Delhi assurance key to saving Sri Lanka

India has done well to extend concrete support to Sri Lanka’s economic recovery. New Delhi has sent a written financial assurance to the International Monetary Fund (IMF) expressing support for Sri Lanka’s loan programme “with financing/debt relief consistent with restoring the island’s public debt sustainability.” With this written support to Sri Lanka, India has become the first of Sri Lanka’s creditors to officially back its debt restructuring programme. As a result of its flawed policies and excessive borrowing for vanity projects, and following the pandemic lockdowns, the Sri Lankan economy collapsed last year. Its depleted foreign exchange reserves forced it to default on debt payments. A desperate Sri Lankan government turned to the IMF, which late last year agreed to extend a $2.9-billion loan to the country. However, unlocking the loan required Sri Lanka’s creditors to provide “adequate assurances.” Over the past year, Sri Lanka’s creditors responded to the crisis either with mere verbal expressions of support, or worse, as in China’s case, silence. It is here that India set itself apart. It extended lines of credit and sent humanitarian aid. And now it has led by example to support Sri Lanka’s economic recovery with written assurance. With New Delhi showing the way, other creditors, including China, are expected to follow.

Sri Lanka’s problems are far from over. Restructuring its economy as per the IMF’s demands is bound to trigger mass protests that could quickly take an anti-India turn. Delhi should nudge Colombo to avoid coercive measures in dealing with unrest. However, it must ensure that it is not seen to be meddling in the island’s politics.

Geographic proximity and historical, cultural and ethnic ties have traditionally determined India’s policy toward Sri Lanka. However, China’s rising clout over the island has been of immense concern to India as it has ramifications for India’s security. Consequently, wariness of China has driven New Delhi’s heightened engagement with Sri Lanka in recent years, prompting India to pour in millions of dollars in projects that are aimed more at keeping China out rather than promoting Indian interests. Such projects do not have the support of the Sri Lankan people either, which means Delhi may be unwittingly stirring anti-India sentiment in the island. India must promote people-centric projects as it has in some African countries. Crafting our Sri Lankan policy according to what China does or doesn’t do is not in India’s interest in the long run as that will essentially be a reactive policy. Rather, India must craft its policy vis-à-vis its smaller neighbours based on a vision for the betterment of the region. Economic and strategic benefits will follow.