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Colombo at a crossroads: India’s balanced response to Sri Lanka crisis

14 May , 2022   By : monika singh

Colombo at a crossroads: India’s balanced response to Sri Lanka crisis

Finally, the President of Sri Lanka, Gotabaya Rajapaksa, spoke, and he spoke under duress. After months of refusing to take decisive measures to stem the tide of impending economic and political collapse, the people of Sri Lanka forced him to come out of his shell and reach to the developments on the ground. Though he himself refused to quit, he had to concede to the demand for a new prime minister as well as a promise to introduce key constitutional reforms to curb his powers. His elder brother, Mahinda Rajapaksa was forced to resign as prime minister earlier this week after violence erupted following an attack on the anti-government protesters by his supporters and is under protection at the Trincomalee naval base after his residence was set on fire.

The anger of the people of the island nation is directed at the Rajapaksa dynasty, and it is unlikely that Gotabaya would be able to escape their wrath. But he has few options left as he engages with a divided polity of his embattled nation that is staring at anarchy if the political leadership doesn’t get its act together quickly. Sri Lanka’s central bank Governor Nandalal Weerasinghe had suggested that the country’s economy would “collapse beyond redemption” unless a new government was appointed within days and was reported to be contemplating quitting if no political stability could be achieved in two weeks. This is happening even as the nation’s army had to refute reports of an impending coup with the military returning to the centre-stage of the rapidly evolving political and economic crisis.

This is worst economic crisis that Sri Lanka is facing in its post-independence history and the real tragedy is that, for weeks, no one seemed to be in charge. The Rajapaksa dynasty is reviled for mismanaging an economy that just a few years back was doing relatively well. Mahinda and his son, Namal as well as his brothers, Basil and Chamal, all had to go and yet it is unlikely to satiate the street in Sri Lanka that feels betrayed by the callousness of this dynasty. Gotabaya’s political future is on the line and so far, he has performed miserably in the handling of a crisis that has shown no signs of abating.

The present anarchy in Sri Lanka is certainly a function of economic mismanagement by successive governments over the last few years, though it was accentuated by an ill-timed tax cut promised by Gotabaya in 2019 elections. Then came the Covid-19 pandemic which proved catastrophic for a nation that relied on tourism for economic sustenance as well as one of its biggest foreign currency earners. As forex reserves went into a downward spiral, economic decision making in Sri Lanka moved from bad to worse. The government decided to ban chemical fertilisers in 2021 only to reverse that decision later, but it had a deleterious impact on the agricultural output. As the Sri Lankan rupee plunged, provoking severe shortages of basic items such as food, fuel and medical supplies, desperate people had no option but to respond to this dire situation by coming out on the streets and making their voices heard to an administration that seemed tone deaf.

The other aspect of this saga of gross economic mismanagement is the role of China in this crisis. Colombo had to suspended its foreign debt payments, largely because of its inability to service loans from China that were used finance massive, but rather useless, infrastructure projects. China used its friendship with Mahinda Rajapaksa to sign an agreement to construct the Hambantota port and build the airport next door, in Mattala—both in his constituency. Mahinda’s successor, Maithripala Sirisena, came to office wanting to reduce Sri Lanka’s dependence on China, but ended up awarding the Hambantota port to China not only for a 99-year lease but also with a provision for extension for another 99 years.

Sri Lanka owes $6.5 billion to China, emerging as a text book example of China’s debt trap diplomacy today. The talks on debt restructuring with China have not been very effective. While China had agreed to strengthen Sri Lanka’s foreign currency reserves by swapping the Lankan rupee for its currency, the renminbi, it has been reluctant to move forward after the International Monetary Fund came into the picture and has taken a rather hands off approach towards the Sri Lankan crisis so far.

Given that the political deadlock would have made it difficult for Sri Lanka to negotiate a bailout package with the IMF, Gotabaya moved quickly to appoint former premier Ranil Wickremesinghe as Sri Lanka’s 26th prime minister after Sajith Premadasa, a former deputy to Wickremesinghe, rejected the president’s original invitation to be prime minister. Sri Lankan polity remains divided, but there is hope that Wickremesinghe will be able to bring global confidence back in the island nation’s ability to manage its economic future.

Indian diplomacy has been rather nimble vis-à-vis Sri Lanka so far. It has rapidly adapted to the changing ground realities—first by reaching out to the Rajapaksa administration when it voted in with an overwhelming majority in 2019 and more recently by continuing to help Sri Lanka tide over the economic crisis. This support includes $2.4 billion to help Colombo cover a loan default, a diesel shipment under a $500 million credit line, and a $1 billion credit line for importing essential items, including food and medicine. Ignoring some irresponsible suggestions that India should consider sending military to Sri Lanka, New Delhi is right to assert that it remains “fully supportive” of Sri Lanka’s “democracy, stability and economic recovery” and its outreach is “guided by the best interests of the people of Sri Lanka expressed through democratic processes.”

This is a crisis that ultimately Sri Lanka will have to respond to on its own. New Delhi can lend a helping hand as a responsible neighbour but the future of Sri Lanka will be determined by the political establishment of the island nation coming to terms with its own responsibility to respond adequately to the aspirations of its people.

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