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News: As per reports, Sri Lanka has sought an additional $1 billion by way of a credit line, which would be on top of the $2.4 billion aid package it has already received from New Delhi this year.
India should help Colombo get past its economic crisis for the sake of friendly ties and regional interests. But this should be done in a way that doesn’t strengthen its leader’s power.
How bad is the situation in Sri Lanka?
– Queues at fuel stations have lengthened as supplies run dry
– Long power cuts have become the norm
– Essential commodities are scarce
– A food shortage has grown acute.
– Lack of foreign exchange
– Currency has lost value and retail inflation has soared
– Popular discontent against the Rajapaksa government has spilled onto the streets in the form of protests
How can India help?
To prevent instability, New Delhi can extend low-cost help to alleviate the hardships of Sri Lankans. But this must be done with due care.
What are the factors behind Sri Lanka’s crisis?
Easter Sunday terror attacks of 2019 followed by covid closures hampered Sri Lanka’s tourism
Even pre-pandemic, it had such loose fiscal and monetary policies that economists warned prices would rise, slow commerce down and compress tax collections.
Barring of imports: In 2020, it had blocked inward vehicle shipments. Last year, it barred chemical fertilizers in a misguided push for organic farming that hurt its farm output (and had to be reversed).
Reduced credit ratings: With some $6 billion in foreign payments due this year, its credit ratings have also been slashed.
What is the way forward?
It is in India’s interest to contain Chinese presence and influence in Sri Lankan archipelago region.
Sri Lanka’s poor record on minority rights under the Rajapaksa clan has been under watch. So the relief provisions India makes must not end up backing a regime whose disposition towards Tamils, among other groups, has been a cause of concern.
Source: This post is based on the article “Aid Sri Lanka’s economy and not Rajapaksa’s grip” published in The Livemint on 29th Mar 22.