investment. Urgent supply of food and health security ‘package’ on an extended line of credit takes priority perhaps to ward off food riots and the fall out of the COVID-19 pandemic. Energy security package for import of fuel from India on an extended line of credit comes next, as the country's petroleum stocks are drying up. Perhaps, to make it attractive to India, it has been tagged with the dusting up of a long forgotten Indian offer for modernisation of Trincomalee tank far. Facilitating Indian investments in different sectors in Sri Lanka figures the last.
The SHC statement further added, “It was agreed that modalities to
realise these objectives would be finalised early, within a mutually agreed
timeline. Minister Rajapaksa and ministers Sitharaman and Jaishankar agreed to
open direct lines of communication and to be in direct and regular contact with
each other in order to coordinate the above initiative.”
Shorn of such frills, Basil’s ‘Mission New Delhi’ could be
described as “work in progress”. In military terms familiar to the veteran
President Rajapaksa, the mission status would be described as SNAFU —
“situation normal, all fouled up”. This is evident from the finance minister’s
humble speech in parliament on his return from India.
In normal circumstances, the Rajapaksa government would have
sought China’s help as in the past; it already owes China around $5 billion.
But, of late, China has become a no-go area, after Sri Lanka reneged on organic
fertiliser import deal worth over $48 million with China, when fertiliser
samples were found to be contaminated with harmful pathogens. Now the disputed
deal is facing arbitration proceedings in Singapore and Colombo. To add insult
to injury, Sri Lanka imported liquid nitrogen fertiliser from India to tide
over the shortages. The relations between the two countries appear to have
worsened further after Sri Lanka appeared to be having second thoughts over
developing hybrid energy systems in three northern islands of Sri Lanka by Sino
Solar Hybrid Technology. The Chinese embassy in Colombo has tweeted that the
projects have been suspended due to third-party intervention, presumably
referring to India. India had expressed its concern at Chinese involvement in
this project in locations barely 43 km from its coastline.
India can bail out Sri Lanka as in the past with currency swaps
and exports of essential goods including petroleum. Even in the midst of the
pandemic, India’s forex reserves have gone up from $ 478 billion last year to
$577 billion this year, through some smart fiscal management.
So, India has the money, but does it have the inclination to come
to the aid of Sri Lanka, particularly after Rajapaksas in power have repeatedly
shown to favour China? Does India’s lack of readiness to immediately respond to
Sri Lanka’s request show it is tired of being taken for granted by the island
neighbour?
These are legitimate questions in the Indian mind, if we look at
the past. Prime Minister Ranil Wickremesinghe signed a memorandum of
understanding (MoU) with India during his visit to New Delhi in April 2017. Its
focus was mainly on promoting time-bound projects in energy, infrastructure
connectivity and port development structures with Indian assistance and
investment in Colombo and Trincomalee areas as well as road segments mostly in
Northern Province. The projects included a liquid natural gas (LNG) fired 500
MW power plant, an LNG terminal/floating storage re-gasification unit in
Kerawalpitya, 50 MW solar power plant in Sampur, joint development of upper
tank farm in Trincomalee, port, petroleum refinery and other industries in
Trincomalee, and development of Mannar-Jaffna, Mannar-Trincomalee and
Dambulla-Trincomalee expressways with Indian investment, among others.
India’s offer has been ignored in most of these projects, when
they came up for consideration. Projects under this MoU, have now been offered
piecemeal to others. Through this MoU, India hoped to team up with Japan to
substantially contribute to the development of industries and infrastructure
links in the North and East, which would have speeded up the regions to
integrate with the rest of Sri Lanka.
The COVID-19 pandemic has almost killed tourism industry, the country's main foreign exchange earner. Chances of its revival look bleak with the appearance of Omicron mutant in the scene. Remittances from Sri Lankans working overseas have dwindled. When President Gotabaya Rajapaksa assumed office two years back, he inherited an economy already mauled by mismanagement by successive governments. Implementation of his own lofty ideas on food self-sufficiency through organic farming and clean energy, suited for normal times, has crippled agriculture production and tea industry adding to economic woes. Under these circumstances, China's lack of interest in further investing in Sri Lanka is understandable. It has happened in Pakistan also.
PM Mahinda Rajapaksa has decided “Prosperous Motherland that
Overcomes Challenges” as the theme for the 74th Independence Day celebrations
on 4 February 2022. To make it a reality, India’s helping hand is a must. To
gain that Sri Lanka must perhaps show a little more sincerity and walk the
extra mile.
The press release on Basil’s visit did not contain any reference
to India’s political and national security concerns, which had figured during
the visit of almost all Indian dignitaries to the island, from PM Narendra Modi
to ministers of external affairs and defence chiefs. These include fulfilling
the promises President Mahinda Rajapaksa made during the Eelam war to implement
in full 13th Amendment of the constitution, as a part of achieving ethnic
amity.
Seventeenth century Dutch philosopher Spinoza’s rather cynical
statement “big fish eat small fish with as much right as they have power” comes
to mind when Sri Lanka finds itself in the middle of a big power contest in the
Indian Ocean, now part of the Indo-Pacific strategic domain. This is more so
after India and China are flexing their muscles, after their relations went
south in 2020. It would be prudent for Sri Lanka to bear this in mind when dealing
with China. Under President Xi Jinping, China is more likely to expand its
domain in Sri Lanka in the coming year. India is here, closer geographically,
as part of the family of South Asian nations, more accessible in contrast to
China. But India is showing signs it cannot be taken for granted, one can only
hope Sri Lanka notices it.
The writer is a retired MI specialist on South Asia and terrorism
and insurgency. He was the head of intelligence of the Indian Peace Keeping
Force in Sri Lanka from 1987 to 1990. The views expressed are personal.