News: Sri Lanka’s economic crisis is aggravating rapidly, putting citizens through enormous hardship. Sri Lanka’s Consumer Price inflation is at 16.8%, and it must repay foreign debt totalling nearly $7 billion this year.
Reason for the crisis
Ever since the start of the pandemic, 1) Sri Lankan labourers in West Asian countries were left stranded and returned jobless, 2) Garment factories and tea estates were shut and youths lost their jobs in cities. This hit all key foreign exchange earning sectors, such as exports, remittances and tourism, in Sri Lanka.
3) Lack of a comprehensive strategy: This includes decisions such as an abrupt shift to organic farming, harsh import restrictions that led to market irregularities and hoarding.
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How India is helping to avert the Sri Lankan economic crisis?
Beginning January 2022, India has extended assistance totalling $2.4 billion — including an $400 million RBI currency swap, a $500 million loan deferment, and credit lines for importing essential commodities such as food, fuel, and medicines.
What are the concerns raised with India’s assistance?
A Sri Lankan media depicted India’s emergency financial assistance as “diplomatic blackmail” for crucial energy projects. There is a suspicion in Sri Lanka that India’s assistance in the past was “tied” with key infrastructure projects. Such as Trincomalee Oil Tank Farm project; the National Thermal Power Corporation’s recent agreement with Ceylon Electricity Board to set up a solar power plant in Sampur and two renewable energy projects in northern Sri Lanka.
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Source: The post is based on an article “Sri Lanka’s aggravating economic crisis” published in The Hindu on 22nd March 2022.